LIHUE — Tough decisions, county officials say, lie ahead as they try to balance the county’s budget without an anticipated windfall from increased state tax revenues charged to visitor accommodations.
What this could mean for residents, they said, are potential cuts in some county services and increases in taxes and fees, including property taxes and motor vehicle weight taxes, among others.
“Many alternate scenarios are being considered,” Kauai Mayor Bernard Carvalho Jr. said this week. “We must meet our obligations and balance our budget, and are trying to do so without further burdening our taxpayers or sacrificing critical services.”
State lawmakers Tuesday unanimously approved a scaled-down version of a bill that will give the state’s four counties a $10 million bump in capped revenues collected from transient accommodations taxes, commonly known as the TAT, over the next two years.
This slight jump from $93 to $103 million translates to a $1.4 million increase for the County of Kauai, which currently receives $13.5 million in TAT revenues annually.
Prior to the bill’s approval, many County of Kauai officials said they were counting on a significant windfall in TAT revenues to help offset projected shortfalls in next fiscal year’s budget, which will be taken up by the County Council on May 12.
The proposal they favored — one that was also backed by other neighbor island officials and some state lawmakers — would have removed a $93 million cap placed in 2011 on the amount of TAT revenues that counties statewide could receive.
In all, the state’s four counties collected 44.8 percent of all TAT revenues each year before the cap was placed.
By lifting the cap, all four counties would have shared a total of $165 million in TAT revenue generated during the 2013 fiscal year, creating a nearly $10 million bump in revenue for the County of Kauai alone.
But that didn’t happen.
And now county officials say taxpayers may be left holding the bag.
“The impacts of visitors on county services is huge, and for years, visitors have paid TAT to offset a portion of the costs,” Kauai County Councilman Tim Bynum wrote in an email. “Now that the Legislature has failed again to do what is right for the counties, they are saying, in essence, ‘You know that visitor at the Hyatt sipping a Mai Tai by the pool? Their TAT contribution is going mostly to the state, so we will let the maid that cleaned their room or the bartender that poured the drink pay the tax bill instead.’”
An uncertain future
Although there is no longer any question as to how much TAT revenue counties statewide will be getting for the next two years, county officials say they are wary of what lies ahead for them and residents.
“The failure to bring us back to our original entitlement (14.5 percent) of the total TAT, has put us in a very difficult revenue position with no confirmation what future years will bring as to our fair share,” Council Chair Jay Furfaro said.
And then there are the impacts of the visitor industry to the island.
“We are the smallest of counties with a population of 69,512 residents and a daily census of 18,500 daily visitors, who put a sizable demand on county services — police, fire, lifeguards, traffic and emergency responding to natural events,” Furfaro wrote in an email.
A number of revenue enhancing measures outlined in Carvalho’s budget proposal, including raising real property taxes for hotels and resorts, non-residential solid waste tipping fees, motor vehicle weight taxes and zoning fees, could raise an additional $6.7 million for the upcoming fiscal year.
How much resort property taxes could increase is yet to be determined.
But even those revenues may not be enough.
The County of Kauai, according to current budget projections, faces an $8.9 million shortfall in the general fund alone — most of which is due to collective bargaining raises for county employees that were approved last year.
“We may have to look at freezing any public services going forward, which may include housing expansion, additional bus increases, lifeguarding shifts, and of course, the increase in cost as it deals with solid waste,” Furfaro said. “We have already, in this budget cycle, planned on some property tax increases. Solid waste tipping fees and motor vehicle weight tax are still being considered but our revenue sources are about exhausted.”
Another area that could take a hit is the county’s annual health benefits contribution for employees, which is now fully funded but may be reduced to 73 percent, according to Carvalho’s last budget proposal.
Restoring full funding for those contributions, Carvalho said in his budget message, would have been his administration’s first priority, if the TAT cap had been lifted.
“Currently we are re-evaluating all aspects of our fiscal year 2015 budget proposal with the main focus on how to deal with the proposed short-funding of the employee health benefits obligation,” Carvalho wrote in an email.
The mayor’s administration will submit their final budget proposal to the County Council no later than May 8. The County Council, in turn, will take up the budget on May 12 and 13.
• Darin Moriki, county government reporter, can be reached at 245-0428 or dmoriki@thegardenisland.com. Follow him on Twitter at @darinmoriki.
