LIHUE — A recent change in the county’s real property tax system has upset some residents when they realized their annual tax bill more than doubled. Meanwhile, the Kauai County Council is working on a bill that could potentially alleviate some of the issues.
Gini Martin, who runs a small preschool in her residential property in Wailua, said she was surprised when she saw her property taxes increased to $3,625 this year from $1,335 in 2012.
“I thought they made a mistake,” she said.
But when Martin checked with the county’s Real Property Tax Division, they told her that when she signed a tax survey, she put down she was running a business, so they taxed her home as a commercial property.
“We were never personally notified the property has been changed to commercial property,” she said. “It’s really trying, it’s really frustrating.”
Martin was not alone; others have also said they have been caught by surprise.
This year, the county increased tax rates for nearly every class of taxpayers and began taxing by use rather than zoning.
Commercial, industrial and vacation rental classes pays $8 per $1,000 of assessed value. The homestead class was the only one that didn’t have an increase — resident homeowners pay $3.05.
Additionally, residential class pays $5.75, agricultural and conservation rates are $6.75, and hotels and resorts pay $9.
Councilman Tim Bynum, who has pushed for a reform to address inequities, said “changes are painful,” and most resident homeowners will see reduction on taxes, but county officials only hear complaints from those whose taxes went up.
Bynum said he has received many complaints, and almost all of them are a result of the change in the system that now taxes according to use. Because Martin’s home is in the same tax map key as her school, her entire property got taxed as commercial use, he said.
Despite Martin and others saying they were unaware of the changes, Bynum said there was plenty of notice, including tax credits that may have applied to some of them.
“There’s only so much that the county can do to inform people of these programs, but we have actually sent a letter to every single taxpayer,” he said.
Koloa resident Tom Bartlett was another who was caught in the mix, but for a different reason. He owns a home in Princeville and rents it out to an older couple.
“It was shocking,” he said of when he realized his taxes went up more than 100 percent. Bartlett, an associate Realtor at Makai Properties, said he is aware of the laws, but missed these changes.
Bynum said the new laws allow landlords who rent on affordable rates, to keep their properties in the homestead class. Those who missed a chance to apply for the exemption should do it for next year, he said.
“That’s a huge incentive to landlords, and not all of them are eligible,” he said
Bynum said if Bartlett has a long-term lease and it’s affordable to people with 80 percent of the median income, he can apply and his entire property goes back to homestead class.
Bartlett, however, said his property is not an affordable rental.
The council’s Finance Committee, of which Bynum is the chair, is scheduled to begin working today on Bill 2495, which proposes a revision on property tax exemptions and caps.
“If this bill passes we will have completely eliminated the inequities,” Bynum said. “Every taxpayer will be treated the same.”
County Deputy Finance Director Sally Motta said the Real Property Tax office has heard from several concerned residents about the impact of the bill.
“The main reason the bill was proposed was to address inequities in the current tax structure and to provide some relief to homeowners who occupy their principal residence but don’t currently qualify for the benefits the permanent home use exemption provides,” she said.
Some taxpayers will have an increase in taxes and others will see a decrease, she said.
Bynum said under this bill, which he introduced by request of the administration, is a compromise, with significant tax reductions for the majority of homeowners. The bill removes a tax cap and increases tax credits.
The cap may have protected homeowners during the boom of the economy, but it also created major inequities for new homeowners and those who missed applying for the cap. Those who have been protected by the cap — “the winners” — have been paying very low taxes, and may see an increase, according to Bynum.
Bill 2495 also increases the county’s standard minimum tax from $25 to $150 incrementally during a two-year period. Hawaiian homesteaders, however, would be exempted.
The bill also requires that credit unions, which are nonprofit organizations, now pay a $1,500 minimum tax, which has made some of these organizations “unhappy,” Bynum said.
“Credit unions have never paid any taxes, even though they have big commercial operations,” he said.
• Léo Azambuja, staff writer, can be reached at 245-0452 or email@example.com