Tax casualty? Maui County Carnival

The second Maui County Carnival, scheduled for April 6-9, has been canceled. Skyrocketing state government fees have been blamed as one reason for the cancellation.

In April 2016, E.K. Fernandez Shows brought the carnival to Maui for four days at the War Memorial Complex in Wailuku. The inaugural event featured rides, games, food, entertainment and special attractions. The Boys & Girls Club on Maui was the primary nonprofit beneficiary of the carnival.

This year, E.K. Fernandez Shows announced that it was cancelling the carnival. The company cited huge increases in shipping rates, over 40 percent in the past three years, which they said made it almost impossible to ship the necessary equipment from Oahu to Maui. They said that they tried unsuccessfully to negotiate a more competitive shipping rate with the shipper.

In Hawaii, there is only one company licensed to provide interisland shipping, namely Young Brothers. A company spokesman said that E.K. Fernandez was offered a special charter voyage to take all the equipment over on a single trip, the rate for which was about 9 percent higher than it was in 2016. More than half of the increase, around 5 percent, was blamed on an increase in state wharfage fees.

Wharfage fees are what the state Department of Transportation, Harbors Division, charges shippers using the harbors in Hawaii. As we reported earlier this year, wharfage fees charged by the Harbors Division were hoisted 17 percent on Feb. 1, 2017, with two more double-digit increases swiftly coming down the river: 15 percent to hit on Oct. 1, 2017, and another 15 percent on July 1, 2018.

At our governor’s office, no one seems to be fazed by the magnitude of the increases. Instead, in a news release dated Feb. 7, the governor commended the state DOT when Standard & Poor’s upgraded its rating of Hawaii’s harbor system revenue bonds. Per the release, the upgraded rating “reflects a positive view” of the Harbors Division’s actions, including “[r]ecent and frequent tariff increases that have allowed for consistently strong debt service coverage given rising costs,” and “[e]xceptional liquidity position in unrestricted cash, equal to almost five years of operating expenses.”

If we are holding five years of operating expenses in unrestricted cash, why aren’t we considering paying down some of these bonds (which represent borrowed money)? Money sitting around in the bank is certainly not drawing more interest income compared with the interest expense we are paying to float the bonds. In addition, the last thing we want to do is have a wad of cash sitting around waiting for some legislators to think up ways to raid it as they have tried to do with other programs such as GEMS (which also involves lots of borrowed money).

And then, does anyone realize that these recent and frequent tariff increases get baked into the costs of the clear majority of goods and many of our services? If these are praiseworthy in our government’s mind, then it is no wonder we have an astronomical cost of living.

The Maui County Carnival may be one casualty caused by this mentality. Let’s hope that our policymakers can take a more expansive view of what it takes to boost the general welfare of our state.

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Tom Yamachika is president of the Tax Foundation of Hawaii.

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