The Hawaii County Council is considering granting homeowners a $250 property tax credit to alleviate the financial strain of the COVID-19 pandemic.
In a resolution introduced during Tuesday’s meeting of the council’s Finance Committee, Hilo Councilwoman Sue Lee Loy proposed offering eligible homeowners a onetime $250 credit on their 2022 property tax payments for their primary residences.
“This has never been done before,” Lee Loy said, adding that she wanted to acknowledge the sacrifices many Big Island homeowners have made during the pandemic.
Under the proposed terms of the credit, properties “in the homeowner class” — meaning properties used as the owner’s principal residence — for which the owner paid the full real property tax due in fiscal year 2021-2022 would be eligible for the credit.
County Finance Director Deanna Sako said there are an estimated 33,000 homeowners on the island who would be eligible for the credit, which is estimated to cost the county about $7.7 million.
But because the proposal is so unprecedented, there remain several open questions about it — including whether it would be legal at all.
Sako said the council does have the authority to increase or decrease real property tax rates via resolution, and can implement a real property tax credit. However, doing so could run afoul of conditions tied to federal coronavirus relief funds the county received last year.
Sako said the specific funding source for the tax credit would not necessarily be directly from federal funds received through the American Rescue Plan Act or the Coronavirus Aid, Relief and Economic Security Act. But, she said the terms of those funds prohibit the county from using them to reduce taxes, whether directly or indirectly — so county funds offset by the federal aid could still violate those terms if they are used for a property tax credit.
“Basically, they’re saying not to use this to balance the budget,” Sako said.
Other council members, upon learning of the questionable legality of the proposal, expressed reservations. Most lauded the intent of the credit, acknowledging that homeowners have had a rough time during the pandemic, but questioned whether the proposal was premature.
Hamakua Councilwoman Heather Kimball questioned why the credit would grant a flat $250 credit to all homeowners instead of adopting a more progressive system based on means testing.
Lee Loy responded, saying that she had considered a progressive credit scale, but found that it became too unwieldy for the resolution.
In any case, Lee Loy herself moved to postpone the issue until an April meeting of the committee, after the council has gone through a budget review process. Her fellow council members voted unanimously to do so.
Email Michael Brestovansky at mbrestovansky@hawaiitribune-herald.com.
