Kauai Chamber opposes tax amendment

HILO — Hawaii Island property owners could end up paying an extra $75 million annually if a constitutional amendment passes that would allow the state to carve off a piece of county property taxes for public education.

It’s not known which categories of properties would be taxed if the ballot amendment passes in the Nov. 6 general election.

Property classifications such as affordable housing and agriculture could fall under that category, in addition to the non-owner-occupied residential class, which already carries the highest property tax rate in the state. Preliminary indications are the state surcharge alone could increase that rate from $11.10 in tax for each $1,000 in property value to $18 per thousand.

That’s according to county Finance Department officials, who made a presentation Tuesday to the County Council Finance Committee. The $75 million increase in state taxes compares to the county’s current $524 million budget.

Counties are opposing the constitutional amendment, saying property taxes are the counties’ only dedicated revenue source. In Hawaii County, property taxes account for 76 percent of the general fund budget, said county Real Property Tax Administrator Lisa Miura.

“We struggled with the loss during the lava of $5 million (in property taxes),” Miura said. “I can’t imagine us raising $75 million.”

The Kauai Chamber’s Board of Directors voted unanimously to oppose the amendment.

The Affordable Hawaii Coalition PAC, a coalition of concerned citizens and community organizations representing diverse interests from across the state – has been formed to inform the public about the negative effects of this proposed constitutional amendment and to stop this new tax.

It is urging business leaders to speak to other businesses and community organizations; provide information to employees; write letters to the editor of your local newspaper and post information on social media.

“The proposed amendment establishes a new tax on real properties that would take money from the counties’ only source of funding for critical services like police, fire, park maintenance, road repairs, garbage pickup, etc. The counties are already struggling due to a lack of resources,” the coalition’s report says.

It warns that “the impact will be felt not just by local property owners, but by the people and businesses who rent from them. The result will be higher residential rents and business leases and an increase in the cost of goods and services.”

Hawaii has the only state-run school district, compared to other states, where schools are controlled locally and subsidized by property taxes. Hawaii’s Department of Education currently has a $2 billion budget, but students still lag behind national peers in test results, and the state is chronically short of teachers.

The Hawaii State Teachers Association has pushed for a dedicated funding source for years. HSTA President Corey Rosenlee downplayed concerns that the tax would be charged on anyone other than owners of pricey second and third homes.

“No one wants to tax mom and pop stores. No one wants to tax residents,” Rosenlee said in an interview last week. “They’re just saying that to make people afraid.”

But local officials feel they have a reason to be fearful. Not only could the county lose control over its primary revenue source, but it’s very likely its bond rating would suffer as well, Miura said. Losing control of its tax base could result in a lower bond rating and consequently, higher interest rates on county borrowing, she said.

“We can’t afford to open the door and let the state start taking county funds for state departments,” said Miura. “Once you open the door we can’t stop it.”

Currently, the constitution states, “all functions, powers and duties relating to the taxation of real property shall be exercised exclusively by the counties.” If the ballot initiative passes, this wording will be appended, “provided that the legislature may establish, as provided by law, a surcharge on investment real property.”

  1. harry oyama September 6, 2018 11:41 am Reply

    Maybe the State should go after the corrupt bloated DOE administration and cut those ranks of useless parasites, those so called “Complex executive principals”. Why does the DOE need so much personnel that amounts to around 13,000 plus that out number 11,000 teachers?

    Its like having 13,000 CEOs to run a company that has 11,000 employees. Time to cut that number in half and fire them out right to avoid paying pension, medical and other expenses, just doing that will save $75 million easily.

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