Editor’s note: This is the fourth part in a series on the proposed property tax system reform. Part 3 appeared Aug. 26.
by Nathan Eagle – THE GARDEN ISLAND
As the Kaua‘i County Council prepares to continue its work tomorrow on a property tax reform bill submitted by late-Mayor Bryan Baptiste’s administration in May, concerned residents have zeroed in on its potential impact to the business community.
The proposed legislation would cut in half the overall number of tax rate categories, creating a general classification that would lump together commercial, industrial, improved residential and certain vacant lands.
“We’re helping our businesses,” said Eric Knutzen, who served as a facilitator for the county Real Property Tax Committee.
Although it is up to the council to set the tax rates, the administration has suggested a system based on use instead of zoning and a three-to-one building-to-land tax rate ratio for the four categories proposed under the revenue neutral Bill 2274.
For the general category, the committee has proposed taxing buildings at $10.50 and land at $3.50 per $1,000 of property valuation. This would impact the various sub-classifications in different ways.
On average, commercial businesses, such as retail stores, would see a 12 percent decrease in taxes and industrial businesses would see a 10 percent drop under the proposal, county documents show.
Property taxes for improved residential lots and certain apartments, however, would go up on average 21 percent and 15 percent, respectively.
The county would pick up an extra $2.46 million, a nearly 5 percent increase, from the 13,695 parcels in the proposed general category, county documents show. The proposed real property tax system would balance this increase by decreasing the amount collected from the residential and resource lands categories by a combined $4.82 million and increasing taxes on the resort category by $3.75 million.
The general category would compose 63 percent of the total revenue the county collects from property taxes. The proposed changes amount to a 2 percent hike.
The bulk of the increase to the classification would come from homes — usually a second or third house for someone — that are not occupied by the owner or a long-term renter, Knutzen said.
“It’s really a burden for us,” he said. “They have to pay their fair share.”
In a presentation to the council, Knutzen noted the county services vacant properties still require, such as fire protection.
Property owners can calculate an estimate of what their taxes would look like under the proposal by going to www.kauaipropertytax.com and inputting their tax map key number, assessed values and the proposed rates.
Councilman Ron Kouchi, who chairs the Committee of the Whole where the bill now sits, said yesterday that he supports the general category as proposed in the legislation.
It acknowledges, as evidenced by the overall reduction in revenue collected in this category, that industrial and commercial businesses have endured tough times in the past and tougher economic times lie ahead, he said.
Kouchi said he also likes how the proposed system taxes like a commercial enterprise those property owners not committing to long-term uses.
It offers incentives to property owners in the improved residential class to put their homes into long-term rentals to take advantage of the break in the tax rates, he said, creating more housing for residents.
The councilman, who has received much public input for and against the legislation, said the proposed three-to-one ratio is “where we start.”
A separate bill needs to be introduced that structures a tax break for resort, commercial and industrial property owners to reinvest in their businesses, he said.
Rather than attract the construction of brand new buildings, Kouchi said, the tax system should encourage the upkeep of the island’s current inventory.
Although the Lihu‘e Business Association has not taken a stand on the bill, its president, Pat Griffin, said she personally feels the bill should not be rushed.
“We have been talking about property taxes for years, but I don’t think it’s been vetted enough to the public,” she said. “We need more public and open sessions where the implications and the changes are explained.”
The administration had given the council an Aug. 27 deadline to pass the bill to affect next year’s tax roll, but extended it until at least Sept. 10. The community can testify on the bill at the Committee of the Whole meeting at 9 a.m., tomorrow, at the Historic County Building.
When asked if the council expected to meet the new deadline, Kouchi said, “We’ll see what happens on Wednesday.”
The Lihu‘e business district stretches north to Wailua River and south to Tree Tunnel Road, including large and small landowners and a diversity of business interests, Griffin said.
There has been discussion among business owners about the bill, she said, but most of the buzz in the community has been about the other proposed categories.
“People are always interested in their taxes,” Griffin said. “We need to make sure it’s for the overall good of the island and that it will help us to flourish.”
• Nathan Eagle, staff writer, can be reached at 245-3681 (ext. 224) or firstname.lastname@example.org