Keeping a lid on property taxes

LIHUE — County officials are taking another look at how to keep taxes affordable for owner-occupied homes and rental properties.

The bill being considered by the Kauai County Council relating to a homestead tax cap for home exemption and long-term affordable rental properties was deferred for two weeks on Wednesday.

Gary Hooser, councilman and member of the budget and finance committee, volunteered to work with Steve Hunt, the county’s real property tax manager, on creating another bill that would outline a cap on assessment, instead.

What that does is put the brakes on the current homestead tax cap bill, originally proposed by Hooser, while he and Hunt work on another solution, without killing the bill completely. That’s because the administration introduced another possible route for dealing with real property taxes — an assessment cap instead of a tax cap.

The difference in the two approaches, according to Hunt, is that under a tax cap, the amount of property taxes that you would pay is capped. The assessment cap limits the net taxable amount.

Property taxes are calculated by multiplying a tax rate by the assessed value of the property. The County Council sets the tax rate annually and the assessment is determined by subtracting any exemptions from the market value.

“Under an assessment cap, you are not limiting the amount of taxes you can derive, because you still have control of the rates,” Hunt said. “The difference between an assessment cap and a tax cap is the rates are no longer meaningful under a tax cap and they still are under an assessment cap.”

An assessment cap would still accomplish the same original intent of the bill Hooser introduced to the floor — prevent widespread swings in property values.

“(The assessment cap) takes out the spikes and the valleys (of the real estate market),” Hunt said.

By limiting the dollar amount of the market value minus exemptions, or the assessment amount, the council would have to raise or lower the tax rate in order to adjust their income from property taxes.

Under the method of capping the tax itself, the council could potentially leave the tax rate as is and still have increased revenue, generated by rising assessment values.

Councilman Arryl Kaneshiro said he’s against the homestead tax cap because of the inequality it causes among homeowners, but is open to the idea of an assessment cap “if the assessment is a fair percentage.”

Councilman KipuKai Kuali’i said he’s not in support of the idea, either. He’s a proponent of targeted relief, he said, in the form of a laundry list of exemptions, as well as the opportunity to appeal the tax based on assessed value, denial of exemption, or the property’s tax class. Tax appeals can also be based on whether the tax is legal and constitutional.

“The mechanism is already in place,” Kuali’i said.

A homestead tax cap was put in place in 2004, according to Councilman Mason Chock, and was removed in 2014.

Hooser was part of the council that repealed the tax cap in 2014, and he said he did so because he believed that it caused too much of an inequality between taxes of those who qualified for the homestead tax cap and those who don’t.

Repealing the homestead tax cap didn’t help, though, and Hooser said this is another attempt to control the tax.

The goal is to have the new bill drafted in time to go before the County Council on Jan. 27. Then, the council will have to decide if they want to keep both bills and work on them simultaneously, or choose one and kill the other.


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