First, let’s congratulate the county council and the mayor’s administration for spending a lot of time and effort on the $179.2 million budget it recently approved. We appreciate all the work that went into it and know this is one of the most difficult tasks facing our county leaders — deciding on expenditures. Kauai continues to have a growing population with an increasing demand for services, and our visitors add to the stress on an already overloaded infrastructure. Balancing this year’s budget, as some council members said, was a challenge and we thank them for looking out for Kauai.
That said, we are disappointed the budget included tax increases in four areas: Rental properties, hotels, trash and vehicles. That’s hitting residents hard and placing the real burden of balancing this budget on the backs of taxpayers, and visitors, too, because hotels will likely raise their rates in response to the tax hike. The county’s financial situation must be extremely trying, because in an election year, you usually won’t hear much talk about raising taxes and new fees. Talk of taxes and fees isn’t something candidates holding public office want attached to their names when they’re also going to be asking folks to vote for them. It’s usually the kind of thing officials avoid until after they’re elected and have another two years in office. That tax hikes were approved in a wide net indicates the depth of the county’s financial difficulties. We know taxes are going to go up now and then, but when vehicles, trash, rental homes and hotels are targeted at the same time, it is a bit unexpected. That, as one longtime Kauaian put it, is a triple whammy of taxes on most island residents.
So why are these tax hikes necessary this year? There are many factors that influenced the budget.
Part of the problem is this: The county receives $13.5 million in transient accommodation taxes and was expecting a windfall this year to help offset projected shortfalls in the next official year’s budget. Instead, it will receive another $1.4 million because a proposal to remove a $93 million cap on the amount of TAT revenues faltered in the Legislature. By lifting the cap, all four counties would have shared $165 million in TAT revenue generated during the 2013 fiscal year, creating a nearly $10 million bump in revenue for the county of Kauai. The idea was to make visitors pay their way during their stay here, on the argument they impact infrastructure and services. That cap removal didn’t happen and that left the county looking to taxpayers.
There are other problems with the county’s financial health. Consider:
• Fitch Ratings, a global credit rating agency, downgraded the county’s long-term credit grade, citing consistent rises in expenses, stagnant growths in revenues and shrinking balances in county reserve funds.
• County officials withdrew $35.2 million in taxpayer money from the general fund to pay for county services between 2011 and 2013. Between 2003 and 2010, however, they didn’t draw a dime from the general fund.
The county’s operating fund has been climbing steadily over the years. As recently as 2006, it was $122.2 million. The next year, $131.2 million. In 2008, it rose to $148.7 million, and in 2009, to $157 million. It fell to $154 million in 2010, and decreased again to $147.6 million in 2011. The budget then increased to $185.8 million in 2012, was $166.4 million in 2013 and $159.4 million in 2014, before increasing another roughly $20 million for next year. It makes sense if the operating budget rises, higher taxes will sometimes follow. We understand, and as county staff explained, the operating budget has increased due to rising prices they must pay, the higher cost of doing business and providing services, and required raises for county employees due to collective bargaining agreements. But the question must be asked: Are residents seeing an improved product as a result of spending increases?
The workforce, too, has increased at the rate of about 4 percent a year since 1998. In 2006, the county employed 1,119. This year, 1,279, an addition of 160 workers. But the question residents should ask, again, has more workers equated to improved services, better parks and better road maintenance? Are they seeing improved responses to queries?
Most folks, when facing a financial shortfall, reduce spending. We’ll agree with and quote Councilman Ross Kagawa, who cast the lone dissenting vote against the county budget’s approval. He said county officials should trim budgets in individual departments at a time when supplemental funding is scarce.
Kagawa said: “I believe that cutting the budget is the way that we’re going to be sustainable, because we somehow need to get our expenditures less than our revenues, and we’re striving to that point. I think, with these fee and tax increases, we actually did achieve that, but I was looking at not increasing fees and not increasing taxes. We’re still struggling — I mean, people out there … are not happy with these increases in taxes.”
County officials though, as Councilman Gary Hooser said, opted against substantial cuts: “No one recommended a balanced budget with cuts — no one — and I think we need to acknowledge that. Every budget that was discussed or approved at this table involved tax increases. The tax increases that we’re voting on today, some of them reluctantly, I think are reasonable and responsible.”
The tax increases are reasonable, but could they have been avoided?
It is troubling to hear no one recommended a balanced budget with substantial cuts. It seems that could have at least been considered — suggestions put on the table, a hard look at staff and services weighed against benefits to residents.
Still, the council to its credit did make some small reductions, including: Reducing health benefit contributions for current county employees over the next fiscal year by 5 percent and cutting overtime costs by 5 percent across all county departments, except for police and fire. Those two departments, because of collective bargaining requirements, will experience a 5 percent reduction in discretionary overtime costs. Cut travel budgets across all county departments by $113,004; reducing county electricity costs by $88,898; and not funding a deputy county attorney position set aside in the Office of the County Attorney’s budget for a proposed litigation team. For the first time, the council also approved a 10 percent reduction in annual health benefit contributions for retired county employees, amounting to $1.5 million, which it will pay later. All told, those reductions amount to around $2 million, which is about 1.5 percent of its overall operating budget.
We believe the council worked hard on this budget and thank them. We believe they researched, studied and anguished and did their best. Few understand the challenges of operating a county such as our leaders. But perhaps they didn’t make the tough call to cut spending and reduce services when they should have. If the county’s financial picture doesn’t improve within the next year, we recommend the council take a harder look at reducing spending, rather than raising taxes again. We believe Kagawa said it best and ask him to lead the way:
“We need to tighten the belt, not let the leash go and let the departments be in control of their own budgets. This wouldn’t even have an affect on the public because some of these departments have that fat in their budgets, so they can make administratively wise decisions to not perform certain things that aren’t necessary and just do what is essential.”
