Reduce tax rates, cut spending is key to healthier Maui County budget

The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the Maui County Council on May 13, 2025.
_____________

May 13, 2025, 11 a.m.
Kalana O Maui Building

To: Maui County Council
       Alice Lee, Chair
       Yuki Lei Sugimura, Vice Chair

From: Grassroot Institute of Hawaii
            Jonathan Helton, Policy Analyst

RE: REAL PROPERTY TAX RATES FOR THE COUNTY OF MAUI, EFFECTIVE JULY 1, 2025

Aloha Chair Lee, Vice Chair Sugimura and other members of the Council,

The Grassroot Institute of Hawaii opposes the property tax rate increases proposed by the Council for fiscal year 2026.

Grassroot is concerned these higher taxes could harm locals businesses and reduce economic growth as higher costs are passed on to visitors.

Under the Council’s proposal, County property tax revenues would increase by $26 million more than the $643 million in property taxes that Mayor Bissen is asking for in his proposed fiscal 2026 fiscal budget. For context, the mayor’s proposed budget represents a $116 million increase over fiscal 2025 and a more-than-$400 million increase over fiscal 2016.

The additional revenue from the Council’s proposed property tax rate increases would help fund a $1.271 billion FY26 operating budget. That’s compared to the mayor’s proposed FY26 operating budget of $1.226 billion.

The $26 million in higher revenues proposed by the Council would be generated by higher rates on timeshare, hotel and resort, non-owner occupied and short-term rental properties.

The Council has also proposed increasing the tax rate of the high-value tiers of owner-occupied, long-term rental and commercialized residential properties, and lowering the rates of the lower-valued tiers of those classes.

Grassroot likes the idea of reducing the rates for owner-occupied, long-term rental and commercialized residential classes, but for all the other classes, we recommend that the Council just stick with the rates proposed by the mayor.

Table 1, on the following page, lays out what the rates would be if the Council kept its rate reductions and left all other rates unchanged from the mayor’s proposal. Doing this would reduce the proposed fiscal 2026 budget by roughly $28 million.

With lower revenues, the Council would need to amend the budget to reduce spending. This could be accomplished by reducing each “operations and equipment” line item by 3%. Of course, this is impossible for some line items, such as debt service and post-employment benefits. But in general, such a reduction would free up $30 million from the $1 billion budgeted for “operations and equipment.”^[1]

The Council could also take a second look at the many vacant positions in the county budget,^[2] consolidating them where possible and abolishing others that have not been filled for many years.

For example, consolidating two $45,000-a-year positions into one $60,000-a-year position would increase the county’s chances of attracting an applicant, and it would reduce total budgeted spending by $30,000.