LIHUE — The Kauai County Council will consider five measures today that seek to provide relief for residents who, in some cases, saw their real property tax bills increase over the last two months by hundreds of dollars, if not thousands.
“I believe that all the proposals are serious and we need to have an open discussion to determine what is the best path forward,” Councilman Tim Bynum said. “For each tax proposal, my focus is on three main areas: Are they balanced, where is the relief targeted and where is the money coming from to pay for it?”
Still, some county officials say the mixed proposals point to a larger problem that will not be solved quickly.
“The answer isn’t to piecemeal it, because on the surface there’s this problem and that problem,” Council Chair Jay Furfaro said. “I’m suggesting that we do it for a fixed period with the assumptions being terminated at a certain date when a tax task force is prepared to make a full recommendation.”
At issue, however, is how to bring targeted real property tax relief to residents in a way that is fair and equitable, some county officials say. Here’s what’s being considered beginning at 8:30 a.m. in the Historic County Building Council Chambers.
Reinstating the permanent home use cap
Councilmen Ross Kagawa and Mel Rapozo say they are putting forth a proposal, outlined in Bill 2556, that would reinstitute the recently repealed permanent home use tax credit, which capped future real property tax increases on owner-occupied homes, with the proper exemptions, at 2 percent beginning in 2004.
Kagawa said the removal of the tax credit last year hurt some residents.
“I think we need to step back, go back to the drawing board and really make a good plan and educate the public,” Kagawa said.
Some county officials, however, say the tax cap is not a good option.
“If we restore the cap, it means going back to where we were — some people are going to have low, suppressed property taxes while other people in similar situations pay more,” Councilwoman JoAnn Yukimura said. “Later on, it’s going to be harder and harder to remove the cap because the gap gets bigger and bigger, which is what we’re having to deal with right now.”
Discounting tax increases
Mayor Bernard Carvalho, Jr. and his administration, meanwhile, have a different solution, albeit a temporary one.
Their proposal, outlined in Bill 2554, would provide tax credits to taxpayers in the county’s homestead and residential tax classes who received real property tax increases greater than $500, if they meet certain qualifications:
- the property did not change ownership after Sept. 30, 2013;
- a second home was not built on the property nor was the living area of the original structure substantially increased; and
- the property has held a home use exemption during the 2012-2013 and 2013-2014 tax years.
The proposed credits, County Finance Director Steve Hunt said, would discount any tax increase above the county’s allowable $500 threshold by 70 percent.
“We looked at various extreme cases and how they would have fared, if they had taken advantage of the relief measures that are currently in place,” Hunt wrote in an email. “We felt this was a good threshold to provide the relief where it was most needed.”
The proposal from Mayor Bernard Carvalho’s administration also extends the due date for the first half payment of real property taxes from Aug. 20 to Dec. 31 for all property owners who have current home use exemptions. Any penalties and interest accumulated during this extended period would also be waived retroactively.
About 1,500 property owners, Hunt said, “will be provided some relief and a bridge to next year, when any additional tax relief measures for which they are eligible will kick in.”
“We still feel that the lifting of the permanent home use cap and a return to an ad valorem system of taxation (one in which tax is based on value) is fair and equitable for all property owners on Kauai,” Hunt wrote.
Creating low-income tax credits
Council Chair Jay Furfaro said he is putting forth his own tax proposal, in the form of Bill 2557, that would create a tax credit for low-income households that may not benefit from current property tax programs.
“I think there’s a possibility there that it was something missing from the equation,” Furfaro said.
To qualify for this credit, the gross income for all titleholders must not exceed 50 percent of the Kauai median household income, which ranges from $31,800 for one person to $59,950 for a family of eight.
“By introducing this measure, it is my hope that this proposal will address some of the concerns raised by various homeowners in recent months,” Furfaro wrote in a memo to fellow council members.
Bynum and fellow Councilman Gary Hooser said their proposal, outlined in Bill 2558, would give county taxpayers more time to take advantage of current tax relief programs by extending application deadlines and applying the proper exemptions retroactively.
“The proposals we are putting forward will provide significant relief for both those that were caught unaware by the removal of the cap and those who were mistakenly placed in the wrong tax class or missed out on exemptions they were legitimately entitled to,” Bynum wrote in an email.
Their bill would allow any claim for an exemption applied for in the 2014-2015 tax year, either the long-term affordable rental or home preservation tax limit tax credit, to be applied retroactively to a person’s real property tax bill for the 2013-2014 tax year.
Homeowners, according to the bill, would also be allowed to submit a new Use Survey Form to the county’s Department of Finance by Dec. 31 for the 2013-2014 tax year and receive a tax credit for the 2014-2015 tax year. The tax form was sent to some county residents over the last year and allows county tax officials to determine which tax classes properties belong in based on their highest and best use.
The bill would also waive all penalties and interest for delinquent payments due to an incorrect tax classification.
Hooser said he will also introduce another proposal, outlined in Bill 2559, which would allow a property with multiple uses to be classified under each applicable tax classification based on the percentage of property dedicated to each use.
Under current tax laws, properties are placed in tax classes based on their highest and best use. But those laws, Furfaro said, do not take into account the footprint of that use.
“It’s very concerning because you’re holding the whole parcel at its highest use, so this is an amendment that would allow us to address this,” Furfaro said. “If two-thirds of a property, for example, has a home use exemption and one-third of the property is used as a TVR (transient vacation rental), then only one-third of the property get assessed at the vacation rental tax class rate. Those are some finer points along the line.”