Smaller increase holds little comfort for city taxpayers

THE ISSUE Property valuations on Oahu have increased by an average of 15.1 percent.

OAHU residents, property owners and even renters will feel a bigger sting of taxes in the new year. Not only will they have to begin paying a surcharge for a mass transit system, they also will lay out more in taxes on their homes and condominiums -- unless the City Council and Mayor Mufi Hannemann decide to change the tax formula.

Though the rise in property valuations this year wasn't as steep as in 2005, as the mayor was quick to point out, successive double-digit increases since 2002 compound the burden.

The city is sending out assessment notices to about 280,000 property owners, telling them what officials have calculated their homes are worth, the base on which they will be taxed.

Valuations increased an average of 15.1 percent. From the mayor's point of view, that's not too bad considering last year's boost averaged 26.1 percent.

However, homeowners in Oahu's rural districts, where valuations increased significantly, may not find much comfort in that. The Leeward Coast saw values jump by a whopping 23.6 percent, while homes in the Kaaawa to Kahuku area went up 19.5 percent in value and assessments in Wahiawa vaulted by 19.9 percent.

The huge increase last year prompted the Council to raise exemptions for property owners who live in their own homes to $80,000 from the current $40,000 and to $120,000 for those 65 and older. Though the exemptions will ease some of their pain, renters are likely to see their fees -- already among the highest in the nation -- go up as owners pass on their costs.

If property tax rates remain the same, the higher valuations will bring to the city's treasury an extra $109 million. Officials could drop the rate, now set at $3.59 per $1,000 valuation, but Hannemann has indicated he would rather hold on to the surplus and collect a "fiscal reserve."

For Council budget honcho Ann Kobayashi, the city's expenses will have to be measured before consideration is given to further tax cuts. But Council member Charles Djou, a staunch tax-cut proponent, may be correct in his belief that Oahu residents are reaching a tax threshold.

If so, taxpayers are going to have to demand a change.

One way would be to re-examine the way valuations are set; they are based on recent sales of similar properties that have skyrocketed in price in the past few years. Of the $191.6 billion in property value, more than half was established for single-family homes that were not renovated or expanded, but increased 11.5 percent nonetheless. This inequity should be corrected.