LIHUE — A new change in current tax laws approved by the Kauai County Council on Wednesday is scheduled to bring relief to thousands of county taxpayers who experienced noticeable increases on their real property tax bills.
The seven-member board unanimously approved a measure that will cap the allowable tax increase on a property with existing home exemptions at $250.
“It’s like Christmas,” said retired Hanalei resident Steve Lindsey, who saw his real property tax bill jump from $2,440 to $7,589 between this year and last. “I was very accepting of some increase, but mine increased 211 percent, so that’s wonderful. I’m thrilled. I can’t even put it into words. Many of my neighbors were talking about leaving and selling their homes because we’re all retired and some of us are near the end of our earning years, so big increases like that were going to make a lot of us move.”
The changes, which go into effect immediately, extend the first half payment deadline for real property taxes to Dec. 31.
It allows tax credits to be issued for properties with existing home exemptions, if the real property tax bill for the 2014 tax year increased $250 over the prior year’s tax bill; the physical characteristics of the dwellings on a property have not been substantially altered over the past year; the property has not been subdivided; and has not been sold since Oct. 1, 2013.
Qualified properties, as a result of the new changes, will be issued tax credits “for the remaining amount of the assessed taxes which exceed the sum of the taxes assessed for the 2013 tax year plus $250.”
“It’s a bit more aggressive in terms of the relief than what was proposed, but I think it also solves potentially some of the solutions that were brought up with some of the changes in use and the retroactivity bills that were being considered,” County Finance Director Steve Hunt said. “I think this would be a broad relief that would cover many of those measures. It certainly would be a one-time fix.”
Council Chair Jay Furfaro agreed with Hunt that more tweaking is needed.
“We need a new tax bill, because right now, we have a mummy walking around,” Furfaro said. “He has got Band-Aid and gauze wrapped all over him. This guy is like the living dead.”
The board also appropriated about $1.9 million from the county’s $4.9 million uncommitted reserve fund to subsidize the projected costs of the tax law changes.
The county has 3,105 residents who saw tax increases greater than $250 who should benefit from the change.
But not everyone will see tax relief despite the council’s decision.
That’s because the board, by a 5-1 decision, struck down a proposal to bring back the permanent home use tax credit, which was repealed by the County Council last year and capped future tax increases on owner-occupied homes, with the proper exemptions, at 2 percent.
“The (permanent home use cap) cap was very well-intended and it was intended to be a temporary measure, but it remained in place for 10 years and it caused huge inequities,” Councilman Tim Bynum said. “Its removal led to curing most of those inequities.”
Councilman Mel Rapozo, who cast the only vote in favor of restoring the permanent home use tax credit, said he would have liked to have seen the old system restored but supported the tax increase ceiling because it targets some property owners who were hit the hardest.
“This is a cap and it’s inequitable, but it’s necessary to save people’s homes,” Rapozo said. “Was the cap the best system in the world? Absolutely not, but removing it created a whole bunch of problems.”
In all, 3,720 property owners across all tax classes with home use exemptions, or 54.5 percent of all of those who received increases on their real property tax bills, experienced hikes that were not greater than $250. So they won’t see relief.
The Kauai County Council will take up five other real property tax proposals, including those to provide low-income tax credits and allow owners to resubmit tax forms declaring the use of their property, during their Oct. 15 Finance Committee meeting, beginning at 8:30 a.m. in the Historic County Building Council Chambers.