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Hawaii Tourist Haven Awash in Public Debt

By Jaymes Song
Associated Press
Sunday, April 10, 2005; Page A09

HONOLULU -- Waikiki is flush with tourists. New high-rise condominiums are changing Honolulu's skyline, and jobs are plentiful. Property values have skyrocketed, with even modest homes now costing $550,000, and property taxes are at record levels.

But amidst all that wealth, Honolulu is strapped for cash and making significant budget cuts.

Despite sky-high real estate values and record property taxes, the city and county of Honolulu owes $3 billion because of public works spending. (Lucy Pemoni -- AP)

"We're in a serious situation here. We're facing a major debt problem," Mayor Mufi Hannemann said.

The city's debt has surged to an estimated $3 billion, up from $1.89 billion owed in fiscal 2000. Most of the debt was accumulated in the previous administration to pay for projects installing trees, signs, landscaping and parks. At the same time, sewer lines, roads and other infrastructure were neglected, and now major restructuring is required.

"It was definitely a credit-card mentality," Hannemann said. "Now the credit card's due, and it's time to pay up. The longer we defer and play this game of Peter paying Paul, all we're doing is passing that debt to future generations."

Since taking office in January, Hannemann has stuck with his fiscal mantra of considering every project by "need to have" vs. "nice to have" criteria. He has already cut tens of millions of dollars in landscaping, new sidewalks and other projects proposed by his predecessor, Jeremy Harris.

If Hawaii's economy were not so strong, "it would be terrible," Hannemann said. "We would probably be facing bankruptcy. No question."

The city and county of Honolulu -- home to 80 percent of Hawaii's 1.3 million residents and the destination for 65 percent of its visitors last year -- are spending about 20 percent of their $1.4 billion operating budget to pay off debt.

The state, by contrast, is spending about 11.5 percent of its $4.4 billion budget this fiscal year on general obligation bond debt service, according to state budget director Georgina Kawamura's office.

"Our debt service is so high because the previous administration borrowed money when payments were due," said Honolulu Councilwoman Ann Kobayashi, chairwoman of the budget committee.

She said many of the beautification projects were part of Harris's plan for his unsuccessful run for governor.

Harris, who has remained out of the public eye since leaving office, could not be reached through his attorney for comment on this report. Harris served as Honolulu mayor for 10 years. He won a special election in 1994 and was reelected in 1996 and 2000.

Still, some of Harris's work, especially the millions spent revitalizing Waikiki, has apparently paid off. Hawaii's tourism hub has new waterfalls, streetlights, palm trees and popular programs such as "Sunset on the Beach," which attracts thousands for free movies on Waikiki Beach.

"Look at Waikiki now. It's really nice," said Councilman Gary Okino. "If the city didn't pour all that money into Waikiki, it wouldn't be the way it looks now. He did a good service, but it's a matter of balance. How much of that should we have been doing?"

Hannemann said Harris often led the council to believe that the city's finances were fine while he raided the sewer funds and left the debt for the next mayor. But he also said council members who approved the plans were "asleep at the wheel."

"He was the ringleader, but by the same token, he needed five votes down there to go along with him," the mayor said.

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