Harris eyes tax rate hike to boost city revenues
By Treena Shapiro
Advertiser Staff Writer
Even though most property owners will pay more taxes next year because their homes are worth more, Mayor Jeremy Harris said yesterday he was considering raising the tax rate, because the city will be short of money.
Harris did not say which kinds of property would see a rate increase, but suggested strongly that hotel and commercial property were the likeliest choices.
HARRIS
"It's good that residential values are coming back, but still, these other properties are lagging behind," Harris said. "At this stage, I think it is unlikely to assume that we're going to be able to continue to have hotel, resort, commercial and industrial (classes) pay less than in 1993 and 1994."
The mayor said the overall 16 percent increase in tax assessments would generate about $51 million for the fiscal year starting July 1, but the projected budget shortfall is $85 million. That estimate assumes the City Council will pass a motor vehicle rate tax increase next week, and no other fee or revenue increases, Harris said.
About 264,000 property owners received their real property assessments this week. The tax rate is applied to those assessments to calculate property taxes owed. The first payments are due in August.
Any increase in the tax rate would have to be approved by the City Council. Only council member Gary Okino said a rate increase would be necessary. Others reached yesterday said the city's rising costs would force them to maintain the current rate, rather than lowering it to give taxpayers some relief on higher assessments. And some said they would like to consider lowering the rate to compensate for the rapid escalation in property values.
Residential property assessments increased 17 percent, while commercial and industrial properties saw smaller increases, and hotel and resort properties saw a slight drop.
The city said the assessed value of commercial properties increased by an average of 4.6 percent and industrial properties by 5.3 percent. Hotel and resort values dipped an average of 0.3 percent.
Overall, O'ahu property is valued at $110.4 billion.
Harris said there were too many variables to say yet whether the residential property tax rate would remain the same. The mayor will unveil his tax rate proposal at the beginning of March, when he sends his budget to the City Council. The council then has until the beginning of June to make any adjustments.
Council Budget Chairwoman Ann Kobayashi said it was unlikely the council, after raising property tax rates this year, would vote for a another increase. "I don't know that it would be an easy sell to raise the property tax rate again," she said.
But because of the city's rising costs for employee salary increases, retirement and health benefits, the city probably will have to maintain the current rates, Kobayashi said.
Council Chairman Donovan Dela Cruz said he did not expect a rate increase. "It's the administration's kuleana to send down a balanced budget by the beginning of March, and it would just surprise me if there is a request to raise the rates, being that (Harris') position for the last nine years was that a rate increase was not necessary."
As for lowering the rates, Dela Cruz said, "We should always consider how to alleviate burdens on the taxpayer, but we still have to see how that relates to our core services and other services and projects that constituents depend on."
Okino, however, said the city probably would have to raise property taxes to meet the budget shortfall, which he thinks could reach $100 million. "My gut feeling is we're going to have to raise it," he said.
Councilman Mike Gabbard wants to see whether the Legislature will let the city levy a 1 cent sales tax or give the city a share of the uncontested traffic fines before he can comment about property taxes.
Meanwhile, Councilwoman Barbara Marshall, whose Windward district is seeing higher assessments for the second year in a row, said: "I am very hopeful that we will be able to, certainly, at least keep the tax rate where it is, if not reduce it."
She cautioned, however, that the city needs to look at the numbers. "We have huge bills facing us just to maintain city services."
As the council learned during the bus strike, constituents want services maintained, Marshall said.
Councilman Charles Djou said he would oppose any rate increase. "Last year, we had a nice valuation increase, and we piled a tax increase on top of that," Djou said. He expects another rate increase to be proposed this year, but "it will meet opposition from me."
Reach Treena Shapiro at tshapiro@honoluluadvertiser.com or 525-8070.
