Reactions to Kauai tax
reform plan mixed
LIHUE >> A Kauai County task force unveiled a sweeping property tax reform proposal to mixed reviews at Thursday's County Council meeting.
Council Chairman Kaipo Asing expressed doubts, saying he believes the proposals to limit property tax values while land prices are skyrocketing will fuel even more buying by land speculators who plan to leave the parcels vacant for years or decades while they increase in market value.
"If I had a lot of money, knowing the land values (for tax purposes) are not going to move much, I would buy a lot of land," Asing said.
In contrast, Council Finance Committee Chairman Joe Munechika endorsed the proposal: "I understand the concept and I like the concept. Part of my responsibility is to sell it to the other members."
The Council sent the matter to Mayor Bryan Baptiste with a request for a bill for them to act on. In a written statement, Baptiste thanked the task force for coming up with a proposal that "appears" to be better than the current law but still will be considerably amended.
Public testimony on the proposal was limited because the task force did not make copies of its recommendations public until only a few minutes before it was presented to the Council.
Appointed last spring by Baptiste and the Council in reaction to double-digit increases in property tax collections the past two years, the nine-member task force is recommending drastic changes to the way in which the county places a value on land.
But the proposal does not limit the Council's authority to set tax rates or place any cap on county spending.
The spreadsheets that accompanied the document were all "revenue neutral," meaning that the recommendation was designed so that it would not increase or decrease county property tax revenues in 2005, assuming the tax rates stay the same as in 2004.
Examples provided with the recommendation show that owners of expensive beachfront property will receive the biggest tax breaks. A beachfront home in fashionable Anini would receive a 74 percent tax cut; what was termed a "beachfront mansion," also in Anini, would see taxes reduced 62 percent; and a "luxury dwelling" in Poipu would be given a 99 percent tax cut.
"Why are we giving all these breaks to millionaires?" Asing asked.
The housing boom, which started on Kauai late in 1998 and hit property valuations in 2001, sent property values soaring 13 percent last year and 21 percent this year. The Council declined in both years to roll back tax rates, and county coffers are bulging.
The task force recommendation would set the 2005 value of every parcel on the island at a figure that equals the average of the same property's tax valuation from 1999 to 2003.
It then would limit annual increases or decreases to the Honolulu Consumer Price Index, which has been growing by 1 percent to 2 percent in recent years. The valuation for tax purposes would remain fixed even if the property is sold.
It also would reduce Kauai's eight tax classifications to two: residential and general. Long-term rentals would be classed as residential. Vacation rentals would be classified as general property and valued at double the amount of residential.
A competing proposal from citizens group Ohana Kauai might appear on the ballot this fall. That measure is limited to residential property. It would roll property valuations back to 1998 and limit increases in total tax bills to the annual cost-of-living increase. That would put tight reins on the Council's ability to change the tax rate.
