City Council considers golf course tax break

By Treena Shapiro
Advertiser Staff Writer

The City Council is considering placing privately-owned golf courses open to the public in the same property tax bracket as residential properties.

The move would provide relief to struggling course owners but could place a greater burden on homeowners and businesses.

Bill 63 (2002) would move roughly 1,600 preservation and unimproved residential parcels into the residential property tax category, resulting in a net loss of $3.9 million in tax revenue to the city. Twenty-six privately-owned golf courses would be affected, as well as some single-family residences on large tracts, watershed land and parts of the Waimea Falls park.

The bill will be heard by the Budget Committee at its July 23 meeting.

Council Budget Chairwoman Ann Kobayashi said the rate change would protect golf courses that are operating at a loss with little financial effect on the city. One golf course director said the future of his course hinges on the change.

But Mayor Jeremy Harris said the city should scrutinize any proposal that would shift the tax burden to others and at least one City Council member, Barbara Marshall, expressed concern about providing property tax relief to only one type of business and about homeowners paying higher property taxes.

Privately-owned golf courses now pay property taxes at a $10.63 rate, but under the bill, would pay at a $3.75 rate, the same as homeowners.

Kobayashi said the proposed change is intended to aid privately-owned golf courses that are open to the public.

"We like having them because they have open space," she said. "Houses that are near them are able to be sold at a higher rate because there's that open space."

However, the bill would provide the same relief to exclusive golf courses attached to country clubs and resorts. Kobayashi said that the bill would have to be tightened to exclude those courses "because they are able to pass on the increased property tax to their members."

Ron Huffman, director of golf for Coral Creek Golf Course, told the Budget Committee Wednesday that the fate of his golf course could be linked to this bill. "We're at a point where it's very close to getting our doors closed," he said.

His course is operating at a loss roughly equivalent to his $200,000 property tax bill, he told members.

Huffman said the problem facing the golf courses is that the assessment does not take income into account, so golf courses have to pay the same tax rate even if they are having trouble bringing in customers.

He pointed out that the privately owned courses have to compete with the less-expensive municipal and military courses. "Neither of them pay property taxes," he said.

And, Huffman said, golf courses benefit all residents because they provide open space and green belts, they can be used as flood control bases and they recharge the water aquifers.

Gary Kurokawa, administrator of the city's real property tax division, told the Budget Committee that one way to recover the lost revenue is to raise the real property tax rate for residential property by six cents per $1,000 of assessed value. Another would be to make up the difference by raising commercial property taxes.

Harris said his administration would spend the next week analyzing the bill.

Marshall said she was concerned that the bill allows only one type of private business to be classified as residential property.

She also questions whether this will open the door for other businesses to come to the council for tax relief.

Marshall, whose Windward district has seen two years of increased valuations, as well as a tax rate increase, worries that this could lead to a higher residential rate increase. "My people are hurting, and I don't want them hurt any more than they have to be," she said.

In tax bills coming out on July 20, all property classes except for apartments and condominiums will see tax-rate increases ranging from 2.7 to 15 percent and the city is preparing for another tax-rate increase next year.

Lowell Kalapa, president of the nonprofit Tax Foundation of Hawai'i, agrees that shifting golf courses into the residential property class could open the floodgates for other commercial properties to argue for similar changes.

He supports the bill because it would bring the city a step closer to adopting one tax rate for all properties.

The golf courses' request is reasonable, using an internationally-approved approach to income-based assessment, Kalapa said.

"Property tax is the one tax that you have to pay regardless of whether somebody buys something from your store ... or whether you have customers," he said.

Harris said he is "absolutely steadfastly opposed" to a single tax rate, which would lead to enormous tax hikes for homeowners and huge tax cuts for commercial properties. "We think that is very unfair," he said.

Reach Treena Shapiro at tshapiro@honoluluadvertiser.com or 525-8070.