Maui County again has to decide whether it wants to increase the state’s general excise tax by 0.5 percent to pay for transportation projects, and the body that oversees federal funding for those projects thinks the county should do so.

The Maui Metropolitan Planning Organization is calling on the Maui County Council to adopt the surcharge, which it believes would help kick-start a long list of transportation projects that state and federal funds can’t cover.

“We knew that there’s not enough funding from our traditional sources to do some of these major improvements, such as the work along Honoapiilani Highway,” MPO Policy Board Chairman David Goode said Thursday. “We saw this as an opportunity to increase the funding to get some of these additional capacity roadways completed.”

But, to some council members, that’s not the county’s job, and it’s uncertain whether the issue will come up for debate on the floor.

“These are state highway projects, so they should take it out of their funds,” council Chairman Mike White said. “There are sources of funds available at the state that they’re not sharing with the counties.”

The general excise tax, or GET, applies to businesses in Hawaii and is imposed on the gross income of business activity.

During the state Legislature’s recent special session to fund the Honolulu rail, Gov. David Ige signed a bill allowing the counties to increase the rate from 4 to 4.5 percent for a 12-year period. The counties have until March 31 to decide whether they want to apply the surcharge starting in 2019 — a decision the state has left open to the counties before.

On Wednesday, the Kauai County Council voted in favor of a surcharge, according to The Garden Island newspaper. The bill is now awaiting the signature of Mayor Bernard Carvalho Jr., who’s been supportive of the increase. In Hawaii County, Mayor Harry Kim isn’t a fan of the GET increase, and multiple Hawaii island council members are reluctant to sponsor a bill to increase the tax, West Hawaii Today reported Dec. 2.

Last year, Maui County Mayor Alan Arakawa proposed a bill that would increase the GET in an attempt to get a conversation going at the council level. He said he agreed with Goode in supporting the surcharge and hoped that the council would get a chance to discuss the issue before the deadline.

County money, state projects

On Oct. 26, Goode wrote a letter to White in support of a surcharge. He said that the Maui MPO has started to select projects to receive federal funding for 2019 to 2022 but worries there won’t be enough to go around.

The Maui MPO was formed last year as a vehicle for the county to receive federal funding for transportation projects. The panel is made up of three council members; the state transportation director, currently interim director Jade Butay; county Planning Director Will Spence; county Transportation Director Don Medeiros; and Goode, the county Public Works director.

Goode thinks a 0.5 percent increase would be worth it. Creating a GET surcharge would generate $37 million per year, or $450 million over 12 years, according to the Maui Transit Short Range Plan.

A person who spends about $20,000 on taxable goods and services in a year would pay $100 more with the tax increase, Goode explained. Someone who spends $40,000 would pay $200 more.

“These folks are spending that kind of money and gas sitting in these traffic jams,” he said.

He said that the MPO staff has looked at other options, like toll roads and increased car rental taxes. But both of those would take changes at the state level first.

“The Legislature has offered (the surcharge), and it’s in front of us,” Goode said. “So if other options become available later . . . this could be discontinued or reduced. But, again, until they (Maui County Council members) have that discussion, we don’t know where we stand.”

White has been opposed to raising the GET for some time. He doesn’t like that it’s a regressive tax, taking a larger percentage from lower-income residents. White thinks the answer lies in the mostly visitor-funded transient accommodation tax. Maui County generates about $125 million in TAT and gets back only $24 million from the state.

“I would rather the state just simply let us have a greater percentage of our TAT,” White said.

He pointed out that the state has the power to raise the GET if it wants to.

“There are 17 different taxation vehicles in the state,” White said. “The counties have three of those, and the state has the other 14. They have a vastly greater capacity to increase taxes than we do.”

While state transportation projects do affect county residents, White is concerned about the message the county will send if it increases the GET for those projects.

“If we let the state off the hook then they’re going to continue to expect us to pick up after them,” he said. “I’m not willing to fund things that the state should be funding when they’re not giving us the money that we should be getting.”

Mixed support

Meanwhile, the three council members who sit on the MPO Policy Board vary on their opinions of the tax increase.

Council Member Kelly King said that because the state has chosen only to focus on repairing the roads it currently has, the funding to build new or expanded roads has to come from somewhere. A GET surcharge would guarantee a stream of funding through 2030 and allow some much-needed projects to start, she said.

“I think the public should look at this and be able to voice their opinion, because people feel like we should get these projects funded sooner or later,” King said.

Council Member Stacy Crivello, who also chairs the council’s Housing, Human Services and Transportation Committee, said that she doesn’t agree with a surcharge “at this stage.”

“I think we need to do more research,” Crivello said. “We need more information. Is it only for county projects because we are going to request the increase from our county residents? Or is it going to be work on the state highways? If so, then the state should consider increasing it instead of us.”

Council Member Yuki Lei Sugimura was hesitant to put more responsibility on county taxpayers.

“Although there is a need, it’s really hard for us as a county to charge our citizens additional taxes,” Sugimura said.

“The GET really is a state tax, not a county tax. That’s the challenge.”

Council Member Riki Hokama, chairman of the Budget & Finance Committee, could not be reached for comment on his position on the surcharge. His committee has not received a communication from the MPO as of Friday, but Crivello has prepared an avenue for the committee to receive and expedite deliberations when it arrives due to the deadline, said a council committee staffer.

‘Business will continue’

Tom Yamachika, director of the private nonprofit Tax Foundation of Hawaii, said Thursday that a GET surcharge might not be as bad as people might think.

“Everybody was kind of predicting doom and gloom when the Honolulu surcharge went into effect, and we seemed to survive,” Yamachika said. “Yeah, it’s going to be bothersome, and some people will have to retool their registers, and people won’t like paying more, but by and large business will continue as normal as it does over (on Oahu).”

Yamachika said that it “won’t be that noticeable” for the everyday resident.

“Half a percent on a McDonald’s lunch is not very much,” he said. “If you’re buying millions of dollars in property or a very large truck, for example, then yeah, it’ll be real money. But for Joe Consumer, it’s not going to really make that much of a difference.”

Goode thinks there’s room for flexibility — the council could limit the number of years of the GET surcharge, apply a smaller surcharge or reduce the surcharge in the future if other funding becomes available.

He said that if the county doesn’t move forward with the tax increase or can’t find some other source of funding, then “some really hard decisions are going to have to be made.”

“Do we not rebuild some of our bridges that are failing?” Goode asked. “Do we not repave or reconstruct sections of our highways that are failing?

“Where else is the money going to come from?”

* Colleen Uechi can be reached at cuechi@mauinews.com.