Council moves mayor’s property tax proposals forward

Published On: Jul 10 2013 11:29:00 PM HST

With the cost of public worker pay raises expected to surge during the next fiscal year, Mayor Kirk Caldwell wants to begin a dialogue with Oahu residents about the creation of a tiered system for property taxes.

"We want to engage the public in a detailed conversation to see what they think about these different proposals," the mayor said Wednesday. "Not about raising the tax, but creating different classes."  

Caldwell finds himself walking a fine line between ensuring new union contracts will be paid for during the next four years and possibly increasing property taxes on more expensive homes, one of 10 bills he hopes will be approved by the Honolulu City Council before budget discussions heat up next year.

Last week, Honolulu police officers represented by the State of Hawaii Organization of Police Officers received arbitrated pay raises of 16.8 percent over the life of a four-year contract. The award is expected to cost city taxpayers $121.49 million, but the amount does not include health benefits, projected at another $35.86 million.

Overall, wage increases for the city's public workforce are projected to cost more than $50 million during the next fiscal year (FY-2015), $61 million in fiscal year 2016 and another $83 million in fiscal year 2017.  However, another arbitration award for the Hawaii Fire Fighters Association is at least three months away, and HGEA Unit 13, with 8,000 members, has yet to settle.

"Going forward nothing gets cheaper," said Caldwell. "We saw the price of homes goes up, the price of government goes up, and how do we continue to address our core services while finding balance?"

Among the mayor's proposals is Bill 42, which would assess a higher property tax rate for homes costing $1 million or more, as long as the homes are not occupied by owners.  According to public records, 316 homes and condominiums with values of $1 million or more have been sold on Oahu through the first six months of the year. In 2012, that number stood at 573.

"Those who may own a second or third home (and) live somewhere on the mainland or in Asia or Europe, but has a multimillion dollar home in Kahala or the North Shore… perhaps they pay a higher tax," said Caldwell.

The mayor is also seeking council approval to curtail property tax exemptions for certain nonprofit groups and corporations, while adding the word transient to the "Hotel and Resort" class. Such language would allow the city to tax bed and breakfast homes and short-term rentals at a higher rate.

Although only a handful of people testified about the mayor's proposals during a council hearing Wednesday, those who did stood in opposition.  

"The council has not seen fit to legalize any more bed and breakfast since 1987, and yet here is a new form of taxation on bed and breakfast (operations)," said Dan Carpenter of Waianae.

"Gosh, I don't know any other way to say it, but it looks to me like the city and county of Honolulu is broke and you guys are scratching for money," added William Page, a Kailua resident.

All 10 of Caldwell's bills were approved by the council on first reading, which is customary for all but the most controversial of measures. However, the mayor apparently learned an important lesson in March, when council members defeated his proposal to increase the city's fuel tax by a nickel, before the bill could be debated in committee.

That's why Caldwell said he's open to just about any revenue enhancers the council may come up with in the coming weeks and months, as long as they are within reason.

"I'll look at anything that's proposed, but again I want to be cognizant of the impact it puts on people," he said.  

In 2010, the city created a non-homeowner occupant class for property taxes with a rate 16 cents higher for every $1,000 of value on homes occupied by their owners. The classification was removed by the city council the following year.

During the just completed fiscal year, which ended June 30, the city raised $809.22 million in property taxes. According to the city's Real Property Assessment Division, the assessed value of all homes, buildings and land on Oahu was estimated at $180.23 billion.


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