Council budgets to help businesses hurt by rail

A $2 million fund aimed at helping business owners adversely affected by construction of the city’s contentious East Kapolei-to-Ala Moana Center rail project is included in the latest version of the city’s $2.45 billion operating budget.

Bill 25 cleared a preliminary vote of the City Council Budget Committee this week, as did other measures tied to Mayor Kirk Caldwell’s budget package for the 2018 fiscal year that begins July 1.

Lynn Elisala, who owned Kristen’s Kitchen and four related lunch wagons, said she’s hoping the fund will help her family pay off some of the debts incurred when they were forced to shut down after even diehard customers stopped coming because of the inconvenience caused by rail construction.

Daily revenue for the popular Waipahu restaurant was $1,000 when the construction project moved into her neighborhood in January 2015, Elisala said.

“In five short months, that amount had dropped to $200 a day,” she said. “Our staff of 21 was all laid off.” By November of that year, the business started by Elisala’s late husband in 1998 was forced to close.

The Council passed a transit project mitigation plan for businesses two year ago, but city officials — and businesses like Kristen’s Kitchen — later learned that glitches in the appropriation’s language prohibited the money from being used. “Had there been money available to us via the mitigation fund, we would still be operating a thriving restaurant and four lunchwagons on the Pearl Harbor-Hickam base,” Lynn Elisala said.

The family was finalizing plans to relocate and was banking on the promised mitigation fund to help them do that, said Russell Elisala, Lynn’s son and Kristen’s onetime head chef.

Now they hope they can tap into a new fund to pay off the landlord who sued after they stopped paying rent when Kristen’s was forced to shut down.

City Budget Director Nelson Koyanagi told the Budget Committee that because the current proposal calls for the mitigation to be in the form of real property tax breaks, it would not help business people who did not also own the property, such as the Elisalas.

Budget Chairman Joey Manahan amended the language in the budget proviso to require Koyanagi’s department to come up with a mechanism to help business owners affected by the project, even if they didn’t also own the property.

During a seven-hour meeting Tuesday, the committee’s biggest move came at the beginning when Manahan announced the shelving of two measures aimed at increasing the city’s at-the-gas-pump fuel tax by 3.5 cents per gallon to 20 cents a gallon. Council members will now need to find $10.85 million in annual revenues that the tax increase was supposed to bring in.

The committee also advanced a property tax plan that increases the rate for hotel-resort owners by 50 cents per $1,000 of assessed value, to $13.40 per $1,000; and a revised plan for Residential A property owners that taxes the first $1 million at $4.50 per $1,000 and $9 per $1,000 for any value after that.

The hotel-resort class rate hike was opposed by Outrigger Enterprises Group and the Hawaii Lodging and Tourism Association. Outrigger executive Max Sword questioned why hotel and resort owners are being hit with the large hike when no rate increase is proposed for the commercial property category. The increase would force hotels to pass on the added expense to visitors when the tourism industry already has to compete with other destinations, he said.

The Residential A category consists of residential properties that are valued at more than $1 million and don’t have a homeowner exemption. Residential A property owners currently pay $6 per $1,000 of assessed value while standard Residential class owners have continued to pay $3.50 per $1,000 for a number of years. The new, tiered system is designed to lessen the financial impact on property owners whose values have skyrocketed over the $1 million threshold.

The $4.50 and $9 rates were chosen to ensure the impact to the city budget would be “revenue neutral” from the operating budget submitted by Caldwell in March, Koyanagi said.

The tax rate schedule does not reflect an across-the-board increase of 8 to 14 percent that Caldwell this week warned would be needed for a 20-mile rail line if the state Legislature does not provide a 10-year extension on Oahu’s half-cent surcharge on the general excise tax to pay for the $8 billion-plus project’s construction.

The House approved a bill Tuesday that would extend the surcharge only two years, to 2027. But the measure now must go to a Senate-House conference committee, which could still give the city the 10-year extension.

Manahan told the Star-­Advertiser after Tuesday’s meeting that he’s hopeful a 10-year extension will be passed so the Council can avoid a discussion on raising property taxes for rail construction.