Viewpoint for Monday – March 21, 2005

• Letter to the mayor on budget

Letter to the mayor on budget

By Steve Faunce

If one can believe the article in yesterday’s issue of The Garden Island (Wednesday, March 16), the budget increase for the coming year “stems from a significant increase in projected real-property-tax revenues generated by a 48-percent increase in real-property assessments of Kaua‘i properties this year.” I don’t know whether the article’s an accurate reflection of the mayor’s presentation or not. If it is, I’m appalled at the lack of logic that has our county’s budget being driven by increases in property values. I would have assumed that the county would start by determining how much it will cost to provide needed services to our residents this year and submit a budget that reflects that level of spending. That number would then be divided by the total of all of the current real-property assessed values for the County of Kaua‘i (i.e. the “tax base”), and the result would be the real-property tax rate applied to the our assessed valuations to determine the taxes due for next year. I’ve observed over a period of many years that the assessed valuations for properties all over the island were typically well below their market values (as indicated by the sales prices whenever the properties actually sold). It makes perfect sense to me that, if the adjustments have been made equitably, we should begin to see assessed valuations that are more in line with market values. What doesn’t make sense at all is that the budget for providing county services would magically rise by $22,400,000 next year (including a $10,500,000 line item in the budget which may or may not be returned to the taxpayers as “tax relief” in the future). The budget process must begin to separate the issue of how to equitably assess the market values of individual properties from the issue of how much it costs to provide the services needed by Kaua‘i residents. Do the budget first, then figure out what tax rate will be needed to pay the bills with the current tax base. If you continue building the budget based on fixed rates and increasing property valuations, we may find ourselves on very “slippery slope.” It undoubtedly looks like a great idea now with property values rising each year. However, I suspect it will look a lot less attractive when we hit one of our inevitable market slumps and the property values stay the same (or even decline) from one year to the next. Will it suddenly cost any less to run the county than it does now? Will the assessed valuations be reduced? Where will salary and collective-bargaining increases come from? When the voters approved the amendment to the county charter in the last election, I was opposed to it because it seemed to take care of those of us who’ve lived in our homes for many years at the expense of those purchasing after a certain date. I was sure that the reasoned judgment of our elected officials together with the recommendations from their key staff members would come up with a more equitable solution. As of today, I am not as confident that this is likely to be the case. The county cannot continue to base its spending plan on the increases (or decreases) in property values. Every office holder must understand that a change in the size of the tax base is a totally separate issue from the amount needed to provide county services. If that difference isn’t clear, that person shouldn’t be involved in our budgeting process. The tax rates for our properties should probably change (both up and down) from time to time to reflect changes in the relationship between the tax base and the cost of providing needed services. For example, with the huge (48-percent) increase in the tax base this year, I would assume that the tax rates should probably be reduced. Please take the time to consider making this basic change and do not assume that, just because the market values of all of our properties go up, you have a mandate to spend more.

Steve Faunce is a resident of Koloa.