LIHU‘E — Starting today, the Kaua‘i County Council begins a four-day review of the supplemental budget for Fiscal Year 2013 submitted Tuesday evening by Mayor Bernard Carvalho Jr.
On March 15, Carvalho sent the council his proposed budget for the upcoming fiscal year, beginning July 1. By law he is allowed to send a second version — the supplemental budget — on May 8, after the council has spent a few weeks scrutinizing the original submittal.
Tuesday’s submittal proposes a tax increase for land rates in the single-family residential tax class and increases land and building taxes for the hotel and resort class.
In the last three years, hotel and resort tax class collections dropped $2.2 million due to decreasing real estate values.
“We understand that this a revenue-neutral position … but the bottom line is we do not want our taxes to increase,” Aston Islander on the Beach General Manager Sandi Kato-Klutke told the council on Wednesday.
Kato-Klutke is also the chair of the Hawai‘i Hotel and Lodging Association’s Kaua‘i Chapter.
In case property values go up again, “there is no way” the council would reduce rates, she said.
Council Chair Jay Furfaro said the council can revisit rates each year.
Pono Kai Resort General Manager Peter Sit was also at the meeting, but did not testify. He said he came to show support for Kato-Klutke.
The revenues collected from the hotel and resort tax class in FY 2010 was $17.57 million and in FY 2011 was $15.38 million. In the current fiscal year, their tax bill dropped again, to $14.94 million.
If their rates remain the same, their bill will drop even further — the county will collect $14.41 million from them in the upcoming fiscal year.
The proposed increase would allow the county to collect almost exactly the same revenues from the hotel and resort class next year.
Kato-Klutke, however, said hotels that invested millions of dollars in renovations, such as the Sheraton in Po‘ipu and the St. Regis in Princeville, will likely get penalized because their property values have increased with the renovations.
Lowest tax rates statewide
Kaua‘i is the only county in Hawai‘i that divides property tax rates in land and building values.
The new budget proposes single-family residential land rates, currently at $3.95 per $1,000 of land value, to increase to $4.85 per $1,000. The tax rates for buildings in this tax class would remain at $4.25 per $1,000 of the structure’s value.
The proposed increase in hotel and resort rates would bring those taxes to $7.14 per $1,000 of land value and $8.20 per $1,000 of building value. This tax rate currently is $6.90 per $1,000 of land value and $7.90 per $1,000 of building value.
The average between land and building value that the hotel and resort tax class pays is $7.40 per $1,000 of value. Carvalho’s proposal raises this average to $7.67.
By comparison, the hotel and resort tax class pays $12.40 in Honolulu, $9.85 on Big Island and $9 on Maui.
Kaua‘i is the only county in Hawai‘i that allows the mayor to submit two budgets each year; one on March 15 and another one in mid-May.
On Wednesday, the council passed on first reading a resolution that would ask voters in the November elections if they wish to amend the Kaua‘i County Charter to allow the mayor to send only one budget, on March 15.
“It makes our budget process very dysfunctional,” Council Vice Chair JoAnn Yukimura said.
Councilman Mel Rapozo called the process “unfair,” because after the council spends weeks reviewing the first submittal, they have to start all over again, and have only four days to make a decision.
Furfaro said if the council does not reach a decision by Tuesday, the March 15 submittal becomes law.
The resolution will now go to a public hearing before the council makes a final decision. For it to be into this year’s ballot, the council has to reach a final vote by June 13.
Visit www.kauai.gov for more information.
• Léo Azambuja, staff writer, can be reached at 245-3681 (ext. 252) or lazambuja@ thegardenisland.com.