Oahu property values up 26%
City leaders plan relief measures but say financial health dictates against cutting tax rates
Property values on Oahu continued to climb this past year, rising nearly 26 percent during a construction boom and a hot real estate market, with sales of oceanfront property as a factor in the increase.
Mayor Mufi Hannemann and City Council leaders are expected to propose measures to help struggling homeowners, although they say reducing property tax rates is not an option.
"I'm very cognizant of the fact that with higher real property tax assessments, obviously there are those who will be very hard pressed to pay higher property taxes," Hannemann said.
"We don't want anyone to lose their home because of property taxes," Council Budget Chairwoman Ann Kobayashi said.
Hannemann wants to give homeowners age 62 and above a one-time tax credit of $200 beginning in February 2007. He is also encouraging those who qualify for but do not need the tax credit to dedicate it to a program to benefit the homeless. The administration is working on the details of that program.
"We want to be able to allow those with a roof over their head to help those who don't have a roof over their head," Hannemann said.
And with a projected increase in revenue of $120 million as a result of the rise in values, Hannemann wants the city's "rainy day" fund to grow to about $50 million from the current $5 million. Such a fund would help boost the city's credit rating.
"Like homeowners, like individuals, like businesses, we need to put more into our savings," he said.
The city began mailing property assessments yesterday to 273,550 property owners. Assessment notices are not tax bills. Property taxes are calculated by multiplying the assessed values by the tax rates given for different classifications of property. The City Council sets the rates each spring.
The total valuation of property on Oahu went up to $166.2 billion, an increase of 25.9 percent. The overall increase is being attributed to new construction, home improvements and the continuing trend of high real estate sales.
Single-family home values increased 27.8 percent across the island, with the section between Kaaawa and Kahuku having the highest average increase, 43.5 percent. It was followed by the Leeward Coast and the North Shore.
Hannemann said the desire for oceanfront property appears to be driving the rise in these outlying areas.
"We know that there's a tremendous interest and demand for oceanfront property, and that's why I think you see (higher) values in the Windward, North Shore areas, the Leeward Coast," he said.
Kaaawa resident DeeDee Letts has also seen those kinds of sales where she lives. "Things are selling for ridiculous prices in this neighborhood," said Letts, who is also chairwoman of the Koolauloa Neighborhood Board.
Letts said that rising property values will have the biggest impact on longtime families.
"I think there is a good chance some of the multigenerational families will be forced off or forced to develop it because they can't afford it," she said. "That would be the saddest thing."
Letts said that while the mayor's tax credit proposal is nice, the focus should be on struggling families.
Apartment values also rose by just less than 29 percent, with Wahiawa having the highest average increase at nearly 52 percent.
City Council Chairman Donovan Dela Cruz, who represents the district that includes Wahiawa, the North Shore and the northern section of Windward Oahu, is advising residents in his district to appeal their assessments if they feel they are too high. The deadline to appeal assessments is Jan. 17.
In the meantime the Council will explore further tax relief, including revisiting a proposal signed into law this year that caps property taxes for owners with annual incomes below $50,000.
Valuations for hotel and resort property rose by 22.6 percent, commercial by 13.8 percent and industrial by 11.5 percent.
At least one Council member is advocating that the tax rate be decreased.
"I do think the city is raking in money hand over fist, and the fact that we're still struggling to balance our budget, even though tens of millions of dollars in additional revenues are coming into city government, is a sure sign that our spending is out of control," Councilman Charles Djou said.
Djou said the cost of living in Hawaii gets higher with increasing valuations. "It means there is less money in the pocketbooks of the average family, and it just makes it that much more harder to make a living in Hawaii."