COM 0615.000 2012-2014 - Laserfiche WebLink

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Page 12 granted $12 million from the State General Fund for "infrastructure and,/ or tourism-related activities" in addition to the existing $19 million in grants-in- aid. In.1989, the Legislature nearly doubled the grants-in-aid to the counties from $39.4 million to $71.9 million, while rejecting the transfer of tobacco and liquor taxes to the counties. In 1990, the mode of revenues to the county switched to the TAT, with 95% being distributed amongst counties. In the same year the Legislature authorized Honolulu to impose a 0.5% GET surcharge for the fixed rail project and gave the other counties a time-limited right to impose such a surcharge for general purposes. None of the counties invoked their authority, and it expired. Between 1993 and 2009, the State increased the TAT tax rate on room rates, ending at 9.25% of room rate in 2012. All of the additional revenues generated were allocated to State related needs. In 2011, TAT revenues distributed to the counties were capped at $93 million. During that time, in 2001, the Legislature provided for a sharing of the public service company tax revenues with counties that exempted public utility real property from taxation. In 2005, a 0.5% GET surcharge was authorized for the counties, but only Honolulu chose to levy the surcharge. By law, the revenues collected were earmarked for operating or capital costs of public transportation systems within each county. III. Suggested Counties Approach: Instead of being forced to choose one taxing power over another, it would be more strategic for counties to ask for a portfolio of limited (i.e., not open- ended) taxing powers and/or revenue sources. It will also be important to demonstrate that the counties are following budgeting best practices to assure the Legislature that we are being judicious with taxpayers' money and will not use the additional powers simply for political gain (i.e., to keep real property taxes low to get re-elected). IV.Proposal: The counties should ask for a portfolio of limited powers or revenue sources that will allow flexibility among the counties that have different needs and circumstances. A diversified base is also a more stable base. Limitations (such as caps, conditions, etc.) should be imposed to guard against unwise and politically motivated expenditures. There could be built-in incentives to encourage efficient and effective use of resources and to encourage long-range over short-term thinking. The powers and sources could include: