Kauai County Council Budget Overview: FY27 Operating & CIP (March 27, 2026)

This meeting on March 27, 2026, featured a detailed presentation of the proposed Fiscal Year 2027 operating and capital improvement budgets (CIP). County finance and administrative staff walked through revenue projections, expenditure drivers, and departmental budgets, followed by councilmember questions and public commentary. Key themes included inflationary pressures, global conflicts' impact on fuel and supply costs, progress on affordable housing contributions, a focus on workforce development, and the looming sunset of the general excise tax (GET) surcharge in 2030.

Budget Presentation Overview

• Proposed FY27 operating budget totals approximately $346 million – an increase of $17.9 million (5.2%) over FY26. General fund revenues are projected at $307 million, with 85% coming from real property taxes.
• Real property tax revenue is estimated at $261.8 million – a $20.8 million (8.6%) increase driven by higher assessed values (7.72% net taxable increase) and new inventory. Non-resident owner-occupied, vacation rental, and hotel/resort classes provide 76% of property tax revenue despite representing only 55% of assessed value.
• The county is proposing to contribute $15.75 million (6% of real property taxes) to the Housing Development Fund – well above the 2% minimum – to fund affordable housing initiatives. This contribution will be transferred to the CIP, totaling about $46.7 million.
• General fund expenditures increase 0.6% in salaries & benefits, with a decrease in lease/rental costs (-0.9%) and an increase in auto equipment (+1.5%). The largest departments by appropriation are Public Works (32.8%), Police (15.5%), and Fire (~15%).
• The GET surcharge fund – which funds roughly 75% of public works and 25% of transportation projects – is set to sunset December 31, 2030. County officials noted this is a critical funding source for infrastructure and jobs, and they will request state legislation to extend it.
• Park improvements include the upcoming opening of the PE Choi Youth Center (summer 2026), which will focus on infant/toddler care after the state’s free preschool program saturated the market. The center will be self-funded through provider fees, with the county providing the facility and utilities.

Public Comments & Testimony

• No formal public testimony was recorded during this session.

Discussion Items

Revenue Forecasting & Real Property Tax Details

• The real property tax team (Megan Shimamoto) presented that FY27 net taxable value is $35.5 billion (up 7.72%), with appeals increasing slightly but still well under the 2% threshold. New parcels entering owner-occupied and affordable rental classes – 611 new owner-occupied units and 1,070 parcels moved to the new long-term affordable rental class – drove the 4.59% growth in those capped classes.
• Councilmember Cowden expressed concern about the tax burden on market-rate rentals (non-owner-occupied residential) in high-value zones (Zone 2: Koloa/ʻŌmaʻo; Zone 5: North Shore), arguing that the current tiered system effectively taxes out working families and exacerbates the housing shortage. She reiterated a previous proposal for zone-based tax rates to better align with local home values.
• Councilmember Kuali’i questioned the increase of 109 vacation rental parcels, asking how the county ensures they are legal (within VDA). Staff clarified that the increase comes from new construction and conversions inside VDA, but compliance checks are done by Planning. Councilmember Kuali’i requested a list of those parcels for verification.
• Councilmember Cowden noted that a single ag parcel in Anahola was classified as a TVR despite no vacation rental use, suggesting the classification can be used punitively. Staff promised to follow up on that specific parcel.

Operating Budget – Major Trends & Risks

• Councilmember Holland raised the impact of the Iran conflict on fuel costs (gas up $1/gallon in one month) and potential cascading effects on inflation, food bank demand, and county operations. Mayor argued the budget is responsibly focused on basics (infrastructure, housing, cost of living) and that the county’s shift of tax burden to non-residents provides some buffer, but uncertainty from higher-level instability remains.
• Councilmember Cowden (Chair) acknowledged the GET surcharge sunset as a major risk, noting that transportation funding would be severely impacted. Mayor confirmed that every year the county makes a case to extend it, but state legislature hasn’t prioritized it.
• Councilmember Kuali’i noted that the $15.7 million in affordable housing contributions is supported by a 2% minimum ordinance, but the administration is proposing 6%. He applauded the contribution but cautioned that the fund must be carefully managed.

Departmental Budgets: Mayor’s Office & Human Resources

• Mayor’s Office: Budget is declining ~1% to just over $4 million. A new early childhood center at the civic center (PE Choi) will focus on infant/toddler care (space provided free by county, providers collect parent fees). Councilmember Kuali’i asked about the impact on the Filipino Cultural Center lease; staff confirmed the intention to phase out that lease. Councilmember Kuali’i also asked about potential openings to non-county employees; staff indicated it would be open to all if space permits.
• Human Resources: Budget includes a $130,000 increase for vacation credit payout (administration change), $50,000 for internship program (minimum wage adjustment and program expansion), $65,000 for Workday success plan (to reduce reliance on Accenture), and a zero-funded payroll specialist (expected to be funded by Department of Water). Councilmember Kuali’i questioned the IT arrangement (SBITA) line item, noting year-to-date spending of $592,000 vs. a FY27 request of $463,000. Staff explained that Workday subscriptions are paid upfront and encumbered, but could not reconcile the difference fully; they agreed to follow up.
• HR Director Annette Anderson noted that the pilot sick leave buyback program (running January–March 2026) has seen double the expected participation, with employees reducing sick leave usage. Councilmember Kuali’i also asked about efforts to correct overpayments/underpayments from time entry errors; HR described auditing and training processes to address these.

Key Outcomes

• No formal votes were taken. The council will continue budget review with remaining departments on later dates.
• Requests for data: Councilmembers asked for detailed zone-based tax burden analysis (Cowden), a list of new TVR parcels (Kuali’i), and a report on the internship program (Kuali’i).
• The mayor’s office and HR committed to follow up on specific questions (SBITA line item, payroll specialist funding, parcel reclassification).
• Next steps: The council will hold additional departmental budget hearings and consider any amendments before voting on the final FY27 budget in May 2026.