Fix the Economy and the City’s Budget Problems Will Disappear

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“Charles Djou Image”

Honolulu has a major budget problem. In 2003, city taxpayers likely will face a budget deficit approaching $160 million on a budget of about $1 billion.


In addition, the city will have tremendous new financial demands, including long-overdue pay raises for our police officers, maintaining our waste-water systems in compliance with federal environmental laws and finding a new landfill for our garbage.

These fiscal demands present a massive challenge for the new Honolulu City Council to meet. Some have suggested raising property taxes to meet those demands.

Although the operation of city government is extremely important, the health of our state economy is even more important.

Today, our economy is in the early stages of recovery after a decade-long economic slump. Hawaii’s economic recovery, however, is immature at best. Without clear support of business by our government, Hawaii’s economy can easily slip back into another period of prolonged economic decline.

To build a healthy, vibrant and growing community, we need a healthy, vibrant and growing economy. A tax increase at the city level, however, will only push our economy into a “double-dip” recession.

Raising taxes, just as our economy is beginning to show signs of real recovery, will likely destroy any hope of a prosperous and healthy community.

Furthermore, a possible war in Iraq presents additional challenges. The Gulf War, coupled with the burst of the Japanese asset “bubble,” threw our economy into a tailspin in 1991. Today, with the Japanese economy continuing to languish, a tax increase coupled with a war could kill any hope of building a vibrant state economy.

Property tax increases are more painful than income or excise tax increases, which are assessed throughout the year. Most residents pay their property taxes in lump sums twice a year. Increasing the property tax would directly reduce individual disposable income.
Although a property tax increase would hurt everyone, it would hurt retail merchants and small businesses most because they depend on the spending of disposable income.

Raising property taxes to fix the city’s fiscal woes is simply a bad option. A tax increase would poison any prospect of a sustained economic turnaround.

City government must look to other alternatives. Unfortunately, there is no magic bullet to solve our budget problems. We have to explore multiple options:

*We must use the newly passed privatization legislation to transfer more public services, such as waste management and park maintenance, to the private sector when private companies can handle such services more efficiently and cost-effectively.

*The state must share revenues more equitably. The counties repeatedly demand a share of traffic and parking fines, which they collect, but the state still keeps all the money.

*The city must reduce its capital expenditure budget to reduce its ever-increasing debt load. Honolulu can no longer afford every skate park, bandstand or soccer field that is requested.

*The City Council should look at revising the procurement code to reduce the numerous cost overruns on city projects. The U.S. Navy has adopted a good public procurement system that deserves our attention.

*Civil service reform must be re-examined. The city’s budget demands are different from the state and the other counties, but state law still mandates that we pay our civil servants the same as state workers and employees in all other counties. We need to end this anachronism. Let the city negotiate wages based on its own budget realities, institute merit-based pay and provide city managers an easier hiring and firing process.

*Finally, the city has to cut services and programs. To balance the budget, many popular programs may have to be eliminated or severely limited. No one wants to cut programs, but we can’t solve our budget problems without deep cuts.

Balancing the budget … will be painful and difficult. Increasing city taxes, however, would cause far more harm than good.

It will not be easy, but we must dramatically alter the nature of municipal services, reducing the size and scope of city government to a level we can afford.

”’Charles Djou was elected to the Honolulu City Council and represents District 4 (East Honolulu).”’