Bill seeks to offset Honolulu's sewer fee hike
Bill 43, which was introduced May 5, would redirect a portion of the 3 % visitor-generated Oahu transient accommodations tax, which is earmarked for Honolulu's rail project, to the city's sewer fund.
The measure would temporarily amend the disposition of the city's OTAT revenues so that 50 % would be deposited into the transit fund, while 41.66 % would go into the sewer fund.
The legislation also allocates 8.34 % to create a special fund, one to be named by the city Department of Budget and Fiscal Services, in order to mitigate impacts of visitors on public facilities and natural resources and 'supplement any funds regularly appropriated for that purpose.'
If approved, Bill 43 would take effect July 1, 2027, and be repealed June 30, 2037. The full Council is scheduled to hold a first reading on Bill 43 on Wednesday.
Waters told the Honolulu Star-Advertiser, 'Bill 43 offers a more strategic and equitable alternative to the administration's proposed 115 % rate hike. By using the Council's existing authority to reallocate a portion of OTAT revenue, Bill 43 reduces pressure on working families.'
He added, 'It ensures that visitors who contribute heavily to the wear and tear on our water and wastewater systems contribute a fair share. This is more than sound fiscal policy ; it is about responsibly utilizing the existing OTAT, which is a practical step towards a more equitable and sustainable future.'
In recent months the city Department of Environmental Services has said the planned sewer fee increases—amounting to a total increase of 115 % across all rate-paying classes over a decade—would take effect July 1.
Currently, the city says, an average single-family residential sewer bill totals approximately $110.89 a month. By July 1 that bill could rise to $122.04 a month.
ENV said that planned sewer fee rate hikes are necessary to address rising operational costs and fund critical projects within its $10.1 billion capital improvement program, scheduled for 2025 to 2040. That includes work to upgrade the Sand Island Wastewater Treatment Plant to full secondary treatment at an estimated cost of $2.5 billion.
Potable-water fee rates will not be adjusted, as they are separate fees administered by the Honolulu Board of Water Supply.
The proposed sewer rate fee hike is being proposed under city-initiated Bill 60.
In October, ENV initially proposed to increase sewer fees annually for the next 10 years—by 9 % over the first six years, followed by four smaller annual increases of 8 %, 7 %, 6 % and 5 %.
But since that time other versions of Bill 60 have materialized, including a revision by ENV itself that supposedly lessens the initial blow of higher fees to its rate-paying customers.
ENV Director Roger Babcock presented a so-called 6 % option that would see sewer rates rise by 6 % on July 1, during an April 29 Council Budget Committee meeting.
Those rates would increase by 7.5 % in 2027, 8.5 % in 2028, 9 % in the following four years, then rise by 8 %, 7.5 % and 7 % in the final three years, ending in the year 2035.
Under this 6 % option, the city said the same average single-family residential sewer bill in the first year would go to $119.18 a month instead of $122.04, a 2.3 % difference.
'We were asked if we could do anything to try to modify the rate schedule in order to perhaps reduce rates in the initial years, ' Babcock told the panel. 'The important thing was we took our revenue requirements for the 10-year period, and actually beyond, and made sure that we had enough revenues in each year of the rate package.'
He said new rates should ensure the city is 'whole, in terms of operations and maintenance, debt service and new debt issued in order to do our (capital improvement program ).'
During committee questions, Waters said the city's new 6 % option is 'putting the big rate increases at the end of the 10-year cycle, rather than at the beginning.'
With regard to Bill 60, Waters' tentative proposal to increase sewer fees annually for the next decade includes a 6.75 % increase for the first five years, starting July 1. The initial increases would be followed by an 8.75 % increase for the next two years, then a decrease to 7.75 %, 6.75 % and 5.5 % over the remaining years, 'thereby creating savings, ' he said.
Waters said instead of a 100 % increase over the decade, 'it would amount to approximately about a 70 % increase over 10 years.'
Waters is not a voting member of the Budget Committee ; however, he said he would 'love for this committee to seriously consider this approach, ' rather than the city's versions of Bill 60.
Later, Waters told the committee he had 'a bill already drafted which would infuse the sewer fund using the OTAT, using approximately $49 million a year.'
He noted 50 % of OTAT currently funds the city's over-$10 billion rail project. He said by 'using cash from the OTAT, ' the city would not have to issue as many bonds to fund major city projects such as sewer treatment plant upgrades.
But not all embrace Waters' use of OTAT funds to cover sewer costs rather than city rail.
During public testimony April 29, Natalie Iwasa, a board member of the Honolulu Authority for Rapid Transportation, said such actions might negatively sway bond investors connected to the city's multibillion-dollar upgrades to its sewer treatment infrastructure and related utilities.
'If you are taking cash or you are taking TAT or you are taking any other money that could go to the general fund and using that to supplement the sewer fund, what does that tell investors ?' asked Iwasa, in her individual capacity. 'Investors want to have the assurance that (the city has ) the sewer money here and that they have the general (fund ) money here.'
'And if you're taking from the general money and you're putting it over here, what happens to the general fund ?' she queried. 'Is the bond rating in the future going to go down because of that ?'
In response to Bill 43's critics, Waters said, 'I respect those concerns, but the Council must look at the city's broader needs.'
'Rail is important, as is clean water, public health and environmental safety, ' he told the Star-Advertiser. 'The bill is not taking anything away from HART, but we're maximizing how we use visitors' revenue.'
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