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Lots of the controversy swirling around the ballot measure seeking to impose a “surcharge” on investment property to support public education involves our Department of Education. The DOE currently receives an appropriation from the state’s general fund of about $2 billion and is also able to pull from other funding sources such as federal funds.

But did you know that the DOE can also impose tax?

The Hawaii Revised Statutes contains 12 sections relating to “school impact fees,” starting with section 302A-1601. The law states, in part, “New residential developments within identified school impact districts create additional demand for public school facilities. As such, once school impact districts are identified, new residential developments shall be required to contribute toward the construction of new or expansion of existing public school facilities.”

Builders of large projects within school impact districts are required to provide land for school facilities depending on the numbers of students expected in their projects and the amount of available classroom space in existing area schools. Smaller developers and individual home owner-builders are required to pay a fee instead of land, when their project is too small to entertain a school site. All home builders or buyers must pay a construction cost fee.

This law, which we have discussed before, recently has been used to create a “school impact district” that goes from Kalihi to Ala Moana. It’s defined as the areas served by the following elementary schools: Fern, Kalihi Kai, Kalihi Waena, Linapuni and Puuhale in the Farrington Complex; and Kaahumanu, Kaiulani, Kauluwela, Likelike and Royal in the McKinley Complex.

Yes, the impact district “tracks” the path of the new Honolulu rail line, pardon the pun.

Fees Not Chicken Feed

In a news release, the DOE announced that the fee, which goes into effect on Oct. 1, will be $3,864 per unit. That fee is considerably cheaper than the $9,374 proposed two years ago, but it’s not chicken feed by any means. Multiplying the current fee by the 39,000 additional dwelling units that the DOE is anticipating yields more than $150 million, many times more than the $4.7 million in school impact fees it has collected to date for districts in Leeward Oahu, West Maui and Central Maui.

These fees, of course, are going to have to be paid by someone. If you think they are all paid by wealthy, fat cat developers who are going to be swimming in money because of the transient-oriented development, think again. These costs get passed along to home buyers or renters, in one form or another.

According to its audited financial statements for fiscal 2017, our DOE’s total revenues were $2.915 billion and total expenses were $2.817 billion. A raises questions about whether the DOE is entitled to tens of millions more in federal reimbursements (and we will write about this next week). And, of course, it is the only state agency with independent taxing power.

Let’s now turn our attention to making sure that all entitled revenues are being properly claimed and those billions of dollars are being spent efficiently and wisely.

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