A bill creating a structure for a luxury residence tax — with 99% of the targeted property situated in three West Hawaii council districts — easily passed its first hearing Wednesday before the County Council, with one more vote to go before heading to Mayor Harry Kim, who supports it.
The council voted 8-1, with Kohala Councilman Tim Richards voting no.
“I’m for starting the economy but I don’t think taxing is the way to start the economy,” Richards said. “I think we’re going to have to work harder on our economy and harder on our budget and it’s going to be tough.”
Kona Councilwoman Rebecca Villegas said a higher rate for the wealthy is only fair.
“Less than 1% are being asked to pay a little more,” said Kona Councilwoman Rebecca Villegas, noting what she calls “the disparity of allocation of resources between the 99% and the 1%.”
Bill 169 defines “residential tier two property,” subject to the tax to include homes, vacant land and condos with a net assessed value of $2 million or more that don’t have a homeowner’s exemption and are “classified as residential in consideration of the highest and best use of the land.”
The bill does not set the tax rate; it just creates the new category. The council has until June 19 to set property tax rates.
Under Mayor Harry Kim’s proposed budget, those property owners would pay a rate of $14.60 per thousand in value on all value over $2 million, compared to the current tax rate of $11.10 per thousand. The homeowner rate is $6.15.
The tax would apply to only 935 of the 140,000 properties on the island.
It would overwhelmingly apply to West Hawaii properties, with 55% of the targeted properties located in the North Kona council district, 40% in the Kohala council district and 4% in the Kona council district. The remaining 1% is spread over the remaining six council districts on the island.
Four members of the public testified in support, while 11 opposed the measure. Another 25 people submitted written testimony, primarily in opposition.
Supporters said the extra tax is “morally pono,” helps protect local families from out-of-control real estate prices and helps supplement the budget during difficult times.
Opponents say the proposed tax structure is discriminatory and targets those who don’t vote. They urged the county look at reducing the size and cost of government.
Kristen Alice, HOPE Services’ director of community relations, said owners of second homes are “hoarding resources” needed by those less fortunate.
“This gets to the heart of the problem and it really addresses it rather than put a Band-Aid on it,” Alice said. “We have enough luxury properties here but we don’t have enough affordable housing.”
Koohan Paik-Mander agreed.
“Current policies have generated million-dollar properties where no one even lives all the time while we have people forced into homelessness and subjected to early-morning sweeps without enough time to gather their few possessions,” she said in testimony.
David and Tim Hosbein presented a different view, recounting how their family vacation home at Waialea Beach Lots Subdivision would fall into the $2 million category, although it was purchased by their grandfather, a Big Island physician, for $20,000 or $30,000 in the 1930s.
“It has been a family vacation home for many years. These are unrealized gains,” David Hosbein said. “It’s older landowners and homeowners that will be forced out.”
Scott Nair, general manager of Kukio Golf and Beach Club, said in written testimony the subdivision already pays $12 million in property taxes, generates jobs, contributes to the community and uses very little services. It shouldn’t also be subject to an “arbitrary and capricious designation” that could lead to litigation, he said.
“Please understand this is NOT a threat of litigation, but another unintended consequence of action that may be considered by the homeowners,” the letter adds.
