Tax hike proposed for some TVRs

LIHUE — A bill that would increase the property taxes of Kauai residents with full or part-time rental spaces on their property was met with opposition from some community members on Thursday.

Councilmember Mason Chock, who co-authored the measure, said Bill 2767 seeks to remove transient vacation rentals, or “TVRs,” and hotels from the commercial home use tax category, which was introduced in 2014 “with the intention of finding some middle ground for those homeowners who use their property for commercial use.”

“There is some discrepancy that we’re finding in terms of the use and how TVRs are being placed into this category and benefiting from this tax rate,” Chock said. “We felt it necessary to take a look at this again.”

The bill’s other author, Councilmember Luke Evslin, described the bill as “one of the hardest” he has worked on during the past year because of the number of people who stand to take a financial hit if it passes.

“Any time we’re changing the taxes for 218 people, we have to be careful,” he said. According to Evslin, the purpose of the bill is to ensure that all houses being used in any way as short-term rental properties are taxed in a fair way.

But a number of long-time Kauai residents who testified Thursday afternoon at a public hearing on the measure maintain that the proposal will have unintended consequences and unfairly tax many people who simply can’t afford it.

Amy Frazier said she and her husband have a one-bedroom, detached TVR on their property that, under Bill 2627, would require her to pay higher taxes on their primary home as well.

“My concern — just the very basic concern — that we are going to be charged a TVR rate for a home that we are not allowed to rent, nor do we rent,” she said. “That, to me, is just basic unfairness.”

Frazier explained that the previous council created the commercialized home tax bracket, which she is currently classified under, as a compromise, because the county didn’t have the resources to properly define how properties were being used. Since she bought her home 10 years ago, Frazier said her tax rate has been changed and renamed numerous times, and has already increased by 400%.

“I already exceed the national average for an owner-occupant situation,” she said. “Go back to the problem, which is the Finance Department doesn’t have the right tools to appropriately charge based on use.”

Diane Garrison, who moved to Kauai after retiring 15 years ago, lives in her home nine months out of the year, and rents it out for a couple months while traveling.

She told the council that the bill is “easy to administer but entirely unfair,” and said it is only a matter of time until her property taxes increase beyond the income she gets from the two months of rent, “eventually forcing us out of our home.”

Carol Williams said she and her husband are full-time Lihue residents who only rent their place out as part of a house exchange, swapping their home with a family in California for short time so they can visit their daughter, a trip that would be too expensive otherwise.

“Our house would go up so much it would be unaffordable to us,” she said. “We’re retired. Keep that in mind.”

The testimony at Thursday’s hearing was entirely one-sided, but several residents sent letters to the council in support of the bill.

Kauai Chamber of Commerce President Mark Perriello wrote in favor of the proposal, saying those who oppose the bill “are unwilling to pay their fair share of taxes” and “taking advantage of a tax loophole to the detriment of the housing and infrastructure needs of our entire community.”

“Those who claim they are unable to afford their fair share have the option of shifting from short- to long-term rentals in order to qualify for lower commercial home-use tax rates,” he said.

Another Kauai resident, Carl Imparato, also backed the bill, saying in his letter that property owners “should not be entitled to the benefits of the assessment cap associated with homestead use while at the same time they benefit from the higher property values and appreciation rates” associated with the right to use it as a TVR.

Imparato did concede that people like Frazier should be allowed some sort of an exemption.

“If a parcel contains multiple distinct structures, some of which are 100% dedicated to homestead residential use,” he said, “It would not be unreasonable to assess the parcel as if it were two separate sub-parcels.”

Bill 2627 passed first reading by a 4-3 vote last month. The bill has a few more hurdles before it can be ratified, including second reading and further council deliberations.

This story has been edited for clarity.

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Caleb Loehrer, staff writer, can be reached at 245-0441 or cloehrer@thegardenisland.com.

4 Comments
  1. Kenneth Smith January 17, 2020 3:44 am Reply

    Everyone should check tax statistics, when we sold our home in Waimea in 2015 we found our entire neighborhood. Was taxed as vocation rental. Our home was never a rental!


  2. RG DeSoto January 17, 2020 8:07 am Reply

    So this must be one of the things our brilliant politicians are proposing that will make Hawaii more affordable! Higher taxes.
    RG DeSoto


  3. Dt January 17, 2020 9:37 pm Reply

    I love how on one hand they claim that doing TVR puts more burden on the infrastructure. As if long term rental is less burden.


  4. henry jeffries January 19, 2020 2:55 pm Reply

    Maybe it’s time for the citizens of the Island or of the entire state to pursue appropriate legislation similar to Proposition 13, enacted in California in 1978.
    1. Real property is assessed annually, or when it changes ownership (except within a family, such as an inheritance) .
    2. Barring re-assessment, the tax on a real property asset can change a maximum of 1-1/2% each year.
    3. Tax legislation requires 2/3 majority to pass in the Legislature.
    4. The tax-and-spend legislators every year try to get that law modified:
    a. change the 2/3 to 1/2
    b. exempt business property from inclusion in the provisions of these limits
    c. just create new taxes.
    But then I don’t know if Hawaiians have the ability to initiate Propositions to create new laws as is done in California.
    My new next door neighbor in a house twin to mine that I have lived in for almost 3 years receives a property tax bill 2-1/2 times mine.


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