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Home My WebLink AboutCOM 0755.016 2016-2018 Harry Kim •".'',,; • Deanna S. Sako Mayor ��;� Director r�Rr =_= Nancy Crawford g Mn M•:'1��` • Deputy Director • '�tOF•M�'�- County of Hawaii Finance Department 25 Aupuni Street,Suite 2103 • Hilo,Hawai`i 96720 (808)961-8234 • Fax(808)961-8569 C. C"3 May 31, 2018 =C Valerie Poindexter, Council Chair and _ Members of the Hawai`i County Council �st Hawai`i County Council - fin 25 Aupuni Street Hilo, Hawai`i 96720 Re: Bill 110, Draft,2 Establishing an Operating Budget for Fiscal Year July 1, 2018 to June 30, 2019 When Bill 110, Draft 2 was initially submitted to the County Council on May 4, 2018, we did not imagine that our County would be significantly impacted by severe and extraordinary volcanic eruptions at Halema`uma`u crater and the East Rift Zone, causing damages, losses and suffering that is affecting the health, welfare and living conditions of our citizens and the economy of the entire County. The events beginning on May 3, 2018, are unprecedented. To date, the Governor has issued an Emergency Proclamation and Supplementary Proclamation, dated May 3, 2018 1 and May 9, 2018, respectively; the Mayor has issued an Emergency Proclamation, a Supplementary Emergency Proclamation, a Second Supplementary Proclamation, an Emergency Rule #1, and a Mandatory Evacuation Order; and the President of the United States has declared a major disaster. Current scientific information indicates that the current lava flow will continue to advance. There is no way to tell when this event.will- end and where the lava will flow. These events are directly impacting our current budget, and have changed the revenue and expenditure projections for fiscal year 2018-19. Since the submittal of Bill 110, Draft 2, the Department of Finance has initiated adjustments to current year and future real property tax revenue based on loss of property. Further valuation adjustments will also be considered. In addition to the projected loss of real property tax revenue, expenses beyonddisaster response and recovery are anticipated. At the County Council special meeting on May 22, 2018, to consider Bill 110, Draft 2, these concerns and the financial impact of the events were discussed. Subsequent to that Comm. No. /IS-T. I� Ref. To: 17/C-en.u4c _Q. Hawaii County is an Equal Opportunity Employer and ProviderRef. Date AN 0 6 2018 Bill 101, Draft 2 meeting, lava and ash eruptions have extended and continue to cause more damage and loss. The projected shortfall in revenue to cover required expenditures continues to grow. The County Council has a number of options to address covering disaster related emergency expenditures necessary for the present fiscal year and into the next fiscal year AND as well as the estimated loss of tax revenue due to real property loss valuation. While the State is actively pursuing funding to assist the County with our disaster related costs, we still must address the loss of revenue of approximately $5 million for next fiscal year. The Department of Finance offers the following recap of options that we see as possible, which were discussed with the Council and Finance Committee Chairs: 1) Pass Bill 110, Draft 2 in its current form. 2) Cut expenditures. Even if all disaster related costs are covered by State and Federal funding, there is still an estimated loss of tax revenue of$5 million which will have to be offset with reduced expenditures. Note that this amount is higher than stated at the May 22nd meeting, as the impact of the lava flow has increased dramatically. 3) Increase real property tax rates to offset the projected reduction in values. A table representing an across-the-board rate increase is attached. There would be no adjustment to the budget bill, as these rate changes would simply result in the County receiving the current budgeted real property tax revenue for FY 2018-19. 4) Authorize a general excise tax transportation surcharge of.25%. The resulting revenue for FY 2018-19 would cover the costs of the County Mass Transit System and other transportation needs, and provide funding for improvements. In doing so, it would reduce general fund expenditures by $4.6 million. A proposed bill for the Council's consideration is being submitted simultaneous with this communication. We look forward to a discussion of these options individually or in combination, as the County Council takes up Bill 110, Draft 2. If you have any questions, please feel free to contact me at 961-8234. 04-- Deanna S. Sako Director of Finance Enc. 1 Bill 101, Draft 2 Exhibit A Proposed Real Property Tax Rates for FY 2018-19 Property Class Current Rates/$1,000 Proposed Rates/$1,000 Affordable Rental $6.15 $6.35 Residential $11.10 $11.25 Apartment $11.70 $11.85 Commercial $10.70 $10.80 Industrial $10.70 $10.80 Agriculture $9.35 $9.40 Conservation $11.55 $11.65 • Hotel & Resort $11.55 $11.65 Homeowners $6.15 $6.35