Tax Casualty? Maui County Carnival

Poke portions from the 2016 Maui Carnival event
The 2nd Annual Maui County Carnival, scheduled for April 6-9, 2017, has been canceled.  Skyrocketing state government fees have been blamed as one reason for the cancellation.

In April 2016, E.K. Fernandez Shows brought the carnival to Maui for four days at the War Memorial Complex in Wailuku.  The inaugural event featured rides, games, food, entertainment, and special attractions.  The Boys & Girls Club on Maui was the primary nonprofit beneficiary of the carnival.

This year, E.K. Fernandez Shows announced that it was canceling the carnival.

The company cited huge increases in shipping rates, over 40% in the past three years, which they said made it almost impossible to ship the necessary equipment from Oahu to Maui.

They said that they tried unsuccessfully to negotiate a more competitive shipping rate with the shipper.

In Hawaii, there is only one company licensed to provide interisland shipping, namely Young Brothers.  A company spokesman said that E.K. Fernandez was offered a special charter voyage to take all the equipment over on a single trip, the rate for which was about 9% higher than it was in 2016.  More than half of the increase, around 5%, was blamed on an increase in State wharfage fees.

Wharfage fees are what the State Department of Transportation, Harbors Division, charges shippers using the harbors in Hawaii.  As we reported earlier this year, wharfage fees charged by the Harbors Division were hoisted 17% on February 1, 2017, with two more double-digit increases swiftly coming down the river:  15% to hit on October 1, 2017, and another 15% on July 1, 2018.

At our Governor’s office, no one seems to be fazed by the magnitude of the increases.  Instead, in a news release dated February 7, 2017, the Governor commended the Department of Transportation when Standard & Poor’s upgraded its rating of Hawaii’s harbor system revenue bonds.  Per the release, the upgraded rating “reflects a positive view” of the Harbors Division’s actions, including “[r]ecent and frequent tariff increases that have allowed for consistently strong debt service coverage given rising costs,” and “[e]xceptional liquidity position in unrestricted cash, equal to almost five years of operating expenses.”

If we are holding five years of operating expenses in unrestricted cash, why aren’t we considering paying down some of these bonds (which represent borrowed money)?  Money sitting around in the bank is certainly not drawing more interest income compared with the interest expense we are paying to float the bonds.  In addition, the last thing we want to do is have a wad of cash sitting around waiting for some legislators to think up ways to raid it as they have tried to do with other programs such as GEMS (which also involves lots of borrowed money).

And then, does anyone realize that these recent and frequent tariff increases get baked into the costs of the clear majority of goods and many of our services?  If these are praiseworthy in our government’s mind, then it is no wonder we have an astronomical cost of living.

The Maui County Carnival may be one casualty caused by this mentality.  Let’s hope that our policymakers can take a more expansive view of what it takes to boost the general welfare of our state.

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About Tom Yamachika

Tom Yamachika
Tom Yamachika is the President of the Tax Foundation of Hawaii, a private, nonprofit educational organization dedicated to informing the taxpaying public about the finances of our state and local governments in Hawaii. Tom is also a tax attorney in solo practice and has been since early 2013. Prior to 2013, he was with the accounting firm Accuity LLP, which was formed in 2006 from the Honolulu office of Coopers & Lybrand (which later became PricewaterhouseCoopers). Before that, he served as an Administrative Rules Specialist in the State of Hawaii Department of Taxation from 1994 to 1996, where he drafted rules, interpretive releases, and legislation on several different state taxes. Prior to that, he practiced litigation and tax law with Cades Schutte Fleming & Wright in Honolulu.

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