$100 million for affordable housing and a $300 tax credit for some homeowners are also in the draft.

With island residents still reeling from double-digit real estate assessments fueled by pandemic-related price hikes, Mayor Rick Blangiardi announced Thursday that he is proposing a $3.4 billion operating budget for the City and County of Honolulu for fiscal year 2024, which is essentially flat, adjusted for inflation.

Instead of offering to decrease tax rates, which is what many residents want, Blangiardi said that he will offer a tax credit to homeowners who qualify for the program. Eligible homeowners would receive property tax bills $300 lower than they would otherwise receive, which the mayor called “historic property tax relief.”

Blangiardi said he anticipated that 151,749 homeowners on Oahu would qualify for the tax refund.

In a statement, Blangiardi said the budget reflects the financial strain many households on Oahu are experiencing.

Honolulu Hale building City County Mayor. 23 may 2017
Blangiardi proposed a $3.4 billion annual operating budget, which now moves to the City Council for review. (Cory Lum/Civil Beat/ 2017)

“It has been constructed to address head on the difficult challenges that the City and County is facing, not the least of which is the high cost of living many of our friends and neighbors are experiencing,” Blangiardi said in a press release. “By proposing meaningful tax relief for our residents without losing sight of our commitment to responsible spending on city priorities, we believe this budget is an important step forward for our island home,” he said.

The city’s operating budget for the 2023 fiscal year was $3.2 billion. The increase to $3.4 billion represents a 6.3% increase. According to the Bureau of Labor Statistics, inflation rose 6.4% in the past 12 months.

In the press release, Blangiardi said the proposed budget reflects his commitments to affordable housing and public safety.

The mayor’s capital improvement budget, also relatively flat at $1.09 billion, includes $100 million for land and property acquisition for affordable housing and $19.8 million for drainage and erosion control measures.

At a City Council committee hearing on Wednesday, Honolulu Managing Director Mike Formby detailed a list of affordable housing projects the city is advancing, including on city-owned sites such as the 5-acre Kunia Box Car lot, a site in Pearl Highlands, the former Dee Lite bakery site in Honolulu and a property at 820 Iwilei Road. The city is taking possession through condemnation of a property at 1615 Ala Wai Blvd. The city is also moving toward rehabilitation of the 108-unit Waikiki Vista apartment building.

Public transportation continues to be a hefty expense for the city the draft budget shows.

Diagram of proposed budget expenditure for the 2024 fiscal year. (City and County of Honolulu)

The city will be required to spend $85.1 million for the annualized operating and maintenance cost of Honolulu’s rail system, which will open to the public later this year, the mayor said.

The city’s bus network cost $240 million to operate in 2022 but the city recouped only $32.6 million in fares, or 13.56% of the system’s cost, according to Andrew Kawano, director of the Department of Budget and Fiscal Services.

More than half of the proposed capital budget is taken up by $506 million in wastewater capital improvements.

The city’s biggest single category of expenditure, 23% of the total, is employee salaries and benefits, which the mayor estimated at $783.4 million. Paying off debt takes up another $656.9 million, or 19.5% of the budget.

Other items in the draft budget include $500,000 for planning and design of a canoe halau at Haleiwa Beach Park, $750,000 for designing a replacement boat ramp in Kailua, $100,000 for a bird facility at the Honolulu Zoo, $500,000 to plan and design a landfill on Oahu and $2.1 million for a bus transit center at Middle Street in Honolulu.

Blangiardi would also like to spend at least $12.5 million building or rehabbing police and fire stations.

The mayor’s budget is presented to the Honolulu City Council as proposed legislation, which the City Council then reviews, adjusting the numbers to reflect their own preferences and judgment. Last year, the mayor proposed a $3.35 billion budget but the council passed the measure at $3.2 billion instead.

The needs of individual departments of city government will be highlighted in a series of budget hearings to be held at Honolulu Hale next week.

The mayor provided no details on who might be eligible for the tax refund, but members of the Honolulu City Council have recently discussed ways that low-income people could apply for tax relief. Members of the City Council may have different ideas about how to provide relief to their constituents.

At an informational briefing on Feb. 28, Honolulu City Council members listened to an informational briefing on how Maui County has established differentiated tax tiers for short-term rental properties, time-share apartments and a category called “commercial residential,” which covers properties where owners live on site and rent out rooms on a short-term basis.

On Maui, property owners who rent houses they own to long-term tenants with 12-month leases pay lower tax rates than people who rent out their properties on a short-term basis, the council was told.

Council member Andria Tupola has said she was looking forward to enacting what she called “property tax reform,” and many council members have spoken recently about the financial stress the prospect of higher property tax bills are placing on their constituents.

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