Mayor Kirk Caldwell is emphasizing fiscal austerity in his 2016 fiscal year budget, which includes reductions in capital spending and no new taxes or fees.

“The budget is a no frills budget,” said city Managing Director Roy Amemiya, who presented the budget in the mayor’s absence. Caldwell is out of town on a personal trip.

The $2.3 billion operating budget represents a 6.5 percent, or $139 million, increase in spending from last year. The bulk of that represents increases in non-discretionary costs, debt service and the mayor’s proposal to increase the funding deposited into a fund reserved for emergencies.

Mayor Kirk Caldwell responds to questions during joint a legislative hearing in January.

Cory Lum/Civil Beat

The city’s capital budget has been slashed from $709 million for the 2015 fiscal year to $494 million for the upcoming year in order to reduce debt service payments and prepare for added rail costs.

The city is facing a roughly $1 billion funding shortfall for the rail project. The cost of the project was initially pegged at $5.2 billion, but cost overruns have been mounting. While the the mayor lobbies the Legislature and top state officials to extend a surcharge on the General Excise Tax to fund the project, rail officials are asking the City Council to float $350 million worth of city bonds to help with short-term financing.

“To best position itself for this, the city needs to rein in spending and build prudent levels of reserves in order to demonstrate its ability to underwrite future financing and capital projects, including rail construction,” according to the mayor’s budget summary.

The mayor’s budget proposals mark a reversal from last year, when Caldwell sought to raise taxes on expensive homes owned by non-residents, increase taxes for hotels and resorts, charge residents $10 a month for trash service and raise city revenue by placing advertisements on the sides of buses.

The City Council killed the trash fee and bus ads, while reducing the tax increases. Council Budget Chair Ann Kobayashi criticized the mayor for overburdening cash-strapped residents.

Caldwell also plans to transfer $30 million into the city’s rainy day fund for emergencies such as a hurricane or tsunami.

Spending Plan

Some $142.5 million in spending would go toward federally mandated sewer improvements and $110 million to the mayor’s road repaving project — representing more than half of the city’s capital improvement budget. The mayor has pledged to repave 300 lane miles of substandard roads a year.

The capital budget also includes $13.4 million for park improvements throughout the city, including $920,000 for Maili Beach Park restrooms, $500,000 to fix beach park sewage systems and $700,000 to renovate the restroom at Sandy Beach. Some $1.5 million would go to improving Thomas Square park and $3.2 million for Ala Moana Regional Park.

The administration has also included $20 million in the budget for the purchase of new city buses and Handi-Vans for the disabled. Most of this woul be funded by federal dollars, known as 5307 funds, even though they have been promised to the rail project. Both Caldwell and City Council members have pledged to take the 5307 funds out of the rail budget, but will now have to come up with $210 million in replacement money.

The mayor also hopes to use $18 million to build low-income housing, which would be overseen by his new Office of Strategic Development. He is also seeking $654,000 this upcoming year to support salaries for the office.

Another $5 million has been earmarked in the capital budget to support the development of an integrated bus and rail fare system. The mayor also plans to spend $1.7 million in operating and capital funds to support development plans along the rail line, including projects along the Blaisdell cultural corrider, Kapalama canal and at the Pearlridge bus transfer station.

Addressing the city’s homelessness problem continues to be a priority for the mayor, who has increased the Housing First budget from $3 million last year to $5.5 million this year. The funding aims to support housing and services for more than 200 long-term homeless people, many of whom suffer from mental illness and drug and alcohol abuse.

The mayor has also set aside $4 million in the capital budget to put solar panels at the H-Power facility, which burns the city’s garbage and converts it to electricity.

Managing Debt

The city is facing a $1.7 billion unfunded liability for retiree health benefits. Caldwell is proposing to spend $51.5 million this year to help pay it off, as opposed to the $30.8 million minimum required by state law.

“We feel it is very important to work on this problem and not kick the can down the road,” said Amemiya, who added that it could take decades to resolve the problem.

The city is also facing a sharp increase in debt service in the coming years. For general and highway projects, debt payments are expected to increase from about $160 million in 2015 to over $300 million in 2020.

Debt service is the biggest expense in the 2016 operating budget, comprising nearly 20 percent.

The administration is seeking to end the city’s practice of paying only the interest on bonds for five years, which increases costs in the long run.

The administration is also seeking to transfer $24 million in equipment purchases for such things as fire trucks, street sweepers and police vehicles, from the capital budget to the operating budget — paying for the items in cash as opposed to 25-year bonds. 

The proposed budget is sure to change in coming months as it goes to the City Council for approval. Council members are likely to insert their own spending priorities while amending the mayor’s proposals. The council must pass a balanced budget by this summer.