Last month, I wrote an article for the Forum (April 14, 2012, “Tax relief not a lost cause”) which urged the Kaua‘i County Council to consider reducing the tax rate for our resident homeowners to return the tax burden of these taxpayers to a reasonable percentage of the county’s total property tax revenues.
I thought that this equitable proposal might resonate with council members, as there are about 12,000 residents who are holders of homestead exemptions and who would be favorably affected by a rate reduction; they and their families comprise a majority of the voters on our island.
Following publication of my article, I met with our council Chair and discussed the situation.
In 2004 property values were rising with erratic assessments, and as rates were not being changed, taxes for some homeowners were soaring disproportionally — many more than 100 percent in one year. The net total value of all taxable properties as found by the Real Property Assessment Office climbed from $7.4 billion in 2003 to $9.3 billion in 2004 and ultimately to $19.4 billion in 2008. Tax revenues rose from $53 million in 2004 to $91 million in 2008. The County recognized in 2004 that homeowners needed stability and that taxes had risen unreasonably for some. To control undue tax burdens, a choice between two routes was needed. The County could have adjusted tax rates each year so that the total tax burden for homeowners was geared to a reasonable standard — such as the percentage of total taxes sought — or the County could, as it did, set a 2 percent limit on the amount of tax increase allowable in any year. 2004 was the last year that the council gave attention to rates for the Homestead class. Taxes for that class became 8.5 percent of the total. Since then, Homestead class rates have been unchanged and the tax office has consistently provided false and misleading data which understates the taxes paid by the Homestead class and overstates taxes paid by certain other classes. Because of the defective data it cannot be stated precisely what the Homestead class has paid since 2004, but it appears that the burden borne exceeded considerably what the amount would have been if taxes from the class had stayed at 8.5 percent.
From the $19.4 billion peak in 2008 valuations of county net taxable properties have declined to $15.3 billion. As a result of this decline, taxes for owners of all other classes of property have declined (at least $20 million in these years), while taxes for resident homeowners have continued to climb because of the cap. For the 2013 tax year, Homestead class members are proposed to pay about $9.9 million, or more than 12 percent of the total. It should be noted that when the cap was enacted it stated only a limit on the maximum tax that could be collected. Although a lower tax rate could have been set for the Homestead class, it wasn’t.
In my view, it is clearly better that if resident homeowners are to be taxed at a fair level, that the tax rate not be tied to the amount payable in the prior year, but instead be based on a reasonable percentage of the total taxes collected.
For the coming tax year, the Mayor is seeking total tax revenues of $81.5 million, of which $9.9 million would be from the Homestead class. Thus, the tax office would collect 12.1 percent of its total from the Homestead class, an increase of more than 42 percent from the 8.5 percent set in 2004.
Such an increase would be unfair and relief should be provided.
At my meeting with the council chair, I suggested that the council for the current year provide relief for our resident homeowners by setting a new reasonable percentage of the total tax revenues to be paid by the Homestead class. Several days after our meeting I received an email from the Chair with a closing “I find nothing in the way of a rule or ordinance that indicates homestead residential should not pay more than 10 percent of the total.” The Chair is a politician. When not prepared to commit, it is his style to offer a diversionary observation. I remain unaware of his views on the matter.
The council’s determinations made in 2004 to set new rates for the Homestead class, which resulted in that class paying 8.5 percent of the total, should be recognized as setting a standard for fairness. If the council now approves rates for 2013 for this class as set in 2004 for the class, taxes would be reduced by more than $3 million from the amount sought in the Mayor’s budget. councilmember Bynum, chair of the council Finance Committee, has been working on property tax matters for several years and supports the principles of this solution.
Our council seldom acts without citizen input. In my last month’s article on the subject, I suggested readers contact the council with their views if they were concerned about the council’s intended determination of their property tax. Only a trickle did. If our residents are indifferent as to whether their government is treating them unfairly and is seeking up to 50 percent of excessive taxation from them, sadly, there is little more to be said.
• Walter Lewis is a resident of Princeville and pens a biweekly column for The Garden Island.