Honolulu has been releasing contaminated wastewater into the ocean for decades, in violation of federal law, and by court-supervised consent decree, the city must give its sewage treatment plant a $2.5 billion upgrade to meet U.S. clean water requirements. There is no room for delay in addressing this responsibility: It’s been over 14 years since the consent decree took effect on Dec. 17, 2010, and Honolulu’s wastewater system users now bear the increased costs added by inflation and inaction.
The new fiscal year is now just weeks away, and the city’s plan to finance and pay for wastewater improvements should be implemented by that date for the sake of fiscal responsibility and stability — and the city’s environmental responsibility to avoid fouling our ocean waters. However, the Honolulu City Council is still offering up alternative ideas on wastewater fee increases — including a shift of money from Oahu’s transient accommodations tax (TAT) collections.
Bill 43, which includes this proposal, passed its first reading on Wednesday. It’s a well-intentioned effort to diminish the immediate burden on ratepayers — but it’s based on dubious budgetary and regulatory assumptions, and must be put aside for the long-term good of the city.
Honolulu is legally bound to upgrade its sewage treatment plant by Dec. 31, 2035. After commissioning a study to analyze costs and options, the city first proposed a plan to increase rates by 9% for each of six years, beginning with the fiscal year starting July 1, then by 8%, 7%, 6% and 5% in the fiscal years beginning July 1, 2031 through July 1, 2034. This proposal also shifts the rate structure to draw about 50% (down from 73%) of ratepayer revenue from a base usage charge and 50% from a volume charge — shifting costs to customers using more water, so that customers using less would see smaller increases.
This plan is based on obligation and takes the impact of rising rates into account — but also soundly calculates anticipated need. Every Oahu resident hooked up to the city’s sewer/wastewater system contributes to the costs of this service under this better proposal — which the City Council passed on second reading as Bill 60 (2024), CD1 in April before stalling; it should be revived.
The newer, ill-advised Bill 43 seeks to upend Bill 60. On Monday, city Department of Budget and Fiscal Services Director Andy Kawano warned the Council that the proposal would “negatively impact” the general fund by shifting TAT revenues away from their intended purpose: funding city services, mitigating visitor impacts and supporting Skyline construction.
In other words, diverting general fund monies is fiscally irresponsible, leaving a deficit for those needs that also burdens taxpayers, in that it “may lead to service reductions or tax increases to balance the budget in future years,” as Kawano said, when bills for rail, public safety, city salaries and other needs come due.
For that very reason, it’s an established budgetary expectation that “enterprise funds, such as the sewer fund, are structured to be financially self-sustaining through user fees,” he explained. Redirecting tax revenues to an enterprise fund could also violate legally binding bond (borrowing) agreements, leading to downgrades to the city’s bond rating, then higher interest rates and more expensive borrowing costs.
This concern for the city’s fiscal stability, credit rating and borrowing power is vital, and must be maintained.
The City Council’s concern over escalating costs for residents’ basic expenses, including wastewater disposal, is commendable. Nonetheless, repair, maintenance and regulatory compliance are obligations that cannot be sidestepped, and they are best budgeted for with dedicated funding — in this case, user fees — not by commingling revenue sources.
