A bill expanding the limitations on property assessments to nonresidential properties with a 15% cap was panned Tuesday by the County Council Finance Committee.
Bill 156, introduced by Hilo Councilwoman Sue Lee Loy proposed the cap for apartment, hotel and resort, commercial, industrial, agricultural or native forests and conservation assessments.
“The assessed value of the property shall not increase more than fifteen percent per tax year until the parcel is sold or any portion thereof sold by way of conveyance,” the bill read in part.
Lee Loy also proposed an amendment to the bill that would create a “ceiling and floor” cap, meaning if property values decreased, the tax liability would also be capped at a 15% reduction on the assessed value. The amendment was voted down by a vote of 6-2.
Real Property Tax Administrator Lisa Miura testified that the council basically has free reign to change the tax rates, however that would be another roadblock.
“We don’t have the staff to do a 15% cap, or any other cap,” she said. “The homeowners (classification) has the 3% cap.”
She said the biggest confusion her office hears is among people that purchase property and are confused as to why their neighbor’s property is valued and taxed less.
“The homeowners have a protection. This protection would go to every other classification except residential. The one that bothers me more is the apartment tax class, all the condominiums, all those in hotel/resort areas such as your less than 180 days rentals which under the bill would have a 15% cap,” said Miura. ” I don’t think that is the intent of the bill, to protect that class. I think the intent was to try to put safeguards in places for the businesses more than anybody else.”
She added that she would be very cautious about all of the tax classes that would be given this opportunity to have a cap.
“This would go in effect right away. My staff cannot implement this right now. The main problem is any time a property transfers or sells the cap has to go away. When you are going through that many tax classifications, it makes it very difficult for us to manage,” she said.
Miura added that the department recently finished its property tax assessment appeal hearings. In all, there were 835 appeals with 454 from East Hawaii and 381 from West Hawaii. Of the appeals, 237 were withdrawn prior to hearing and 527 cases are settled awaiting review by a supervisor.
Of all of the cases, she said, the total average reduction in value was 15.7%.
The bill was ultimately given a 7-2 unfavorable recommendation with Lee Loy and Kohala Councilman Tim Richards casting the only favorable votes.
“We are probably going to revisit this a few more times to get to that equity piece that we’re all striving for,” said Lee Loy.
Also considered Tuesday during the Finance Committee meeting was Bill 227 to increase the tax credit from $300 to $400 for owners of single-family dwellings, ohanas, farm dwellings and duplexes.
Only homes built before the 2010 state law mandating new construction include solar water heater systems would be eligible for the credit, which will be offset against real property tax liability for the tax year immediately following approval of the application for the tax credit.
“The real property working group makes recommendations regarding our real property taxing system,” said Hilo Councilman Aaron Chung, who introduced the bill. “One of the recommendations they have been making for many years was to get rid of the solar water heating credit because it’s required for new construction anyways.”
But when it became required for all new construction by the state, the working group felt there was no reason to give any incentives.
“I had introduced a bill before following the guidelines of what the working group wanted but when it hit the floor, and after listening to testimony and using our own good judgment it seemed like it needed some tweaking,” he said. “It did away with the credit for everybody but it didn’t take into consideration that we still might want to provide an incentive for people to convert from their present system. So that’s what this bill does.”
That bill was forwarded with a favorable recommendation to the full County Council by a unanimous vote.