Kauai plan would revise property tax
LIHUE » Kauai Mayor Bryan Baptiste announced yesterday a proposal to change the real property tax rates so that resident homeowners would benefit at the expense of resorts and vacation rentals.
A bill, sent to the County Council yesterday and based on a 2004 proposal, would not only transfer the tax burden onto resorts, hotels and vacation rentals, but lower taxes for resident homeowners by about a third, said Eric Knutzen, projects manager for the county Finance Department.
"We're trying to achieve a fairer distribution of taxes," Baptiste said yesterday at a news conference to announce the bill. "It's innovative."
The bill would change the tax rates on buildings and land. Currently, the average rate on land is about equal to the rate on buildings.
But the bill would make the tax rate on buildings three times the rate for land.
By putting the burden of the tax on the buildings, people in modest homes would pay much less than those in more expensive homes, Knutzen said.
The changes would also keep property taxes more insulated from the explosion in land values, which have risen exponentially with the home market in the past 10 years. Some residents have seen their property tax bills double and triple as their neighbors' homes have been sold and resold.
"If someone puts a $7 million home next door, it doesn't have that same spiking effect that people experienced over the past three, four years," Baptiste added.
The bill would also simplify the tax rate classifications. Instead of the current system where land is lumped together by zoning designation, the new bill would focus on land use.
For example, lands used for farming, fuel production or conservation lands without any buildings would be in one classification, while any properties that pay transient accommodations tax, such as hotels, bed-and-breakfasts and vacation rentals, would be lumped in another classification.
Those in the resort classification would experience the largest tax increase, as they bear the brunt of the new system.
It is something the rest of the counties have done, the mayor said.
Resorts "expect a change," Knutzen said. "We're just catching up here."
The 3-1 building-to-land ratio, which is used nowhere else in the state, was part of a proposal in 2004 by the Real Property Tax Task Force, which also sought to simplify the tax classifications and focus on land use.
That bill died before even receiving a public hearing at the County Council.
The difference between the 2004 bill and this one, Knutzen said, is that the task force bill fixed assessed land values at a certain rate.
The new bill "doesn't restrict (the Council's) authority" or "fixate the assessed values," Knutzen added.
The county says the proposal will not change the amount of tax revenue it collects.
The bill has been shown "to some councilmembers" for their input, the mayor said, but it has yet to be seen by the whole Council or put on an agenda.
"We look forward to the discussion," Baptiste added.