County Deputy Finance Director Eric Knutzen backs a radical change in the way real property tax is formulated on Kaua‘i, a plan he says will stop the flood of residents who have been “taxed out” of their homes. Knutzen, speaking
County Deputy Finance Director Eric Knutzen backs a radical change in the way real property tax is formulated on Kaua‘i, a plan he says will stop the flood of residents who have been “taxed out” of their homes.
Knutzen, speaking at Kaua‘i Mayor Bryan J. Baptiste’s weekly “media chat,” said that the proposal, drawn up by the Real Property Tax Task Force and recently transmitted to the County Council, will create a more easily understood and more acceptable model.
The biggest change that will keep the “Aunties” in their homes, Knutzen said, is the proposal to change the land to building tax rate to a 1 to 3 ratio.
That means, Knutzen said, that improvements on land (meaning buildings) will be more heavily taxed than the land itself. If a long-term resident makes no changes to their homes, regardless of their neighbors’ homes, their taxes should not fluctuate wildly as is being reported by some property tax payers, he said.
Tax rate classes will also change. Instead of the current eight classes, they would be simplified to two — long-term residential and general.
Long-term residential, or properties occupied by the owner and long-term renters, would be taxed at half the rate of all other properties. The Tax Force suggested a tax rate of $2 for the land and $6 for the building for each $1000 assessed value.
And land values, which currently are based on sale activities of nearby homes and land parcels, as well as other factors, would be stabilized, increasing instead with the Honolulu Consumer Price Index cost of living measurement.
These three proposals alone, Knutzen said, would cut down on kama‘aina residents losing their land due to not being able to pay high property taxes.
Rentals would also be affected, as long-term rentals (those that come with at least a year-long lease) will be more encouraged as a property owner would pay half the tax rate.
“I especially like the breaks given to long-term rentals,” Mayor Baptiste said at the meeting. “It’s of great value to us as we talk about affordable housing.” The rise of “Real Property Tax has forced people into (making their houses) vacation rentals” as taxes go up and more money can be made, said Knutzen.
And it has forced the price of rentals up as demand has become shorter.
Agricultural lands would also be affected, as the task force recommends that the homesite assessment not be applied until the dwelling is under construction, and that the homesite assessment be done uniformly with residential or agricultural parcel assessments.
The task force, which consisted of nine community members appointed by the mayor and the County Council, has been working on the proposal for at least a year.
“What came out is a great document, quite far from the norm,” said the mayor. “The work they put together should be applauded and should be supported.”
It now goes to the Council for their review and decision. The proposal, sent in the form of amendments to Chapter 5A, Draft bill No. 2108, is on the agenda for Thursday’s Council meeting. The bill goes for its first reading.
Knutzen said that the proposed charter amendment proposed by Ohana Kauai will hurt the county by only affecting one segment of the population, mainly residential homes.
Like a balloon, if revenue from residential home taxes is lowered, chances are other areas will be squeezed.
“I want to give credit for the citizens” trying, said Knutzen, but Ohana Kauai’s proposal “will only affect a certain group of owner occupants.”
It will instead transfer the tax load to different tax classes, including businesses and agricultural properties, said Knutzen. He suggested a revenue loss to the county around $3 million in the first year, which will be made up either by cutting spending or raising taxes in other areas. “Spending is not capped with Real Property Tax Ohana’s amendment,” Knutzen said. But Ohana Kaua‘i, in an editorial written by member Walter Lewis that was published in The Garden Island Monday, accused the county of deliberately using misleading assumptions to scare the public into not supporting the amendment, which will be on the November ballot. It is also the only measure on which the public will make a direct decision.
Ohana Kauai has proposed limiting tax increases to two percent a year in 2006, as well as rolling back property tax rates for residents to pre-2000 levels.
Two other Council tax amendments, the “circuit breaker” tax and “home dedication” which have provided some tax relief for some Kaua‘i residents would also be rendered moot with the new plan, Knutzen said, by providing relief to those covered in the amendments.
Some tax exemptions, such as the “leprosy exemption” might also be changed in the future as the bill moves through the Council process, said Knutzen.
As for support, the mayor said he’s standing strongly behind it. And the members of the task force will be at Council meetings as well, Knutzen said.
“All the nine members want to be a part of it, want to voice their opinion,” said Knutzen, “It’s their baby. It ‘s not the mayor’s or my proposal.”
The members of the task force are Chairperson Steve Hunt, Dottie Bekeart, David Pratt, Ray Chuan, Roy Oyama, Arnold Nurock, Steve Nishimura, Mike Dyer and Curtis Tom.
Tom Finnegan, staff writer, can be reached at 245-3681 (ext. 226)
