Kauai County Council Bill 2274 is of great importance to us because it would essentially change our entire real property tax law. It contains some attractive changes. Unfortunately it also carries the burden of some important omissions, some technical deficiencies
Kauai County Council Bill 2274 is of great importance to us because it would essentially change our entire real property tax law. It contains some attractive changes. Unfortunately it also carries the burden of some important omissions, some technical deficiencies and several provisions that are correctly opposed by many taxpayers. Real property taxes are a complex subject. They comprise over half of the county’s revenue. It is vital to give our tax laws thorough consideration. From the time of the introduction of the bill, however, some council members have been in an impetuous hurry to seek its early enactment. The haste is unseemly. Impetuous consideration of the bill in the midst of election campaigning is a recipe for failure. Continuation of the present law for another year would not affect the county’s revenue.
On Sept. 15 the County Council held what they announced was a workshop on the bill. Under council practice, workshops are intended to provide an interchange of views between the council members and citizens on the topic of the meeting, instead of the regular procedure where public testimony is given but the witness is not allowed to seek information from or ask questions of the council members. However, the agenda for this six-plus hour meeting was devoted principally to a briefing of the council on economic matters and only two hours were allowed for public comment and that was to be by testimony rather than a workshop interchange. In short, the public was deceived and frustrated.
At the Sept. 15 workshop, outlines of 11 proposed amendments offered by various council members were exposed. The number and diversity of these proposals illustrates the vast scope of the subject. Neither the council members nor the public have had any adequate opportunity to study them or to comment about them. Most have not been presented in detailed form.
Recognizing the inadequacy of the workshop and the other deficiencies, the council, at its Sept. 17 meeting wisely voted to defer action on the bill.
About one-third of the properties subject to the tax are owned and occupied by residents of the county. The term of the bill that was of primary concern to them and became the largest center of controversy was the proposed repeal of the enactment made in 2005 to limit an increase in the taxes of resident owners to 2 percent per year.
The advocates of retaining the 2 percent limit contended that it is necessary protection to safeguard against runaway taxes for owners who needed to budget their costs in these uncertain times when their incomes had not risen proportionately with the assessment increases. Opponents argued that the limit is unfair and discriminatory, but their contentions are flimsy.
First, they said that as the cap is at a lower rate than inflation, over time the homestead group will pay an increasingly smaller percentage of the total tax. They assume an annual Consumer Price Index increase of 5 percent and argue that each year 3 percent of total homestead class taxes are added to others. Even if the assumption was accurate, it ignores the effects of turnovers and only about $200,000 of taxes would be shifted per year. Paradoxically the bill proposes a tax reduction of over $4 million per year for the group. Isn’t is absurd to quibble about an avoidance of $200,000 and then confer a reduction of over $4 million?
Second, they said that continuation of the cap will mean that a new home buyer would have a higher tax cost than someone under the cap. The poster child for this argument is the son or daughter of a resident who is buying a first home. It is true that the buyer of a multi-million dollar home would have a higher tax than an owner under the cap. But the median price on Kaua‘i for homes is around $700,000. It is most unlikely that a first-home buyer would be in the market for a higher priced home. If the bill were to retain the 2 percent cap, because of the effect of the proposed $300,000 exemption, the new-home buyer would have no higher tax than an owner under the cap. The poster child is unhurt.
The real concerns for both sides in this debate about the cap were, however, below the surface. The main objective for council members who are proponents of repeal of the cap was to get absolute authority and discretion to set rates each year at any level they wish. Having this ability unleashes the propensity to grow expenditures without adequate restraint. This power is subject to the well-known comment that all power corrupts and absolute power corrupts absolutely. On the other hand, the basic concern of the taxpayers was that they remember the years 2000 to 2004 when despite promises by county officials taxes surged uncontrollably. Home owners did not believe that the council has earned the right to be trusted to safeguard their interests and that maintaining a limit is essential.
It is critically important to examine more closely the bill and its assumptions, terms and effect. The bill arose from a group of county employees without any significant taxpayer input and limiting our citizens comments to three minute snippets of time is insufficient. A tax collector bill should not be imposed without fully hearing and considering taxpayer views. The council should set one or more legitimate workshops with ample time to permit our citizens who are the real stakeholders on the subject to have a meaningful opportunity to register their comments and suggestions. So far democracy has not been allowed to work.
• Walter Lewis is a resident of Princeville and writes a bi-weekly column for The Garden Island.
