Editorial: Less property tax take will mean city squeeze
The city’s Real Property Assessment Division is now wrapping up distribution of notices to Oahu property owners informing them of their assessments for the 2020-21 tax year.
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The city’s Real Property Assessment Division is now wrapping up distribution of notices to Oahu property owners informing them of their assessments for the 2020-21 tax year. And with the total value of properties dropping for the first time since Mayor Kirk Caldwell started his first term, Honolulu Hale is due for some belt-tightening.
Property taxes, based on assessed value of real property, serve as the city’s largest source of revenues. Since 2013, total assessments have bumped up between 5% and 10% annually. With more tax money flowing in, city expenditures have increased each year.
That trend was fueled, in part, by a now-stalling six-year streak of records for median single-family home and condo prices. This year, the total value of Oahu properties increased by only 1.7%. The upshot could be some abrupt constraints on the city’s budget.
Caldwell maintains that tough choices will have to be made as the fiscal year 2021 budget is pieced together to take effect in July, and he is rightly stressing an aim to avoid a hike in property tax rates. The city should look internally, taking inventory of its more than two dozen departments and agencies to prioritize possible spending trims.
The challenge to make financial ends meet is sure to be compounded by questions tied to the $9.2 billion East Kapolei-to-Ala Moana rail project. For completion of construction, the subsidy from the city budget, as approved by the City Council, is now capped at $214 million in Capital Improvement Project (CIP) funds. But the price tag for operations has no cap.
In March, anticipating the need to step up staffing for the opening of the 20-mile rail line’s first segment in December 2020 and pay for growing fixed costs for employees, Caldwell called for various increases in fees for city services — and raising property tax rates in the categories of hotel-resort and high-end Residential A, homes valued at $1 million-plus not occupied by owners.
The Council took the recommended action, which establishes a rail operations funding stream. Before any attention turns to also sizing up residential rates to feed the stream, the city must show taxpayers that its overall operations are as fit and lean as possible.
With this year’s nearly flat growth in property assessments, rigorous scrutiny is in order, as any increase in one agency’s budget likely means reduction elsewhere. And clearly, at least a few agencies are struggling, including the Honolulu Police Department.
This summer, HPD, which has the capacity for slightly more than 2,140 sworn officers, had upwards of 200 job vacancies. In recent weeks, the staffing shortage has intensified community safety concerns as police investigate a string of high-profile violent crimes.
Also, there’s a job vacancy rate topping 40% in the Department of Facility Maintenance’s division that handles road repairs. The reasons for the staffing shortfalls vary — from baby boomer retirements to low unemployment statewide. Regardless, efforts should be redoubled to continue providing basic city services funded by taxpayers.
The city’s fiscal 2020 budget package includes a $2.83 billion operating budget and a $1.16 billion CIP budget. With drafts for the 2021 budget on the horizon, capital trims should include the envisioned $772 million redevelopment of Neal S. Blaisdell Center. While that complex, which opened in 1964, is looking dated, there are valid questions about whether community support, timing and scope of the ambitious redevelopment plan are on the mark.
City leaders — and those who will pick up decision-making after Caldwell’s term, along with those of several Council members, end next year — must focus on efficiency in city functions and stability in taxes and fees.