During the year 2008 the market value of publicly owned businesses traded on stock exchanges throughout the world declined by one-third or more, the worst year since 1931. The more volatile of the sectors in the market saw even greater
During the year 2008 the market value of publicly owned businesses traded on stock exchanges throughout the world declined by one-third or more, the worst year since 1931.
The more volatile of the sectors in the market saw even greater losses. The financial institutions were so seriously affected that massive government intervention was needed to salvage their existence and operation.
A major cause of the banking world disasters arose from the bursting of the bubble that had covered the price escalation in residential properties. With the shrinkage in value that occurred in real estate the unwarranted excesses in mortgage financings were laid bare and those who had speculated on ongoing price increase for properties were critically struck.
How do these catastrophic realities affect Kaua‘i and its government?
One of the ways is that our county government’s revenues mostly depend on a tax based on the market value of real properties.
During the years of this century the assessed value of Kaua‘i’s taxable properties has grown from about $6 billion to over $20 billion. Much of this increase arose from the pressure from affluent buyers who were looking to acquire second homes on our lovely island.
Today the real estate office sales people in the county anxiously await buyers who never seem to appear while they are listing sites that would be sellers, many of whom owe mortgages with amounts and terms they are unable to meet, are offering. The reduction in sales volume of Kaua‘i realty and the increased period that a typical property remains on the market provide convincing evidence of market problems.
Nationally property values are down over 20 percent in 2008 and 2009 forecasts call for continued declines. Mortgage foreclosures have soared.
The market value of real estate is not as readily determinable as that of business equities.
Stock prices in active securities markets allow current and ongoing daily evaluation measurements for businesses, but the turnover of any given real property is only occasional. Still our property tax law requires that the market value of each taxable property must be determined as of the first of each year by our county property assessors.
Accustomed to stable or improving real estate markets, the present conditions are an unpleasant experience. Determining market value of properties accurately in this environment is a difficult problem. Over 90 percent of all residential properties are encumbered with mortgages. It is estimated that nationally at this time about one-third of all homes have mortgages greater than the value of the home.
Our Kaua‘i assessor has declared that mortgage foreclosure sales do not represent fair market value transactions. In consequence, assessors will attempt to make market value determinations using the limited volume of multiple listing transactions only. It is expected that under this methodology valuations will be unduly inflated.
The small cadre of assessors in the county office do a commendable job of appraising property values in our county. But they cannot be expected to be 100 percent right. In prior years their function has been relatively easier. With generally rising prices a modest error in their judgment was not critical. In current conditions an erroneous assessment is greatly more troublesome and an inaccurate assessment is much more likely.
The Kaua‘i real property tax is, in general, computed as the product by multiplication of the assessment made by the assessor’s office and the tax rate set by our council. Because the council does not like to face the public concern over rising rates and its increasing expenditures, the assessor’s office continues to be under pressure to make higher assessments.
The property tax law contains a serious flaw affecting whether taxpayers must accept an unjust assessment of their property. Under the tax code a taxpayer may not appeal an assessment made unless the assessment amount is more than 20 percent higher than the prior annual assessment. In our present climate even continuing the 2008 year opening value may be a serious overassessment but a taxpayer would have no right to appeal it. Elementary justice requires that this be changed.
Councilman has introduced Bill 2292 intended to open the door to correcting the existing deficiencies in the law. A public hearing was held on the bill on Dec. 17. All public testimony sought elimination of the existing 20 percent barrier to appeal and substituting a right to appeal if the taxpayer believed that the assessment was greater than the fair value of the property.
The unanimous testimony given also proposed that the current procedure for appeals be revised so that taxpayers would be entitled to a settlement conference with the assessor before which the parties would provide each other with the data believe to support their position and at which both the assessor and the taxpayer would seek to resolve their differences. The public witnesses further suggested that if the valuation dispute was not resolved by the settlement conference it should be made subject to arbitration as structured hearings before the Board of Review do not appear to be protective of taxpayers.
These suggestions present an interesting dilemma and test for our normally deliberate council. The timetable is tight. The assessor’s office must give notice to the taxpayers of the 2009 assessments made by March 15 and taxpayers have only until April 9 to appeal.
The need for the council to act is urgent as assessments greater than present market value are likely and taxpayers now have no meaningful rights to protest. The right solution path is also quite clear and has been expressed in the public testimony.
Citizens can now wait and wonder. The choice for our new council is whether to act to serve the interests of our citizens and prevent injustices arising from the troubled state of the economy from unfairly impacting our taxpayers or not. If the council does not act it is probable that many taxpayers will have unjust assessments they cannot appeal.
We should surely hold good thoughts, but if citizens are concerned about the position they may face, they should contact our council members and urge the council to enact a measure that will correct the current law and provide taxpayers an opportunity to remedy excessive assessments.
Silence here is definitely not golden.
• Walter Lewis is a resident of Princeville and writes a bi-weekly column for The Garden Island.
