Property tax
inquiry heats up
Records support charges that the city
By Ian Lind
kept assessments artifically high
to maintain tax revenues
Star-BulletinAssessed property values for numerous commercial and hotel properties in Waikiki were unchanged between 1994 and 1995 despite rapidly falling real estate prices, according to a sampling of real property tax records by the Star-Bulletin.
The pattern of unchanged assessments supports retired property assessment Administrator Ray Higa's charge that the 1995 values were arbitrarily increased to the prior year's levels.
Each $1 million increase in assessed value translated into an extra $9,640 in property tax for hotel-resort properties and $8,510 for commercial properties.
The Waikiki assessments include:
The assessments prompted a substantial increase in property tax appeals for 1995, according to city records. There were 6,307 appeals filed that year, up 33 percent from the year before, according to published summaries.Nine of the area's 10 most valuable individual hotel parcels.
The city reached quick out-of-court settlements of appeals involving some well-known properties, according to records of the state Tax Appeal Court.
The Sheraton Waikiki and Royal Hawaiian Hotels were valued by the city for tax purposes at $718.2 million total in both 1994 and 1995.
An appeal was filed on April 10, 1995, and just three months later the city agreed to drop the assessment 26.5 percent, to $527.7 million, Tax Appeal Court records show.
The Sheraton Moana Surfrider Hotel was assessed at $202.8 million, but the city agreed to reduce its assessment 25 percent to $153 million.
Both cases were settled through negotiations within three months, court records show.
Similar stipulated settlements were reached with several other large Waikiki property owners who filed appeals, land records show, while landowners who did not appeal paid taxes based on the inflated 1995 assessments.
Andrew Rothstein, a private real estate appraiser, said the complexities of appraising commercial real estate could make it difficult to determine whether tax assessments were illegally changed.
"What exactly constitutes fudging the numbers? The assessor is charged with coming up with the market value for that property, and wants to get the highest value he can justify. That's his assignment. And remember, market value is an opinion. Even if you can show his opinion is totally unrealistic, was that incompetency or was that assessor coerced?"
"This whole thing has been like an accident waiting to happen," Rothstein said, due to market forces.
He said the long period of declining real estate values naturally prompts hard-pressed businesses to complain about property taxes.
"Tax assessments are sitting there and killing these commercial properties," Rothstein said. "To reduce costs, the first thing businesses complain about is their taxes. That puts pressure on the county, which is feeling the same pinch trying to raise the income for the programs they want to provide."
FBI opens investigation
The city finance director confirms
By Ian Lind
that an investigation is in progress
Star-BulletinThe FBI is investigating allegations of illegal tampering with city real estate assessments, the city finance director says.
Roy Amemiya last week said that city attorneys have been informed of the FBI probe and have been in contact with federal investigators.
Amemiya cited the federal investigation in turning down a Star-Bulletin request for records of the assessments in question.
Current and former staffers of the Real Property Assessment Division recently told the City Council that property assessments in Waikiki and downtown were arbitrarily increased just before 1995 tax bills were mailed.
Assessors had determined that property values had fallen, but their assessments were changed at the direction of Budget Director Malcolm Tom to boost city revenues, the assessors alleged.
Raising assessments back to their 1994 levels allowed the city to maintain tax revenues without the need for Mayor Jeremy Harris to propose politically unpopular property tax rate increases, which likely would have faced public opposition.
But the move violated city laws, which require assessments to be set based on fair market value as measured according to specific guidelines.
Tom has denied the allegations and said he was not aware of any alterations.
Retired property assessment Administrator Ray Higa has told the Star-Bulletin that assessments for more than 100 properties in Waikiki had been altered.
