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HomeMy WebLinkAboutCOM 0615.000 2012-2014 Mtv or BRENDA J. FORD � ,;. Phone: 808 323-4277 Council Member ' `i'�!` �' ��•• Phone: (808) • • Fax: (808)329-4786 District 6 -Portion of North �,. _ e;'��••Kona, South Kona, Ka`u, & '•op vo• E-Mail: bford @co.hawaii.hi.us •Greater Volcano Area HAWAII COUNTY COUNCIL County of Hawaii West Hawaii Civic Center 74-5044 Ane Keohokalole Hwy. Kailua-Kona, Hawaii 96740 ,_) DATE: January 15, 2014 �n r -v G--- TO: J Yoshimoto, Chairperson, ;' And Members of the Hawai`i County Council c.� FROM: Brenda J. Ford, Council Member , SUBJECT: Council of Mayors' Proposal for a 1% Excise Tax Due to the opening of the State Legislative 2014 session, and the urgency of the topic, I am requesting to have this item be placed on the Committee on Finance agenda of January 21, 2014. The purpose is to allow discussion regarding the Council of Mayors' proposal to the State Legislature allowing the authorization of each county to have the power to increase the general excise tax up to 1%. I have attached supporting documents from Kauai Council Member JoAnn A. Yukimura, and an article from Kauai's Garden Island newspaper article on this subject. Mahalo for your kind attention on this matter. BF/dkr/la Att.: Council Member JoAnn A.Yukimura Letter Dated January 14,2014 Council Member JoAnn A.Yukimura Memorandum Dated October 22,2013, Updated January 14,2014 Kauai Garden Island Newspaper Article Dated December 14,2009 Comm.No. i S Ref.To. Ref.Date Serving the Interests of the People of Our Island Hawaii County Is An Equal Opportunity Provider And Employer ' y COUNTY COUNCIL - OFFICE OF THE COUNTY CLERK Jay Furfaro,Chair o% Mason K.Chock,Sr.,Vice Chair p x. Ricky Watanabe,County Clerk Tim Bynum " +� _ �^ Jade K.Fountain-Tanigawa,Deputy County Clerk Gary L.Hooser Ross Kagawa ��ts►a���; �� Mel Rapozo �,�� 41'71 Telephone(808)241-4188 JoAnn A.Yukimura of Fax (808)241-6349 Email cokcouncil®kauai.gov Council Services Division 4396 Rice Street,Suite 209 Lihu`e,Kauai,Hawaii 96766 January 14, 2014 URGENT AND IMPORTANT Via E-mail RE: COUNCIL OF MAYORS PROPOSAL FOR "UP TO 1% EXCISE TAXING POWER" Dear HSAC colleague: Happy New Year! As you may know, the four mayors of Hawai`i's four counties have agreed to go before the 2014 Legislature requesting excise taxing authority for the each county up to 1% for general fund purposes—that is, to be used for any legitimate county expenditure and not earmarked and limited to transit, as is the existing 1%2 % power to the City and County of Honolulu. Tomorrow, (or today, depending when you read this) Wednesday, January 15, 2013, the Hawai`i State Association of Counties (HSAC) Executive Committee will be meeting at 3 p.m. at Honolulu Hale to decide whether HSAC will align with and support the mayors' request. Under HSAC's rules, while the State Legislature is in session, the Executive Committee is able to take a position on revenue or home rule issues without ratification by every county council. I believe the purpose of the rule was to allow quick response to revenue and home rule issues that emerge unexpectedly during a legislative session. This is not the case with the 1% taxing power as the HSAC Executive Committee has already had three meetings on the subject in the last three months'. At their last meeting in.December, the HSAC Executive Committee decided to wait till Opening Day of the 2014 Legislature, apparently in order to meet;the letter of the law. I am writing you because I believe it is premature for HSAC to take a stand in favor of an unrestricted 1% excise taxing power, especially if it hasn't been endorsed by all county councils. The following are my reasons: 1. We, as individual county councils, and we, as the HSAC, have not had a chance to fully discuss this issue among ourselves nor to get sufficient input from our respective constituencies. It is a far-reaching proposal that will have significant and serious impacts on our island economies and on our people, especially those who already struggle with the high cost of living in Hawaii. HSAC and its member county councils have not fully discussed the proposal among ourselves or our constituents; nor have we discussed alternatives. (Please see Attachment "A" for one alternative that I have floated for discussion.) AN EQUAL OPPORTUNITY EMPLOYER O • • r Dear HSAC colleague Re: Council of Mayors Proposal for "Up to 1% Excise Taxing Power" January 14, 2014 Page 2 2. We, as individual county councils, and we, as the HSAC, haven't done our homework and don't understand the ramifications of the mayors' proposal. As you may know, the excise taxing power, especially as structured in Hawaii, is an extremely regressive tax—that is, its impacts are proportionately hardest on the poor and lower income households. Please see Attachment "B" "Hidden costs lurk in Hawaii's version of sales tax" and Attachment "C," "Info Sheet 1: How Regressive Taxes Affect Different Income Levels." At minimum it seems we need to know how much additional cost of living a 1% excise tax will generate for lower income families. We also need to know the impacts of the "pyramiding" tax on small businesses. 3. As has been said over and over again, we need to be united when we go before the Legislature. Because we haven't had a robust discussion within our councils, within HSAC, or with our constituents, we don't have a united position. We need time to see if we can develop a consensus. If we could find a consensus, it would be very powerful, but a divided HSAC is not a good approach. If, after reading this, you share my concerns, please do the following: 1. Let me know so we can work together. I plan to submit testimony to the State Legislature against the mayors' proposal. 2. Let your HSAC representative know that you would like the Executive Committee to defer this matter so HSAC can make it the focus of our next HSAC general membership meeting and we have the time to discuss the matter in our respective councils and with the citizens of our respective counties. 3.' If the matter is approved by the HSAC Executive Committee, please let your state legislators know that you do not at this time support a 1% county excise tax power that can be used for any county purpose. Thank you for your consideration in reading this. Sincerely, • ANNA. YU ► RA Councilmember, .ua`i County Council JAY:dmc --_ Attachment A COUNTY COUNCIL ° ' OFFICE OF THE COUNTY CLERIC � K Jay Furfaro,Chair Mason K.Chock Sr.,Vice Chair G "'- z, ',.;) Ricky Watanabe,County Clerk Tim Bynum t rM ;, Jade K.Fountain-Tanigawa,Deputy County Clerk Gary L.Hooser ;` Ross Kagawa i`YAr���t _ j���4 Telephone(808)241-4188 Mel Rapozo of Fax (808)241-6349 JoAnn A.Yukimura v Email cokcouncil@kauai.gov Council Services Division 4396 Rice Street,Suite 209 Lihu`e,Kauai,Hawaii 96766 MEMORANDUM October 22, 2013 Updated January 14, 2014 TO: Mel Rapozo, President and Members of the Hawai`i State Association of Counties FROM: JoAnn A. Yukimura, Councilmember, Kaua`i County Council RE: A PROPOSAL REGARDING TAXING POWERS AND REVENUE- SHARING FOR THE COUNTIES I. Legal Framework: "Article VIII, Section 3: The taxing power shall be reserved to the State, except so much thereof as may be delegated by the legislature to the political subdivisions, and except that all functions, powers and duties relating to the taxation of real property shall be exercised exclusively by the counties, with the exception of the county of Kalawao. The legislature shall have the power to apportion state revenues among the several political subdivisions." [Ren and am Const Con 1978 and election Nov 7, 1978] II. Background: Prior to 1978, revenue sources for the counties evolved from one percent (1%) of the General Excise Tax (GET) (distributed by percentages to counties) (1947) to a combination of GET and public service taxes (1965) to grants-in- aid of$18.2 million divided among counties by percentages (1973). In 1978, a constitutional amendment was proposed by the Constitutional Convention and approved by the voters transferring all real property tax powers to the counties. See "Legal Framework" above. In 1986, the Transient Accommodations Tax (TAT) on visitor accommodations was approved by the Legislature. In a separate bill, but presumably taking from the revenues generated by the TAT, counties were AN EQUAL OPPORTUNITY EMPLOYER 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: Page 13 a. General Excise Tax Power with 0.50% earmarked for public transportation.' b. TAT revenues up to what can be justified.2 c. Liquor and tobacco taxes for drug prevention, education, and enforcement up to a certain amount, with condition that evidence based prevention gets 70% of funds. d. Conveyance Tax Surcharge (TBD) to fund the county's affordable housing program. 1. Conditions: Sources of revenues to be available only if: a. A county is paid in full on health and pension contributions. b. A county has a reserve policy. The county must set aside at least % of revenues as reserve. c. Measurable results of drug prevention and enforcement are achieved as certified by third party auditor to Department of Health. d. A county must have a strategic plan. (e.g. See the Office of Hawaiian Affairs' Strategic Plan) e. Property taxes make up at least 70% of the operating budget. f. The fees for services by the county are updated regularly. V. A Work in Progress: The purpose here is to suggest the concept of a portfolio of limited taxing powers and revenue sharing and to recognize the Legislature's interest in making sure that the conveyed powers/revenues are efficiently and effectively used without causing an undue burden on taxpayers. This is offered as a beginning concept for all of us to collaborate on. If the HSAC Executive Committee feels this approach has merit, a special committee could possibly be appointed to work on this concept with representatives from the mayors group and/or this could be the major focus of discussion at our next HSAC Convention. Next to early education, it is said that public transportation is the best investment a community can make. 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