Real property taxes generate about two-thirds of the revenue needed by the county to balance its seemingly ever-increasing expenses. Through the years, the council has struggled to provide “fair” terms for the impact of these taxes on the county’s Homestead class resident homeowners who, with their families, comprise over half of the county’s population.
Until last year, our tax laws offered three forms of assistance to keep homeowners’ taxes at reasonable levels – tax rates were favorable, exemptions from assessments were enacted and caps limiting annual tax increases were in effect.
Because of these provisions, although resident homeowners held over 30 percent of the county’s assessed valuations, they only paid about 10 percent of the tax burden.
Last year, claiming that they were improving the position of our resident homeowners, the council hastily enacted a change which sharply increased exemptions but repealed the cap limiting annual increases.
The council had been advised by the county finance department, which endorsed the change, that revenues from the cap repeal would grow about $1.2 million and the exemptions granted would cost about $1.6 million, so the overall impact would be modestly favorable for the class.
But as should have been anticipated, the change caused many severe inequities and public outcry.
The council is the county’s legislative body and responsible for making and changing laws affecting public policy, including those involving taxes, so a workshop was held on Aug. 28 by the council to consider restoring the cap. The restoration was supported by all public testimony with no private party opposing it.
However, the county finance department filed a 19-page paper favorable to its repeal. The paper offered nine reasons purporting to justify the repeal. Although space does not permit discussion of them, in my view, at least eight were spurious or invalid.
The only finance department argument worth discussing was the one that continuing the cap resulted in owners of comparable properties having different tax obligations.
That argument was completely demolished by the excellent testimony of Hanalei resident Carl Imparato, who urged that our tax system should recognize that a fair basis for the taxation of a resident homeowner should be his or her purchase price for the residence, that such price was carefully budgeted and that the owner should be protected against sudden and unexpected tax increases.
Following the workshop, councilmembers Rapozo and Kagawa sponsored Bill 2556 to restore the tax cap, which protected owners from the vagaries of the real estate market and the county’s demands for startling tax increases.
The position regarding the cap restoration was considered by the council Finance Committee at an October meeting.
The meeting displayed an alarming lack of understanding by some councilmembers and the undue and unwarranted influence that the administration through its finance department had on decision making by the council.
During the course of discussion, the county finance director volunteered that because of problems with the county’s computer system, restoration of the cap could well be unimplementable in a timely manner and that the cost of restoration of the cap would be $6 million.
It should be noted that the county system had no problem with the repeal of the tax cap and the estimate that the revenue gain from its repeal would be $1.2 million. Isn’t it beyond belief that a change that was stated to provide a $1.2 million revenue increase in one year would, if reversed the next year, cost $6 million, especially when the total revenues from the class are only about $10 million? Such partisanship and misstatements by the finance department negates the credibility it should have.
While members Rapozo and Kagawa spoke thoughtfully in support of their bill, other councilmembers never seemed to grasp that the basic issue involved was whether our resident homeowners deserved assurance against undue tax increases.
I could regale you with a number of inappropriate statements by the other councilmembers, but I will just offer one. The committee chair commented that if Mr. Imparato was the representative of our administration rather than Finance Director Steve Hunt, he could vote otherwise.
He probably did not realize that he was really saying that his vote did not come from his own thoughts, but rather he was relying, unwisely I think, on the views of the administration.
It is an election year. The determination as to whom deserves your vote should probably not be based on a single issue.
But insofar as property taxes are concerned, our resident homeowners should understand that the only incumbent councilmembers who sought to protect their interests were councilmembers Rapozo and Kagawa.
They should also understand that last year’s and this year’s actions, which again jeopardized their tax security, were principally engineered by councilmembers Bynum, Hooser and Yukimura.
Observing and analyzing the conduct of our elected representatives and then voting intelligently is the only way we can achieve better government.
Walter Lewis is a retired attorney who lives on Kauai and writes a regular column for The Garden Island.