Increases in property values coupled with an improving economy should provide enough revenue to balance the county budget without having to raise property taxes this year, despite across-the-board salary hikes for county employees covered by collective bargaining agreements.

“There will be no tax increase,” Mayor Billy Kenoi said in an interview Friday with West Hawaii Today. “We’re looking forward to submitting a balanced budget while meeting our collective bargaining agreements and maintaining level funding for county departments.”

The union raises, negotiated at the state level, add about $15 million to the county budget this year.

Following weeks of staff meetings and number-crunching, the budget is not quite complete, the mayor emphasized. The county is working under an estimate of property values similar to last year’s, because the new numbers haven’t yet been finalized.

Still, council members contacted Friday saw good news in Kenoi’s comments. Several found last year’s property tax hikes distasteful and had no plans to repeat the process if it could be avoided this year.

“We’re pleased to hear that the mayor’s not planning to be proposing any new property taxes,” Council Chairman J Yoshimoto said. “We’re very excited to be getting the budget to see what we can do to help make our community more safe and secure.”

Kenoi plans to submit his proposed budget to the County Council late this week. The council will undertake a line-by-line scrutiny of the budget with each county department April 2 to 4. The mayor then submits an amended budget May 5 that takes into account certified property values.

The council has until June 30, the last day of the fiscal year, to pass a budget or the mayor’s budget automatically goes into effect.

Last year’s $394.3 million budget was $27 million, or 7.4 percent, higher than the prior year’s budget, but still $8.9 million less than when Kenoi took office in 2008.

Coming out of the recession, the council agreed to raise property taxes from 10.2 to 10.8 percent, depending on property classification. That translated to about $150 more a year in taxes for the owner of a $250,000 home.

The tax hikes, coupled with significant hikes in fees, were unpopular with many residents, but most council members saw them as a necessary evil in order to prevent severe cutbacks in county services.

“I’m happy to hear that news from the mayor,” North Kona Councilwoman Karen Eoff said. “We had made a collective group statement that we were not going to do that again.”

Property taxes are by far the biggest source of revenue for county government. The county’s share of the transient accommodations tax, a surcharge on hotel rooms and short-term rentals, is second. The county also brings in revenue from state and federal grants, interest and user fees.

Eoff said she’s hoping the mayor finds $1.5 million in the budget to divvy among nonprofits. The administration is required to give out $1 million annually in nonprofit grants, but Kenoi has historically kicked in the extra $500,000.

Last year, motorists saw their total state and local taxes and fees rise annually by $24.70 to $176.70, the first county increase since 2004. Bus riders now pay $1 more a trip, with regular riders charged $2 and seniors, students and disabled paying $1.

In total, property taxes raised $216 million last year. The residential classification, mostly second and third homes or homes not under the homeowner exemption, accounted for the largest chunk of that with $64.6 million in taxes, followed by agriculture and native forest with $41.4 million, apartments with $38.1 million and homeowners with $31.9 million.

Commercial, hotel and resort and industrial, with much lower property tax rates, accounted for $14.2 million, $12.5 million and $9.2 million, respectively.

The council voted 7-2 to raise property taxes, with South Kona/Ka‘u Councilwoman Brenda Ford and Puna Councilman Greggor Ilagan voting no.

The council passed Resolution 115-13 raising property taxes after inserting this language: “Be it further resolved that the Council shall take affirmative steps to decrease the overall schedule of real property tax rates by 10 percent prior to the Fiscal Year beginning July 1, 2014, and ending June 30, 2015.”

That language could make budget-setting more challenging this year, but it’s not yet known how council members will approach it.

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By Nancy Cook Lauer
West Hawaii Today