Property tax reform won’t affect next tax roll

The Kaua‘i County Council Wednesday deferred a bill to reform the real property tax system pending another workshop expected to air 11 proposed amendments to the controversial legislation.

The 6-1 decision to delay action means fundamental changes to the outdated tax system will be unable to be put in place in time to affect next year’s tax roll, county Finance Department officials said after the meeting at the Historic County Building.

“The whole bill is so complicated as a puzzle,” Council Chair Jay Furfaro said, adding that the property tax system is “one of the most important issues in our county.”

Councilman Tim Bynum was the lone “no” vote on the deferral, the council’s third since Bill 2274 was first heard by the Committee of the Whole on Aug. 20.

Council members said the workshop will be scheduled within the next couple months and will be posted to meet the Sunshine Law concerns that caused Tuesday’s workshop to be cut short.

The debate lately over the legislation has centered on its timing almost as much as its overhaul of the current property tax system.

With a contested mayoral race underway, three council members not seeking reelection and all seven legislative seats up for grabs on Nov. 4, residents have voiced concerns at multiple sessions over the increasingly likely potential for the ball to simply be handed off to the next council and administration.

Some council members said they oppose allowing the existing inequities to persist, but others said such a critical piece should not be rushed.

Council members and administrative officials have pointed at the discrepancies that exist in single buildings, for instance, where a timeshare owner pays significantly less taxes than a condo next door.

They have also argued that residents and farmers need relief, but have grappled with how and where to shift the tax burden.

At any rate, it will now be weeks, if not months, before a tax reform package is approved and it will affect the 2009-2010 tax year at the soonest. The administration twice extended an Aug. 27 deadline for the council to approve the legislation if the reform measures were to affect next year’s tax roll.

The 147-page revenue neutral bill was submitted to the council in May by the late Mayor Bryan Baptiste’s administration after an eight-member Real Property Tax Committee spent more than a year working on the legislation. But a discussion on comprehensive real property tax reform has been ongoing for several years and also included a task force committed to providing solutions to fix the system.

Finance Department officials said if the council had been presented with a bill reflecting the current property tax system, it would have been unanimously rejected. Although admittedly not perfect, they said the proposal is a huge step toward creating a fairer system that achieves the county’s goal of preserving an island with open view planes and small towns.

Council members Shaylene Iseri-Carvalho and Mel Rapozo said their access to some of those meetings was limited by the Sunshine Law, which restricts the number of council members who can be at one place at one time outside of their posted sessions. For this and other reasons, such as “too many unknowns,” they supported the deferral.

Iseri-Carvalho said her major concern is burdening the people who do the hiring.

“I think it’s premature and irresponsible,” Rapozo said.

All the council members recognized that the county faces an uncertain, at best, economic future in light of housing, energy and other financial crises playing out in the state, nation and world.

Furfaro said he likes a lot of the pieces in the bill, but wants to make sure residents understand the reasons the county is making the changes before they are made.

“We need a bill that recognizes the economic tailspin that we’re in,” he said. “This is not about giving a tax break right now. This is about navigating the county through what will be some very, very difficult economic times.”

Councilwoman JoAnn Yukimura expressed regret over needing to defer the bill, but said she hopes it provides time to produce a piece that can pass.

“People feel taxes are an imposition but it’s really what enables the county to provide all the services it provides,” she said. “We have to pay attention to those needs or we’ll all self-destruct. We all have to do our share and we’re trying to make the share reasonable and fair.”

The administration has proposed cutting the number of tax rate classifications from eight to four, creating a system that taxes based on use instead of zoning and implementing a three-to-one ratio of taxing buildings versus land.

The effect, under the administration’s proposed rates, would drop taxes on the residential category 31 percent while raising taxes on the resort category 24 percent. The general category would see a 5 percent increase on average and resource lands would drop 65 percent.

Some of the council members’ proposed amendments would reinstate a tax cap and circuit breaker credit that the legislation proposes to repeal, create new classifications, tweak the ratio and provide a construction exemption.

“The amendments put it back to where we started,” Rapozo said.

Residents who presented testimony at the morning session urged the council to further study the potential for unintended consequences.

“We want to give the people of Kaua‘i something that we can work with for a long time,” Councilman Daryl Kaneshiro said.

For more information, visit www.kauai.gov.

• Nathan Eagle, staff writer, can be reached at 245-3681 (ext. 224) or neagle@kauaipubco.com

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