LIHUE >> Kauai's County Council will take up the Garden Isle's skyrocketing property taxes Thursday with a measure that would provide some relief based on a homeowner's income. Kauai Council considers
reducing property taxesAn income-based plan is criticized
as not going far enoughBy Anthony Sommer
tsommer@starbulletin.comOne longtime homeowner told the Council at a hearing last week that his home's valuation -- the dollar value of his property on which the county levies its property tax -- has gone to $875,000 this year from $140,000 four years ago.
His situation is the rule rather than the exception, tax reform advocates say.
But the same critics say the emergency measure passed by a Council committee last week and forwarded to the full Council for a vote at its next meeting is not enough.
County officials concede it will provide tax relief to less than one in 10 homeowners. That is less than 1,000 of the county's 9,600 homeowners.
The problem of climbing property taxes partly is a result of the high demand for residential property on Kauai that began in 1999, coupled with the small supply. That is driving up prices. The total valuation of all real estate in the county is forecast to increase 11.3 percent this fiscal year, which ends June 30.
Wealthy investors have been paying top dollar for land with ocean views and in agricultural subdivisions for retirement or second homes and gentleman farms. The high price tags have contributed to rising valuations throughout the island.
Despite two hefty cuts in the county property tax rates in the past two years, the property taxes paid by almost every homeowner on Kauai have increased. The valuation increases have gone up faster than the tax rates have come down.
A solution to soaring property taxes was proposed several months ago by environmental activist Ray Chuan of Hanalei: a property valuation freeze similar to Proposition 13 in California more than a decade ago.
A bill to freeze valuations at 2001 levels was introduced by then-Council Chairman Ron Kouchi just before he left office. But the new Council chairman, Kaipo Asing, and the new Council -- only three of the seven members are returning incumbents -- have decided a valuation freeze will not provide immediate relief.
A valuation freeze passed this year would not become effective until 2004 because any change approved now could not be calculated until the next tax billing, which is in 2003 for taxes to be paid in 2004.
The quick fix the Council appears to have agreed on is being borrowed from a system Maui has had in place since 1996.
What it would do is this: If a homeowner's property tax bill is higher (under the existing tax method) than 3 percent of the owner's adjusted gross income in 2001, the homeowner would receive a tax credit for the difference between the two figures.
For example: A working couple owns a home and had an adjusted gross income (the amount on which they paid federal and state income tax) of $100,000. Three percent of their adjusted gross income would be $3,000.
If their property tax under the current method is, for example, $4,000 -- or $1,000 more than 3 percent of their adjusted gross income -- they would receive a $1,000 tax credit.
If their property under the current method is less than $3,000, they would continue to pay property taxes as usual and receive no credit.
In Maui County about 10 percent of homeowners are eligible for the credit. Kauai officials estimate the figure in Kauai County will be a bit lower. The total credit should be no more than about $225,000, they expect.
Chuan, who still champions an across-the-board valuation freeze, is opposed to the income-based approach because, he said, it will benefit the wrong people -- including himself.
"My taxes would go from $1,600 a year to $300 a year," Chuan, who is a retired physicist, told the Council, "but I don't think that's fair.
"This will only benefit older people like myself who don't rely on wages and salaries for their income and are receiving pensions and a whole list of tax exemptions. Instead, it puts the burden on young couples whose only source of income is wages and salaries. That's wrong."
County of Kauai
