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(Wed., March 2, 2011)—Mayor Peter Carlisle today unveiled a balanced spending plan for the coming fiscal year that includes a sharply reduced capital improvement project budget and an end to City employee furloughs on July 1.


“Our goal is to move toward long-term fiscal sustainability,” Carlisle said. “We must reduce our skyrocketing debt service costs and unsustainable employee retirement and health care costs.”


The $526 million CIP budget is $279 million less than that of the current year, exclusive of the City’s rail transit project. The City Charter mandates that the new Honolulu Authority for Rapid Transit be responsible for all aspects of the project as of July 1.


The mayor’s plan also includes a $1.932 billion Executive Operating Budget that increases spending by 6.3 percent, due largely to rising debt service and the increasing costs of employee benefits and previously negotiated pay increases for certain employees. Rising energy costs and expenses related to the upcoming APEC meeting are also factors.


The operating budget assumes an end to City employee furloughs and a minimum savings of five percent in labor costs across the board, to be determined through collective bargaining.


“The impact of the worldwide economic recession continues to be felt in Hawaii and there are many fiscal challenges facing the City,” Carlisle said. “We must tackle the long-term fiscal challenges through a balanced approach to budgeting.”


The spending plan sets the real property tax rate for the residential classification at $3.50 per $1,000 of assessed value.


The City Council last year consolidated the homeowner and non-homeowner classifications into one classification. The rates for the old classifications were $3.42 and $3.58 respectively.


Under the new classification, some individual tax bills will be lower, and some will be higher, depending on the assessed value of individual properties. The plan expects the total Fiscal Year 2012 real property tax revenue collected by the City, $796.5 million, to be slightly lower than Fiscal Year 2011.


The mayor’s plan does not change rates for other property classifications. It would be unreasonable to ask for an increase in Hotel/Resort and Commercial rates during these difficult times, Carlisle said.


The plan also calls for a three-year increase in the fuel tax, which has not been raised since 1989. The change is needed to address the increased cost of maintaining and rehabilitating City roadways, Carlisle said. The first year increase would be one cent, followed by increases of two cents and three cents in the following two years, respectively.


To comply with City Council Resolution 06-222, which requires that City fees be phased toward covering 100 percent of the cost of service delivery, the spending plan would increase: sewer fees by 4 percent; driver license fees by up to $2; fees for an 18-hole round of golf at City courses by up to $3.50; Honolulu Zoo entrance fees by up to $4; and monthly parking for City employees by $13.


The budgets, tax rates and fee increases are subject to City Council approval.


The operating budget assumes that the City will continue to receive a fair portion of the transient accommodations tax (hotel room tax) collected from hotel guests by the State. Honolulu receives approximately $40 million annually from this tax, which helps offset the visitor impact on public services such as police and fire protection, garbage collection, park maintenance, and wastewater operations. The budget assumes a City share of $44 million.


At the beginning of the current fiscal year, an operating budget gap of approximately $100 million was projected for the coming year. This projected gap was closed through tax collections from property valuations that were higher than expected, and by continued cost-cutting and forced savings efforts.




Media contact: Louise Kim McCoy, Mayor’s Office, 768-7798.