City debate opens over using hotel tax to trim sewer-rate increases

Honolulu City Council members and city finance officials on Tuesday began a contentious debate over a plan to shift revenue from the transient accommodations tax (TAT) into the city's sewer fund to reduce projected sewer-rate increases for residents.

The proposal that prompted the discussion would allocate TAT revenue to the Department of Environmental Services’ sewer fund as one piece of a larger financing package tied to planned capital projects and outstanding debt on the wastewater system.

Why it matters: The sewer fund carries billions of dollars of capital obligations and debt. City officials and bond counsel warned that using general or other non-sewer revenues to supplement the fund could harm bondholders’ protections and the city’s credit ratings, potentially raising long-term borrowing costs.

Director Roger Babcock, Department of Environmental Services, told the council that the sewer rate study identifies substantially larger revenue needs than the TAT proposal would…