Tavares Testifies: Maui Shortfall will Jump to $73 Million Without TAT Revenues

By Wendy Osher

Maui Mayor Charmaine Tavares will testify today before the House of Representatives’ Committee on Finance at the State Capitol.  Tavares is expected to comment on House Bill 2598 Relating to Transient Accommodations Tax or TAT- which proposes to suspend the distribution of revenues to the counties.  The three year suspension, if approved, would run from July 1, 2010 to June 30 2013.

Tavares said that even with the county’s share of the TAT, Maui is facing a significant revenue shortfall of around $53 million.  “Without the TAT, our shortfall jumps to $70 – $73 million,” said Tavares.  “Making up for these shortfalls puts a huge burden on county taxpayers,” she said.

In written testimony dated February 16, 2010, Tavares said, “The TAT is not a hand out from the State to the Counties—it is a share of what is generated in each county.”

“The visitors will continue to pay the taxes, but if the State takes back our share, we will have an additional 17-20 million dollar shortfall that will have to be made up by County taxpayers,” said Tavares.

Tavares estimates that under the current formula, Maui County would receive 84 cents out of the $12.25 collected in taxes on a room that costs $100 per night.

Tavares said Maui County invests over $3 million in county funds to support the visitor industry.  “We recognize the importance of this industry to the economic well-being of our County,” said Tavares.  She continued, “The investment directly impacts how much TAT is collected.”

In her testimony, Tavares urged the legislature to examine all sources of state revenue including special funds and the state’s own taxing authorities.

“Shifting the responsibility from the State to the County property tax payers and the fee/rate payers for County services, is not fair and undermines the partnership with the State that we have enjoyed in the past,” said Tavares.

VIDEO: Tavares Issues Challenge on TAT in her State of the County Address

By Wendy Osher

In her fourth State Of The County Address today, Maui Mayor Charmaine Tavares challenged the state administration and the Legislature to examine other sources of revenue before cutting the counties share of income from the hotel room tax.

Maui Mayor Charmaine Tavares, State of the County 2010. Photo by Wendy Osher.

“Taking away the TAT revenue from the counties breaks a promise and shifts the tax burden for these costs from the visitors to local residents,” said Tavares.

Tavares said, without the Transient Accommodation Tax revenues, the county’s shortfall will rise from $50 million to $70 million.  Fellow Mayor Mufi Hannemann agreed with Tavares saying the counties at the end of the day are the key to the visitor industry.

“You can do all the marketing in the world.  But if people don’t feel that it’s safe to visit Maui, the Big Island, Kauai and Honolulu, they will not come.  That’s what we do: we’re the home of the first responder, we fix the infrastructure, we maintain the parks, we’re there 24-7.  So that’s a very important message that was said today,” said Hannemann.

In addressing the county’s economic climate, Tavares said she wants no part of the layoffs seen at the state level.  She said the options are simple:  a combination of raising revenues and cutting spending.

“In my mind, we must have a combination of those choices—reduce services and raise revenues—to find a balance that will enable us to keep our community strong,” said Tavares.

Looking ahead to the future Tavares said, the county’s “quest for energy independence through renewable energy resource development is one of the most important programs our county can pursue to ensure success in the future.”

MAUI COUNCIL PASSES 2010 BUDGET UNANIMOUSLY ON 2ND & FINAL READING

The Maui County Council unanimously passed the FY2010 budget on second and final reading this morning.  The budget is $8.8 million less than the Mayor’s $573 million proposal, which translates to a 1.5% difference.

Budget Chair Joe Pontanilla discusses the TAT impact on the county budget during a public hearing in Lahaina.  File photo by Wendy Osher

Budget Chair Joe Pontanilla discusses the TAT impact on the county budget during a public hearing in Lahaina. File photo by Wendy Osher

Budget Chair Joe Pontanilla described the budget as austere and tight for both county departments and nonprofits, but also noted the flexibility presented by the program budget.

“In a program budget, the departments have the option of using funds from vacancies to fund operational needs, including filling vacant positions in situations where the Council reduced the funding,” said Pontanilla.

With $12.5 million in vacancies throughout the county, and additional funding in fringe benefits, Pontanilla said the county already has $21 million in funds appropriated within departments for vacant positions.  Pontanilla noted that the council is not deleting any of the current equivalent personnel, but rather reducing funding for vacant positions.

With amendments already hammered out during first reading two weeks ago, the budget passed in less than an hour with all council members casing 9 ayes in support.

Although she supported the budget, Councilmember Gladys Baisa, was the only one to do so with reservations.   Baisa expressed concern over funding cuts to services within the Department of Parks & Recreation and the Department of Fire and Public Safety saying, “I’m afraid there’s only so much we can cut before it becomes diminishing returns.”  At the same time, she voted in support of the budget with a “margin of confidence” in the work and thought put into the budget by the committee chair.

The committee held 22 meetings in the council Chamber over a six week period to discuss the Mayor’s proposed budget.  The members also held eight district meetings to receive public testimony on the budget from residents throughout the county.

“Should the Administration find that it cannot operate with this budget,” Pontanilla said, “the Mayor has the option of proposing a budget amendment to recognize additional revenue or reallocate funds.”

“I feel we acted cautiously, judiciously and responsibly in bringing about a fiscally prudent budget,” said Councilmember Bill Medeiros who represents East Maui.

Similar remarks were made by fellow Councilmember Michael Victorino who described the budget as “fiscally prudent and lean.”

Lanai Councilmember Sol Kahoohalahala said despite the tough year, the circumstances gave the council the opportunity to look at ways of being innovative and creative.

Council Chair Danny Mateo meantime reflected upon the “sobering moment,” of being faced with the possibility of losing the county’s share of the Transient Accommodation Tax or TAT.  Although the state legislature failed to pass a measure relating the to the item, Mateo said, “The bottom line is we have made a change from business as usual.”

Councilmember Jo Anne Johnson of West Maui agreed that the 11th hour decision on the TAT complicated the budget process.  In cutting and then restoring $4 million in road resurfacing funds, Johnson said, the council was diligent in assuring that provisions were added to address issues of accountability.

Fellow Councilmember Mike Molina said he does not expect the TAT issue to go away next year, summing up the approach to the 2010 budget in a few words:  “We did a lot of belt tightening; I guess you could say we’re on a diet.”

(By Wendy OSHER © 2009; file image by Wendy OSHER ©2009)

Related stories posted earlier:

COUNCIL UNANIMOUSLY PASSES BUDGET ON FIRST READING:

DEPARTMENT HEADS FIGHT FOR RESTORATION OF FUNDS IN FINAL BUDGET DELIBERATIONS

MAUI COUNCIL UNANIMOUSLY PASSES BUDGET ON FIRST READING

The Maui County Council unanimously passed an amended budget on first reading this afternoon.  Council Chair Danny Mateo said that not everybody got what they wanted, but “during these tough economic times, the bottom line is to live within one’s means and take an efficient approach.”

File Photo:  Budget Chair Joe Pontanilla speaks to the public at a hearing held at the Lahaina Civic Center earlier in the budget process calling for support in maintaining the county's share of the hotel room tax or TAT.  Photo by Wendy OSHER 2009.

File Photo: Budget Chair Joe Pontanilla speaks to the public at a hearing held at the Lahaina Civic Center earlier in the budget process calling for support in maintaining the county's share of the hotel room tax or TAT. Photo by Wendy OSHER 2009.

The council reinstated $4 million in funding for road resurfacing.  Budget Chair Joe Pontanilla said the funds are available to match federal or state grants that may arise, and also to address resurfacing requirements and needs within the county.

Chair Pontanilla also recommended an amendment to reduce the county’s bond debt by $7.5 million by moving projects that were considered for bond to cash.  Pontanilla said the move effectively brought down the bond debt as recommended by the County Finance Director.  In reducing bond debt, three projects that had gone from bond to cash including: the old Wailuku Post Office, a portion of the Kihei Police Station, and the South Maui Community Park.

The council also restored a half million dollars in funding to purchase a dozer for the county Department of Environmental Management, and restored funding for positions that had been noted as vacant, but actually had already been filled.

While county directors testified in support of their respective programs this morning, the council did not take action on a number of requests including the Visitors Bureau’s recommendation to reinstate funding for marketing on Maui.

In finance department, the council added two positions to support the real property tax division in its active pursuit to go after delinquent taxes.

Pontanilla said, “Rather than recognizing $18 million dollars in transient accommodation taxes, the county recognized only $17 million because of the continued reduction in tourism.”

The budget passed with 9 votes in support of the amended document and resurfaces for second reading on May 28th.

(By:  Wendy OSHER © 2009)

DEPARTMENT HEADS FIGHT FOR RESTORATION OF FUNDS: MAUI COUNCIL IN FINAL BUDGET DELIBERATIONS

More than a dozen people signed up to testify today on the county budget as the council resumes deliberations in the hopes of finalizing the document.

File Photo of Council Members in Chamber. By Wendy Osher.

File Photo of Council Members in Chamber. By Wendy Osher.

The council had trimmed $18 million from the budget earlier this month amid uncertainty over access to the county’s share of the transient accommodation tax (TAT).

Since then, a proposal to use the county funds to balance the state budget did not have enough support in the state legislature to advance this session.

That leaves the council with the option of restoring all funding, partial funding, or saving the money in anticipation potential further declines in revenue.

Maui Managing Director Sheri Morrison, testified in support of restoring funds for two departments-the Management Information Systems Program (MIS) and the Geographic Information System (GIS) Division.  Morrison is asking for the restoration of $45,000 for the replacement of 30 personal computers at MIS to keep on pace with the department’s replacement schedule.  She also wants $46,000 restored for the GIS technician position.

Terryl Vencyl, Executive Director, Maui Visitors Bureau expressed concern over the H1N1 outbreak and its impact on tourism. According to Vencyl, the Mexican government has put $15 million on the table for marketing to draw back tourism as soon as the CDC lifts its travel advisory in that country.  Vencyl said the mindset prior to the flu was one of frugality.  She said the outbreak gives the consumer yet another reason to determine how and when they schedule a vacation.

Vencyl hopes to strengthen its arsenal in the marketing arena saying, “Our people are stepping up to the plate, we just need to stay out there with the message that this is a place to come, this is a place of value and the experience that they have here is not one that they will get anywhere else.”

In the public works department, Director Milton Arakawa testified requesting a restoration of funds for road resurfacing, base yard repairs and eliminated or reduced positions.  The request includes a restoration of funds for $41,040 for an Engineering Aide II Position, a post that Arakawa says completes a 3-person surveying crew and eliminates the need for the department to hire and outside consultant.  The request also calls for restoration of funds for a $34,000 a year labor position, $35,000 for road bridge and drainage maintenance in Makawao and millions of dollars in road resurfacing in all 8 districts of Maui County.

Lori Tsuhako, the Director of the Department of Housing and Human Concerns, was among the list of people who want the council to revisit the 2010 budget.  Tsuhako is requesting a reinstatement of funding for expansion positions and existing positions where funding was reduced including positions in affordable housing and administrative grant funding positions.  Another positions affected is the half time Nutrition Program position on Molokai.  Tsuhako says that without this position, the department would not be able to deliver meals to dozens of Molokai residents.

In the Parks Department, Director Tamara Horcajo is requesting a restoration of funding for the department’s park caretaker positions, $350,000 for countywide maintenance, and funding for a South Maui District Supervisor.  Horcajo said the part time care takers allow county operations to continue on the weekends and evenings without incurring overtime costs.  Without the South Maui District Supervisor position, Horcajo said the growing south Maui Community  is left with 2 full time positions for 2,500 kids.

The morning hearing will be followed by the regular meeting of the Maui County Council.

(By Wendy OSHER © 2009)