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Home My WebLink AboutCOM 0722.002 2016-2018 Harry Kim ��°J~v of � '�. Deanna S. Sako Mayor ,��'�+' Director �''E�oF;N'''"e______) Nancy Crawford Deputy Director County of Hawai`i Finance Department 25 Aupuni Street,Suite 2103 • Hilo,Hawai`i 96720 (808)961-8234 • Fax(808)961-8569 C":, C rn —!, - r:_; -_. : February 6, 2018 1 --< O,„ C --< -11 Valerie Poindexter, Council Chair and --r..117 1 Members of the Hawaii County Council .1-_-. Re: Establishment of a Transportation Surcharge Please see attached copies of the presentation "Surcharge on General Excise Tax (GET)" for discussion on Bill No. 102 relating to a County Transportation Surcharge. If there are any questions, please do not hesitate to contact me at 961-8517. Thank you. ivO-T-) CLAu,475,4 Nancy Crawford Finance Deputy Director Comm. No. 1 9'). Ref. To: ? ICG Ref. Date FEB 0 6 2018 Hawaii County is an Equal Opportunity Employer and Provider Surcharge on General Excise Tax ( GET) County of Hawaii Bill No. 102 Why we have this opportunity... • When the legislature passed and the governor signed Act 1 from the special session in 2017, they did two things that impacted us: 01611.6 • They made the cap on the Transient Accommodations Tax (TAT) permanent for the Counties • They gave the counties another opportunity to enact a %Z percent surcharge lOwei on GET for the purpose of transportation. �,. • Specifically for operating and capital costs for public transportation systems, including public roadways or highways, public buses, trains, Osw ferries, pedestrian paths or sidewalks, or bicycle paths; and • Expenses in complying with the Americans with Disabilities Act of 1990 with respect to public transportation systems. • In addition, the Act increases the TAT rate to 101A% until December 31, 2030 to help fund the City and County of Honolulu Rail System 2 What is thero osed Transportationp p Surcharge ? o (4.0%)• One-half percent (0.5/) charge added to the four percent state general excise tax (GET) currently paid 6. • All proceeds would go to Hawaii County for transportation related costs • Estimated $25 million per year (could be more than this per the State) !, • The ordinance must be adopted by March 31, 2018 • The surcharge would be in effect from January 1, 2019 through !, December 31, 2030 Who pays the surcharge ? • Purchasers of good and services that are subject to GET I* • Visitors to Hawaii island would pay on all purchases • Currently they do not contribute any taxes directly to the County • Visitors will pay approximately 30 to 40% of surcharge collected • Eligible food purchases under federal food assistance programs are exempt from GET (SNAP, WIC) Current Taxes under our Control... • Real Property Tax • Fuel Tax — (specific to Highway Fund) • Motor Vehicle Weight Tax — (specific to Highway Fund) ihe County has no other taxing authority to cover General Fund operations. 5 Capping TAT means... • With the cap — the County of Hawaii receives $19.158 million each year • If no cap was in place, then the County could receive up to $42.4 million each year • Based on FY2017 TAT revenue amounts, if the old formula was used the County would receive $42.4 million (an increase of $23.2 million) Oft- • If the TAT Working Group recommendation had been adopted, the County of Hawaii would still receive $33.1 million, or $15.8 million more than we 16- receive now • Any additional amount would help to offset the $30 to $40 million that we spend each year on visitors to our island (includes the impact on our operating budget and certain capital projects that benefit visitors as well) TAT Distribution FY 2008 - 2017 600,000,000 50.00% 45.00% 500,000,000 . 40.00% 35.00% 400,000,000 30.00% 11.110100011011* 300,000,000 25.00% 20.00% 200,000,000 15.00% 10.00% 100,000,000 3.77% 8.33% 5.00% 0 0.00% FY07-08 FY08-09 FY09-10 FY10-11 FY11-12 FY12-13 FY13-14 FY14-15 FY15-16 FY16-17 State -Other Counties MINI Hi County HI County % of total Where we are today... • In response to TAT being capped since fiscal year 2011, we have cut and trimmed our budgets while maintaining services, to help us through the recession and recovery op.. • We have not funded our reserves, our fund balance continues to decline • We have deferred facility maintenance and equipment purchases • We continue to pay increasing labor costs, including fringe benefits, which are controlled by the State • We continue to be subject to State Legislature changes that impact our budget and can change from year to year, such as when they capped TAT and increased the ERS (retirement) percentages that we pay for our employees County of Hawai'i Fund Balance Trend FY2011 - 2017 $40,000,000 $35,000,000 $30,000,000 11111 $25,000,000 Excess Fund Balance... Excess Fund Balance 10,746,306.72 1111 $20,000,000 t $15,000,000 $10,000,000 $5,000,000 $0 2011 2012 2013 2014 2015 2016 2017 WI Designated Fund Balance Excess Fund Balance General Fund Expenditures FY2012 - 2019 450,000,000 400,000,000 350,000,000 Revenues $ :8.1°. 9.2'. 300,000,000 .11 0.4° 11 250,000,000 38% 200,000,000 .3.30, 25.2 111.8°, 150,000,000 16.3° ° 100,000,000 25.6% 25.4% 25.30. 31% 50,000,000 —— 14.1% 1% 1 0 0 FY12 FY13 FY14 FY15 FY16 FY17 FY18* FY19** Budget Estimate Debt service Other exp }Benefits Total S&W —Revenues _ i Reasons we need the surcharge... • Opportunity to diversify tax base (other than Real Property Tax and TAT) • Opportunity to address traffic congestion • Opportunity to improve the mass transit system, roadways, etc. • Expand fuel tax capital projects • Provide general fund relief by paying for operations and needs of Mass Transit • Opportunity to recoup costs from the visitors for the resources they use • Approximately 30 to 40% of the GET collected comes from visitors Our Transportation System needs... • Mass Transit improvements Pi' • New buses (immediate need 14 new buses; 38 buses over next 7 years) • Additional funding for reliable, on-time bus service • Improved information to passengers • Modernizing the transit vehicle fleet and services • Being responsive to the needs of transit dependent individuals • More park-and-ride locations for the community 'NW ' 11 I .1101111,111111111r. Il . r i , 1 , I , _ ,..„ a. ,k... 1 +3 R r / c. . 1 --' # rt.,- 1 , :', '''.' / '' f)'%. q ,!, t.) i --... t.,-4).Ft ', ,; ,F c _ i. , lc\ ` s k 4 . 1 .. .--lii- i , t a r� •1 \ t - : i ...-• �+` a, i i eill'' ‘ y ., .f ---,....‘-''-•-.' a 144 t � * • ! .l kil be . i ter ;',,,..:::11' ►t °:y'J ��.�y r • . 11.. �.tfi3f i . i \n. ' l �1 .•; . idi ,, \ ' t 4 t 441)1.'''14; .klIP - titi' • u •t, . '.. Y '44: =/i, 9•t a a •4 ►t � M - .. it ' '' '' ..-3,t .,. . . . ., . .,..,I._ t....-,- 'gap ,I.4i iti,.1*/ , . c, r ; •a 11 r ` '"a ! y' a, Jam' ._. . -�,. + Our Transportation System needs... Road improvements: • Significant backlog of repair and improvement projects • Funds could fast-track important projects lot - Ane Keohokalole extension - 4-mile Creek Bridge • Compensate for reduced Federal Highway funds Trails: • Waimea Trails & Greenways • Hilo Bayfront Trail • Oneo Bay Pedestrian Improvements L.1-1 .- 4-.,,, -:'•t,%,:,, ",. •i I.'•. ••:: '. . 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' - l. /....000*. . 1 so. t- Ikk• . • .... ,,,, -.Fir:4 ' Itaill . - • ... , . .-.... ... ., a., --- - . . • — . ...4 ii •* Financial Benefits... • Estimated to generate $25 million per year ($12 million in first year) lor • Funding approved for 12 years op, • Opportunity for visitors to support local government 'a'' • Will diversify county revenues • Can free up County funds currently supporting Mass Transit operations • Can leverage County funds by matching federally funded transportation projects Quality of Life Benefits... • Reliable, modern transportation to reach work, school, appointments • Road safety improvements • Increased pedestrian and bicycle transportation options • Improved roads will reduce repair costs • Improved reliability and modernize the Mass Transit system • Reduced traffic congestion and commute times, reduced fuel usage • Improved mobility of residents and visitors • Improved transportation services and safety for kupuna and keiki • Promote healthy lifestyles and improved environment Example... What does the surcharge mean to me: • It is different for everyone depending on spending If you typically spend $100 on groceries - ` 10.141°V;- at the store, your bill will increase by approximately Airek 54 cents — instead of $104.16 you will pay $104.70 Legislature to extend adoption date ? • SB 3088, SB 1183 and SB 2614 • HB 2587 • These bills have been referred to committee • Just like all the various bills before the legislature, these bills may not pass MAHALO !