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Proposal limits Kauai
property tax hikes



CORRECTION

Friday, Feb.13, 2003

>> Kauai Mayor Bryan Baptiste commended a proposal by the Property Tax Task Force for its work on a tax plan for Kauai County and said "it appears" its recommendations are more equitable than current county tax laws. He noted that the proposal could be amended repeatedly before the County Council votes on it. A story on Page A5 yesterday incorrectly said Baptiste did not respond to a request for a comment on the proposal.



The Honolulu Star-Bulletin strives to make its news report fair and accurate. If you have a question or comment about news coverage, call Editor Frank Bridgewater at 529-4791 or email him at fbridgewater@starbulletin.com.

LIHUE >> In an effort to slam the brakes on Kauai property tax increases, a county-appointed committee will propose rewriting the county's tax laws today.

Under the proposal, total property tax bill increases would be limited to 6 percent a year, and property values would be based on a rolling three-year average.

At the same time, a tougher tax reduction plan from a citizens group appears almost certain to be on the ballot this fall. It calls for a rollback to 1998 property values and limits annual tax increases to the Consumer Price Index, or about 2 percent annually.

"The County Council has been driven by its ability to set rates to give itself however much money it wants to spend," said Walter Lewis, head of Ohana Kauai, which is spearheading the initiative. "They have made no real effort to limit spending by the mayor and the executive branch. This will place some limits on how much they can increase the budget every year."

With three months left to collect signatures, Ohana Kauai's proposal already has three-fourths of the 2,000 signatures needed to make this fall's ballot. If it does, it will be the first initiative to appear on a Kauai ballot since 1984.

Kauai was the first county to be hit by the current surge in the Hawaii real estate market, which started in 1998 on the Garden Island. An increase in demand coupled with a shortage of properties for sale sent land prices spiraling.

As property values have skyrocketed, the corresponding taxes on the land also jumped.

Property tax collections on Kauai increased 8 percent in 2001. In 2002 they increased 9 percent. In 2003 the county collected an additional 18 percent, and this year, property tax revenues are projected to jump 24 percent, according to county records.

The county added a circuit-breaker provision last year that offers refunds to taxpayers whose tax bill exceeded 3 percent of their gross income, but only 62 homeowners qualified for the tax break.

This year, the county also adopted a tax cut for owner-occupied property if the owners promised to live there for a number of years.

On average, taxes for homeowners have jumped 50 percent in the past four years, according to Lewis. But for some, tax bills have quadrupled.

Hit hard are longtime residents in areas that suddenly became attractive for retirement or second homes for the rich and famous. Most are on the North Shore -- Princeville, Anini, Haena, Moloaa. But even the arid West Shore is not immune. Kekaha, not long ago a remote and dusty sugar camp, is suddenly a boomtown for real-estate sales.

Residents' inability to pay the unexpected tax increases is forcing some to consider selling their homes.

Last spring, Kauai Mayor Bryan Baptiste and the Council appointed the nine-member Property Tax Task Force to come up with a solution. Its recommendation reduces the number of tax classifications to four from the present 16. Two of the four are residential. Owner- occupied and rental homes with leases of a year or more will be considered the same.

Short-term rentals, specifically vacation rentals that have been blamed for much of Kauai's housing shortage, would pay taxes twice as high as owner-occupied and long-term rentals.

Property assessments will still be based on market values, but the value will be a three-year average to ease the impact of rapid land price increases.

Baptiste was given a draft of the proposal almost two weeks ago and did not respond to a query this week asking his opinion of it.

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