Amending property tax laws

The county financial report for the year ended June 30, 2007, states that the administration has created a “Real Property Tax Commission” to re-address the failed model submitted by the Real Property Tax Task Force in 2004. The proposals of the group, which is principally composed of Finance Department employees, were recently submitted by the mayor as a bill to amend county real property tax laws.

Under the Kauai County Charter “commissions” are to be created by the County Council and their members are then appointed by the mayor. As county agencies, their proceedings are regulated. The agendas for their meetings must be officially noticed and public attendance and participation at meetings is required.

The use of the commission nomenclature and the formation of the group in disregard of the method stated in the County Charter is of concern since to date, meetings of the group have been closed to the public and have not met the legal requirements for a validly organized commission.

The changes in the law being suggested by the group are comprehensive and essentially ignore the recommendations of the Task Force. The bill being offered says that its provisions are to accomplish the policies of the county through tax incentives. The prime purpose of tax laws to generate revenue is apparently no longer applicable these days.

The exclusion of the public from the deliberations of the group raises the important question of how tax measures should be proposed. In 2002 the mayor appointed a task force entirely composed of citizens who were members of the public without existing ties to the county government. Their thoughtful recommendations, made after nine months of study, for property tax law changes were discarded by the County Council without any real examination. In 2004 a proposal was circulated by a citizens group (‘Ohana Kaua‘i) for an amendment to the County Charter seeking a limit on taxes for resident homeowners. The amendment was submitted for Kaua‘i voter approval and was adopted by a nearly two-thirds vote. However, the county filed a lawsuit that challenged the validity of the measure and the state Supreme Court, while failing to express any opinion on the merits of the measure, ruled by a 3-to-2 vote that tax measures could not be created by a citizens’ initiative. Although that opinion has been sharply criticized, the charter amendment was never put into effect. Its message, though, that a large majority of our citizens believed that they should be protected against sharply rising taxes, was received by the County Council which in 2005 adopted the ‘ohana measure, a 2 percent annual limit on tax increases for properties owned and occupied by residents. The limit remains in effect, but its removal is now being proposed.

Over 200 years ago our forefathers created the American Constitution. The work they did was magnificent. But it would never have been adopted without the addition by the people of the Bill of Rights setting forth the basic liberties we expect. Making or changing our tax laws also requires the touch of the people if their rights are to be protected.

There is a fundamental difference between tax proposals originating in a citizens group and proposals from a group of government officials. The “commission” group being composed by county employees only, most of whom are involved in property tax administration, unquestionably results in its bias toward the interests of the tax collector and not the taxpayer. This anti-taxpayer orientation is particularly evident in two important respects: the absence of any reformation in the existing procedures for taxpayers appealing unjust assessments and the proposal to remove controls that have limited the council’s powers to choose the burden taxpayers will bear.

At present there is an unacceptably hostile environment for taxpayers who seek to appeal assessments believed erroneous. The Board of Review almost invariably supports the assessor and the law severely limits claims. A “Bill of Rights” change in these terms is essential. However, the provision being proposed that would have the broadest impact on county citizens is the one to eliminate the stabilizing 2 percent annual cap on residents’ taxes now in effect. About one-third of all properties being assessed are those owned and occupied by county residents. The proposed bill relies on increases in exemptions to justify ending the tax cap and glibly assumes that the council, which is given absolute power over tax rates, would never exercise that power in a way that would harm resident owners. Tell that to the citizens who saw their taxes skyrocket before the 2005 adoption of the cap and we all know that it can happen again.

The county has recently adopted a $156 million operating budget for its next fiscal year. This is a sharp increase over the current budget and will require a significant escalation in the revenues to be sought from the real property tax which is the county’s principal source of income. There is no single cause for the increase in government spending, but the growth in visitor accommodations (hotels, condos and time shares) in recent years has far exceeded that contemplated by the county General Plan adopted in 2000. Although the council ought to understand that resident property owners and their families comprise the majority of the voters in the county and that the people of the county should not have to shoulder the burden of rising county costs largely occasioned by needs for facilities and services to support the growing tourism on Kaua‘i, the pressure for revenue may be irresistible.

County residents who own and occupy their homes need to become aware of the threat that the proposals of this bill would have through the unwise repeal of the safeguard citizens have enjoyed with the existing 2 percent limit on annual tax increases, and should vigorously inform the council members of their concerns in order to protect against a misguided change in our tax laws. More in my next column on the perils of the proposed tax bill.

• Walter Lewis is a resident of Princeville and writes a bi-weekly column for The Garden Island.


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