To avoid having to furlough or lay off employees, the City and County of Honolulu has asked each of its departments to propose cuts of 5% to 10% of their operating expenses.

The island’s local government is facing a decrease in revenue amid the COVID-19 pandemic, according to Budget and Fiscal Services Deputy Director Manuel Valbuena. The cuts are an effort to ensure no one loses their jobs.

“Just like any household, if your revenue is down, you tighten your belt, you reduce your expenses so that you can still eat and pay your mortgage,” he said. “We don’t want furloughs, we don’t want a reduction in force and we don’t want to lay off any of our employees.” 

Honolulu City Hall Honolulu Hale Real Property Tax Collection window. 8 aug 2018

Honolulu has a $2.9 billion operating budget, made up largely of property taxes.

Cory Lum/Civil Beat

Property taxes for the first six months of 2020 were due on Aug. 20. The total billed was $729,049,408, Valbuena said. As of Monday, the city collected only $647,334,075 – just under 89%.

This year, taxpayers were allowed to pay in installments on Sept. 20, Oct. 20 and Nov. 18. The city is hoping to make up the difference with those October and November payments, Valbuena said.

Valbuena didn’t know what percentage of taxpayers are taking advantage of the installments.

Honolulu has suffered other revenue losses too. Usually, Honolulu gets about $45 million in state transient accommodations taxes.

Now, Valbuena said: “There is no TAT.”

“Without the rental cars and tourism, that means fewer taxes,” he said. “All our attractions – golf, Blaisdell, Waikiki Shell – that have revenue, are closed. So that has an effect.”

City Councilman Joey Manahan, who chairs the budget committee, also noted revenue losses in the fuel tax, parking fees and zoo admissions.

It’s too early to tell what the impact of those revenue losses will be, Valbuena said, but he’s “cautiously optimistic” about the city’s financial position.

While the state is considering worker furloughs and layoffs, Valbuena said that would be the city’s “last option.”

Each department was asked to examine how it could cut up to 10% of its use of the general fund, highway fund and subsidized funded appropriations “with minimal adverse impacts to core service operations,” according to Valbuena’s memo.

Councilman Joey Manahan, pictured on a day of COVID-19 testing in Kalihi.

Anita Hofschneider/Civil Beat

Responses were due last Friday, but some departments haven’t yet submitted their plans. Valbuena said he hadn’t reviewed the plans yet, but when he does, he will make recommendations to the administration. Valbuena is running the department while BFS Director Nelson Koyanagi is on medical leave.

Asked to share copies of those documents, Valbuena said he wasn’t sure if they were able to be released to the public. Civil Beat filed a public records request for them on Tuesday.

Cost reductions could be accomplished not only by cutting expenses but deferring them too, Valbuena said.

“The economic environment may change,” he said. “You’ve just got to have plans.”

Honolulu “dodged a bullet” this year, according to Manahan, but he said it’s unclear how much longer the city can go without property tax increases. Even if revenue was flat, costs for employee salaries and retirement benefits, dictated by collective bargaining agreements, are always going up and may force the city to compromise on services, he said.

“To be honest with you, the council next year is going to have a harder time,” said Manahan, who is term-limited and vacates his seat in January. “Maybe next year they might be able to get away without having to do revenue enhancements, I’m not sure, but maybe the year after that, we’ll see.”

Raising property taxes would be tough on individuals and businesses that are already struggling, Manahan said.

“It would be very difficult,” he said. “Depending on how the recovery goes, I’d be more worried in maybe the next year or two.”

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