Cost cutting begins as city grapples with projected deficits

 UPDATED 8:39 PM HST Aug 21, 2013
Ember Shinn and Nelson Koyanagi
HONOLULU -

After Mayor Kirk Caldwell personally briefed all nine City Council members Tuesday about a cost-cutting program that will institute $20 million worth of budget cuts, administration officials highlighted the next big concern – a projected gap of $156 million during the next fiscal year.

“It's possible, but it's the worst case scenario,” City Managing Director Ember Shin, told members of the council’s Budget Committee Wednesday morning.    

The latest salvos over city finances has council members concerned, and chief among them, the impact it may have on public services. For the current fiscal year, all but one city department will be impacted by the mayor’s budget ax. Caldwell said the cost-cutting program was the result of many hours of consultation with department heads.

“We're taking, I think, preventative action now and controlling our costs to make sure that we have enough money to last throughout the entire year,” Caldwell said in an interview with KITV4. “It was based on the needs of each department, with the directive that we preserve core services.”

Eight departments will be impacted the most, with the following amounts cut from their respective budgets:

For the police department, the budget restriction will result in 40 less police recruits during the current fiscal year, as the number of recruits in each of the four classes is cut from 50 to 40.

Meanwhile, the fire department is cutting its recruit class from 48 to 24, and delaying the start date from October to January.

Although the mayor maintains cuts to the city’s police and fire departments won’t jeopardize public safety, Budget Chairwoman Ann Kobayashi was less than comfortable with the decision.

“The council has always protected the public safety because they do such a great job of protecting all of our residents, and that is certainly not an area that we would've cut,” she said.

However, there are no easy answers for Mayor Caldwell. Fixed costs, such as public worker raises and health and pension benefits keep rising, as does the public's demand for services. That’s why the mayor’s administration is working with the City Council on various bills for next year’s budget cycle that would create separate property tax classifications, while stripping away some exemptions.

“This council will be making the policy call on whether we want to spread out the effects or not,” councilman Breene Harimoto said of next year’s looming budget shortfall. “If we don't move these bills forward, it's likely that we'll just need to have the political will to increase the residential (rates).”

The city raises the bulk of its revenue through residential property taxes, a total of $444.71 million in fiscal year 2013, and there’s no guarantee the mayor or the council will be able to hold the line on possible increases.

“We're going to work really hard to make sure that gap is closed one way or another,” Caldwell said of next fiscal year’s projected deficit of $156 million. “I think we're going to look for a way to do this (that’s) the most fair with the least amount of pain.”

During Wednesday’s hearing, the Budget Committee deferred six bills that would have stripped away certain property tax exemptions, while creating a residential-multifamily classification for real property.

However the committee passed Bill 42, which creates a new “Residential A” class for real property with values of $1 million or more. It also passed Bill 40, which removes the exemption for low-income homeowners and those who are at least 65 years old. City Budget Director Nelson Koyanagi said such homeowners could still obtain property tax relief through the city’s county tax credit.     

One of the more noticeable signs of the city’s cost-cutting program for the current fiscal year is the satellite city hall at the Keolu Shopping Center in Kailua. Caldwell said the location would close before the end of the year, since it does the least amount of business of all 10 satellite city halls, an average of 5,000 transactions per month. The closure is expected to save the city $50,000 to $60,000 per year on rent, maintenance and utilities, since no workers will be laid off. The mayor said Kailua residents could still visit the full-service Windward City satellite city hall on Kaneohe Bay Drive, about eight miles away.  

“So, that's something very visible that people will see, but we think the impact will be minimal,” said Caldwell.

City spokesman Jesse Broder Van Dyke said the city’s projected deficit for the current fiscal year remains pegged at $26 million, but so far the city was only able to identify $20 million worth of cuts. He said further cuts could be possible as the administration tracks spending throughout the remainder of the fiscal year, which ends June 30 of 2014

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