County officials leery of sales tax authority

Maui News
Thursday, March 27, 2003

By BRIAN PERRY
Staff Writer

WAILUKU — Maui County leaders aren't embracing a suggestion by state lawmakers that all of the counties be given the authority to impose a sales tax.

Mayor Alan Arakawa said he opposes the idea, preferring that Maui County get a larger share of hotel room tax revenue as provided in a House bill that allows the City and County of Honolulu to impose a 1 percent excise tax if the city gives up its share of the hotel room tax.

Arakawa said Maui County already is covering several areas that are really state responsibilities, and having the counties collect a sales tax would see the county taking on more of those responsibilities.

Council Members Mike Molina and Robert Carroll said they don't see the need for the county to impose a sales tax, but council Budget and Finance Committee Chairman Riki Hokama said he wouldn't mind the authority as an option.

He said a county sales tax might be a way to provide some flexibility and some tax relief within the county's property tax structure.

But on Monday, as the council continued the early stages of fact-finding as part of preparing the county's fiscal 2003-04 budget, Hokama said he didn't know if he'd advocate exercising the sales tax option if it were to become available.

Council Member Jo Anne Johnson was flatly against the idea, taking a position similar to Arakawa's.

"That would be a very big mess to administer. We have enough problems as it is," she said.

Arakawa and the council members expressed support for a bill drafted by state Rep. Bob Nakasone, D-Wailuku-Kahului, that would give Honolulu the authority to charge a 1 percent excise tax. Under the Nakasone bill, the tax revenues given up by the city would be added to the funds going to the state and the Neighbor Island counties.

But senators reviewing the House bill proposed a number of possible changes, including allowing the city to charge a sales tax only on retail sales, instead of an excise tax that applies to every payment made on a product or service through shippers and wholesalers.

There also was a suggestion that each of the counties be allowed to charge a sales tax.

State Sen. Shan Tsutsui, D-Central Maui, said that if Honolulu were to charge a 1 percent sales tax, it could see $121 million in additional revenue, compared with its $31 million share of revenue from the transient accommodations tax.

Honolulu Mayor Jeremy Harris supports the Senate proposal, saying he has long sought additional taxing authority for the city.

Tsutsui said Maui County is the only other county that would see a significant increase in the amount of revenue generated if it were allowed to impose a 1 percent sales tax, potentially raising $27 million. By comparison, Maui County's share of the hotel room tax revenues was $16 million in 2002, he said.

Still, he noted that the House Bill 1554 has not been scheduled for a hearing by the Senate Ways and Means Committee, where any of the changes would need to pass muster.

Molina said he'd support the Nakasone version that would give Maui County a greater share of hotel room tax revenue, which would provide badly needed money for infrastructure projects.

"The public here has been crying for infrastructure improvements," he said.

But Molina said he didn't want to overtax residents and visitors with an additional take from sales taxes.

"We're already burdening taxpayers with property taxes," he said. "I don't see the need at this time for additional taxing authority."

Carroll said he opposes granting a sales tax authority to the county.

"The last thing we want to do is raise the sales tax," he said.

Tsutsui and state Sen. J. Kalani English, who are both members of the Senate's Ways and Means Committee, said they would support a measure to allow all the counties the option of passing an ordinance to impose a sales tax.

English, a Democrat representing Upcountry, East Maui, Molokai and Lanai residents, said the measure would be an "equal opportunity for the counties."

If a county wanted to raise revenue through a sales tax, then county officials would need to pass an ordinance to do so, he said.

The county exercising such an option would forgo its portion of the hotel room tax income.

English and Tsutsui said they were convinced the bill providing the sales tax option would lead to more money for Maui County. "We will get more money out of this bill," Tsutsui said.

If Honolulu alone exercises the sales tax option, then the other three counties — along with the state — would enjoy a larger portion of hotel room tax revenue, the lawmakers pointed out.

English and Tsutsui said they expected the measure to come before the Senate Ways and Means Committee soon, although committee staff members said it would probably not be discussed by the panel before Friday.

Former state Sen. Jan Yagi Buen, now executive assistant to Mayor Arakawa, said she spoke with Ways and Means Committee Chairman Brian Taniguchi. He indicated to her that a revised version of the bill forwarded from the House would provide the bulk of hotel room tax money for the state.

Buen said Arakawa finds that unacceptable and does not support such a version of the bill.

She said Taniguchi told her the "state needs the money."

Arakawa said it's a mistake to let the state pick and choose what areas it wants to be responsible for, and what the counties should be burdened with financing. He said he could accept taking over state responsibilities — such as schools and highways — if the state also turns over the revenues that go with the facilities.

"If the state wants to give us all the revenues they received and decentralize, then we'll work with the tax situation," he said.

But if the state won't grant the revenues, the county doesn't want the responsibility, Arakawa said.

"It adds instability to our economy," he said.

Hokama said the original version of the House bill was a "very good option."

"It may provide the County of Maui more revenue," he said.

Hokama said the council has done a good job in steering a conservative fiscal course for the county, and part of that strategy is to resist the temptation to borrow money for projects.

Hokama said the county currently spends approximately $25 million a year to pay off debts, which is money he'd prefer to spend on county programs.

The practice of borrowing may seem wise in the short term, but "eventually it's going to catch up with you," he said.

Hokama said he's also conservative in forecasting the county's revenue, saying he'd consider a 2 percent to 3 percent increase a "great year," especially in light of the war in Iraq.

After the first Gulf War, there were reductions in revenues and a slowing in increases in property valuations, he said.

Return to Sen. English Home Page - KalaniEnglish.com

 

 

 

 

 

 

Home Bills and Resolutions About Senator English Committees Community Profiles Newsletter Archive News Archive Capitol Web Site Media Photos

Connect with Senator English

OUR DISTRICT