HONOLULU (2/18/10)--The Hawaii Credit Union League testified before the Honolulu City Council Budget Committee Feb. 10, opposing a bill that would raise or eliminate a deeply discounted property tax on nonprofit institutions such as credit unions. In addition to credit unions, the city’s $100 minimum tax for nonprofits applies to churches, private schools and other social service organizations (Honoluluadvertiser.com
Feb. 17). However, because Honolulu is grappling with a $140 million budget shortfall for the coming fiscal year, the $100 minimum tax is becoming harder to justify, Nestor Garcia, City Council Budget Committee chairman, told the newspaper. Although the committee deferred two proposals that would raise or eliminate the minimum tax, the measures could be reintroduced during budget deliberations slated to begin in March, Garcia told the paper. The league opposes a proposed cap on the real property tax exemptions credit unions for several reasons, Michael Leach, league legislative/regulatory affairs manager, told the committee. News Now
obtained a copy of Leach’s testimony. Leach said the league seeks to retain the “real property tax exemption for credit unions” because:
* Credit unions are not-for-profit, member-owned financial cooperatives with the sole purpose of serving member needs, particularly members of modest means; * The cost of any tax paid by a credit union is a cost paid by that credit union’s member-owners; * Unlike for-profit financial institutions that are able to access capital from external sources (issuing common or preferred stock for instance), a credit union can add to (strengthen) its capital only by retention of net income; and * As a consequence of deriving capital only from credit union members, any impairment on a credit union’s net income will reduce its ability to grow capital needed for safe and sound operations, especially in this troubled economy.