HILO, Hawaii Island – A proposal to increase the Big Island’s general excise tax to cover millions of dollars in eruption-related revenue losses was defeated on a 5-4 vote of the Hawaii County Council on Tuesday.
That means Big Island consumers won’t start paying an extra 0.25 percent of the GET on their purchases Jan. 1, but likely will see their local government instead reduce programs and services.
“We’re going to have to find $5 million in cuts,” Hawaii County Finance Director Deanna Sako told council members in asking them to pass a half-sized version of the 0.5 percent GET hike the council turned down last month.
“To cut $5 million is not going to be easy,” Sako said.
Kilauea lava fissure 8 seen from Pohiki Road on Saturday. Eruption-related expenses have sapped Hawaii County resources.
That’s how much less property tax revenue the county administration expects to collect annually now that hundreds of Lower Puna homes, farms and businesses – nearly 10 square miles of land – have lost all their value after being covered by lava from the Kilauea volcano eruption that started May 3.
The ongoing disaster has created a need for more services — like caring for the 600 evacuees still homeless — not less, Managing Director Wil Okabe told the council. Okabe is acting mayor while Mayor Harry Kim remained hospitalized Tuesday after suffering his sixth heart attack and second since April.
The meeting was held in Kona, but four Puna and Hilo council members joined in via a live video feed to the Hilo council chambers.
Without additional GET revenue to replace lost taxes, the administration will have to reduce “non-mandated” programs and services like removing $500,000 from the $1.5 million Hawaii County awards annually to Big Island nonprofit organizations and eliminating the council’s $270,000 contingency account, according to information presented to council members. Taking money from vacant positions, operating gyms and pools fewer hours, reducing recycling programs and ending a car allowance for elected officials and appointed staff are among the administration’s other identified cuts.
Taxing those who can afford to pay more, like owners of second homes, and utilizing money the county sets aside to buy and preserve important lands are better options, Puna Councilwoman Jen Ruggles said in urging defeat of the proposed GET hike.
“We’re not helping the poorest of the poor by taxing them,” Ruggles said.
Raising the Big Island’s GET to 4.25 percent would add 26 cents to every $100 in purchases, according to the county administration.
Fellow Puna Councilwoman Eileen O’Hara had a different reason for opposing the bill.
“It’s not sufficient,” said O’Hara, who wanted a 0.5 percent increase and no end date of Dec. 31, 2020.
Hilo Councilwoman Susan Lee Loy said she suspects her colleagues would have removed that provision after passing it.
“So if that’s the case, let’s just be honest” and approve a 0.5 percent increase with no sunset date, Lee Loy said in voting against the bill.
The proposed tax hike was “not to address an emergency,” but to finance the cost of providing services, said Hilo Councilman Aaron Chung, who was among the bill’s supporters.
“I don’t like that it’s a quarter percent,” Chung said. “We need the half percent, and we’ve always needed it.”
Imposing a 0.25 percent GET hike would generate an estimated $25 million a year, Sako said.
Besides offsetting lowered property tax collections, the GET revenues would have financed a $3.6 million upgrade to the county’s public bus system and the $1.5 million cost to design an extension to Ane Keohokalole Highway in North Kona, she said.
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