Mayor’s tax plans get cool reception

The City Council Budget Committee defers on advancing the mayor's proposals

Key pieces of Mayor Mufi Hannemann's property tax cut plan appeared to be out of the running as the City Council began deciding yesterday which proposals stay or go.

The Council Budget Committee deferred moving forward the mayor's proposal to create a homeowners tax classification and a $150 one-time assistance to low-income renters.

Budget Chairman Todd Apo said after yesterday's meeting that it did not appear that either proposal had much support, but he is taking a wait-and-see approach on the homeowner classification.

"I'd like to see what kind of overall tax relief we're able to provide this year, and once we get through that, then we'll say, 'OK, is there a need for a homeowners classification?'" Apo said.

The budget chairman said, however, said the prognosis for the rental assistance is not as good.

"I think that one is in trouble," Apo said. "I don't think it's an effective way to help the rental market."

This is the second year that the mayor has tried to get a homeowners classification through the Council. The proposal would create a separate property tax category for owner-occupants, allowing the city to give the greatest tax break to this group by setting a low tax rate.

But last year, members of the Council said they were worried that the lower rate for owner-occupied homes would translate into higher taxes for others residential properties including rentals -- in turn leading to higher rents.

Hannemann said yesterday that the rental assistance proposal was designed to address the Council's concerns, and he believes there is still time to persuade the Council to advance the proposals.

"I don't see it failing because of what happened today. I'm going to ask the budget chair to move it forward so it can have a public hearing," the mayor said. "It's not dead at all."

Council Chairwoman Barbara Marshall said she is not a fan of the proposals, but pointed out that the renter's credit does not meet the concerns voiced by the Council.

"I think that is (the mayor's) response to what the Council said last year, but I just don't personally feel that that's going to accomplish what we need to accomplish," Marshall said.

The administration has said that the renter credit and the homeowners classification have a price tag of $64 million in the mayor's proposed $1.6 billion operating budget for next fiscal year.

Marshall said money could instead be used to cut the tax rate, and she is proposing an 85-cent reduction in the current $3.59 property tax rate for single-family and apartment property owners.

Marshall said besides giving a break to residential property owners, lowering the rate could also provide a more stable climate for rents.

Lowell Kalapa, president of the Tax Foundation of Hawaii, said that reducing the rate will not necessarily guarantee that the savings will be passed onto renters, and that the best way to keep rents affordable is to increase the supply of rental units.