Property tax cut bill advances
The proposal reduces rates by 16 cents and offers a $200 discount, but at the expense of commercial rates
Property tax rates would drop by 16 cents for single-family and apartment property owners under a measure approved yesterday by the City Council Budget Committee.
But to offset the resulting revenue loss, the proposal also would raise tax rates for commercial, industrial and hotel properties by 60 cents.
PROPERTY TAX PLAN
The City Council Budget Committee approved the following proposed changes yesterday to property tax rates per $1,000 of valuation:
Residential properties (single-family homes and apartments):
Nonresidential properties (commercial, industrial and hotel/resort):
The Budget Committee also is proposing to give homeowner-occupants an additional $200 off their taxes just for the 2006-07 fiscal year.
Council members said the one-time homeowner "discount" together with the drop in the residential tax rate equates to an estimated $47 million in tax cuts for residential property owners.
"I wanted to give more tax relief, but we were worried" about a different proposal to set aside funding for housing and public lands and paying for sewer repair costs, said Budget Chairwoman Ann Kobayashi. "If it weren't for that, we'd be in pretty good shape."
The proposal approved yesterday calls for residential property rates -- single-family homes and apartments -- to be reduced to $3.59 per $1,000 in property valuation, a rate originally proposed by Mayor Mufi Hannemann. Under the proposal, an owner of a $600,000 home (median price) would get a one-time savings of $290.
The measure also increases rates for commercial, industrial and hotel/resort properties to $11.97 per $1,000 valuation.
Kobayashi said she expects to hear an earful from those affected by the proposed increase.
David Carey, president and chief executive officer of Outrigger Enterprises Inc., said in a telephone interview, "I'm disappointed with the Budget Committee, and I hope the full Council will look at it differently."
Hotel executives said the increase puts an unfair burden on business, especially because of the large difference between the property tax rate for hotels and homeowners.
"It's a good example of the lack of political will to appropriate taxes in a fair and even manner," said Mike Paulin, owner of Aqua Hotels and Resorts, which has eight properties in Waikiki with about 1,200 rooms.
Paulin noted that the gap between what hotels pay and what homeowners pay was much smaller 30 years ago but now is about $8 and growing.
"It's just not sound tax policy," Carey said. "I'm disappointed because it takes what I consider an inequitable and unfair situation and extends it."
Kailua homeowner Bob Grantham Jr. said that is not true.
Grantham and other Council members said that in recent years, residential property taxes have accounted for a bigger share of the property tax revenues due to an increase in residential property values.
Now, residential taxes account for about 63 percent of the city's overall property tax revenues while nonresidential taxes make up about 35 percent, according to Council figures.
Grantham, who pushed for lower residential tax rates through the Property Tax Relief Now organization, said the current proposal to increase the commercial, industrial and hotel rates seeks a fairer balance between residential and nonresidential in the revenue pie.
"Overall, it's a good package. We're not 100 percent satisfied, but we're very happy with the outcome," Grantham said.
Councilman Todd Apo, the Budget Committee vice chairman whose office helped crunch some of the numbers, said rates could have gone as low as $3.43 without the $200 off, but the fixed discount aids both longtime residents and lower-income homeowners.
Councilwoman Barbara Marshall said she is still concerned about renters because higher property taxes will undoubtedly mean higher rents. "We could take that money (for the $200 discount) and reduce the tax rate even further."
Councilman Charles Djou said that while he is happy residential rates are going down, he is concerned that increases in the commercial, hotel and industrial rates will be passed onto residential property owners who will have to pay more for goods and services.
The Budget Committee is slated to hold a special meeting on the operating and capital budgets and the $200 credit on Wednesday. The tax rate proposal will be up for final approval June 7.
PROPERTY TAX SAVINGS
If you have a home valued at about $600,000, the median value on Oahu, here is what you can expect to save with the tax cut proposals before the City Council:
If you received an exemption for being a homeowner-occupant by 2005:
Current taxes: $2,100
Taxes with proposed rate decrease to $3.59 per $1,000 of valuation plus one-time $200 homeowner's "discount": $1,810
Total savings: $290
If you did not receive a homeowner's exemption by 2005:
Current taxes: $2,250
Taxes with rate decrease to $3.59 per $1,000 in valuation: $2,154
Total savings: $96