Business property tax hike advances

A City Council proposal to increase tax rates for commercial, industrial and hotel property owners would drive up the cost of everything, critics say.

"Think about the economics," Lowell Kalapa, president of the Tax Foundation of Hawaii, told the Council Budget Committee yesterday. "I'd like each and every one of you to stand outside your local Safeway or Foodland and take responsibility for raising prices on food in that store, because that's what you're doing."

The testimony came as the committee approved an estimated operating budget of $1.4 billion and a capital improvement budget of more than $600 million for the upcoming fiscal year beginning July 1. Budget Chairwoman Ann Kobayashi said the final budget calculations would be completed by Wednesday's Council meeting, when the budgets will be up for final approval.

The operating budget includes $13.2 million in additional revenue from a 60-cent increase in the property tax rates for nonresidential properties. The new rate would be $11.97 per $1,000 valuation.

"This will increase the cost of doing business in Hawaii," said Brandi Allen, a representative of the Chamber of Commerce of Hawaii.

The budget also reflects a $19.5 million loss of revenue from a decrease in property rates for single-family and apartment homeowners, who have been complaining about rising assessments as a result of soaring property values. Residential rates, under the proposal, would be reduced by 16 cents, to $3.59 per $1,000 valuation.

"We certainly recognize the desire and the need for some tax relief for residents. ... My assertion would be you need to spend a greater amount of time and effort on those who need the most assistance," said Murray Towill, president of the Hawaii Hotel and Lodging Association, which also opposes the tax rate increase.

Kalapa said that even if businesses pass on the tax increase, "I think you have to ... look in the mirror and say, 'To who are those businesses passing this burden?' It's consumers, it's employees."

Instead of raising taxes, the Council should look at budget-cutting, which would bring more accountability, he said.

Kobayashi said the Budget Committee will continue to look at the whole property tax structure.

"The problem is that's our ... major source of income," she said. "We're constantly looking at how to make this fair."

The committee also approved a measure that would give a one-time $200 tax reduction to residential owner-occupants who qualified for a homeowner's exemption.

Homeowner William Amona testified, however, that the amount will be a drop in the bucket for his taxes.

"That $200 is not really exciting for us," he said, noting that his tax bill is $4,680.