Mayor Bryan Baptiste’s proposed $131.5 million budget for fiscal year 2006-07 is $9.3 million more than the current year’s budget.
The 7.6 percent increase is attributed to projected revenue gains mainly in the area of real property taxes.
The budget projects a $3 billion increase in real-property assessments for the coming fiscal year. Assessed values equal $14 billion for the current year with a projected value of $17 billion next year. That equates to projected revenues of $75,468,144 in property taxes flowing into county coffers.
Property taxes are assessed so the county can provide services such as fire and police protection, street maintenance and lighting, water, sewer and refuse collection.
As part of the budget process every year, the County Council sets tax rates to meet expenses, resulting in a balanced budget. The tax rates are set separately for each class of property, and for land and buildings. The classes are: Single Family Residential, Apartment, Commercial, Industrial, Agriculture, Conservation, Hotel/Resort, and Homestead. Other than Homestead, the classes are based on the property’s highest and best use, which is usually the same as the zoning.
This year’s tax rates for a resident who owns property and occupies the building on that property is $3.44 for the land and $4.15 for the building. The rate for a business is higher, around $8.
The tax rate is the amount of taxes on the property for each $1,000 of net taxable value. For example, if the tax rate is $3.44 and the net taxable value is $100,000, the taxes would be $344.
The county instituted a 2 percent tax cap ordinance on property taxes last year. What that means is your taxes cannot go up more than 2 percent from last year’s bill — if your tax bill was $100 last year it cannot be higher than $102 this year. Some 15 percent of the island’s tax base falls under the exemptions of the tax cap. The remaining 85 percent of the tax base is subject to the county’s assessment increases that balance the budget.
The County Council may have been inspired by Ohana Kauai when it instituted the 2 percent cap. The Ohana Charter Amendment sought to cap property taxes at 2 percent while freezing rates at what they were when an owner first occupied a home back to the year 1999. That amendment was approved by voters in November 2004 but is currently bogged down in litigation.
In the meantime the County Council enacted its tax cap ordinance. The difference with the county cap is it can be repealed at will and it operates on rates as they were set in 2005.
The Ohana Charter Amendment would require a vote of the people to be repealed.
County Council member Jay Furfaro has said that the mayor should have proposed more property tax relief in the coming fiscal year. Let’s hope, at the least, the tax cap stays in place. That choice lies with the council.
The council certainly has the ability to enact such relief like that Furfaro asked of the mayor, and is in fact responsible for passing any such legislation. That is one of the issues in the Ohana Charter Amendment lawsuit, the county claim of the county council as sole arbiter of taxing power.
A county property tax task force offered suggestions that were left out of the proposed budget, said Furfaro. One suggestion sought to change the tax assessment formula from the current higher rates on land, to higher assessment rates on buildings. That change would benefit long time land owners on the island as their land assessment rates would less likely be tied to neighboring property.
Though the chance for legislation to take effect this year has passed, property tax reform, in this election year, will loom large in the year to come.