Nonprofits protest property tax bills
By Treena Shapiro
Advertiser Staff Writer
The city of Honolulu has sent property tax bills to the Salvation Army and Goodwill Industries of Hawai'i for the first time. The nonprofit organizations are protesting, and a bill developed by the City Council would exempt them from future property taxes.
Nonprofits are not subject to property taxes, but Gary Kurokawa, administrator of the real property tax division, sent the bills totaling $200,000 because both nonprofits operate commercial thrift shops, which are subject to tax.
Kurokawa said he would have sent bills to other O'ahu nonprofits, churches and schools with commercial activities on their premises, but didn't have the resources to track them down.
The move could be short-circuited by a bill approved yesterday by the council's budget committee, which would exempt nonprofit thrift shops from property taxes if their proceeds are used for job training or substance-abuse rehabilitation. The bill now goes to the full council.
Some council members said that if nonprofits had to cut back on job training or substance-abuse services, the city could end up spending more to fight increased crime than it would collect in taxes.
Henry Wong, chairman of the advisory board of the Salvation Army's adult rehabilitation program, urged the budget committee to advance the bill. He said 85 cents of every dollar in revenue received by the stores goes to help program beneficiaries.
Laura Robertson, a Goodwill representative, agreed.
"Our stores are used as a training ground for people with disabilities, people who are on public assistance and also youth at risk, so many of the things that we're doing with donated merchandise and sales from our stores are actually work training."
The city administration supports the exemption, though it has the right to tax commercial activities on nonprofit properties.
"Although there is an approximately $200,000 loss in real property taxes to the city, without this bill nonprofits such as Goodwill and the Salvation Army would be forced to curtail or possibly eliminate the valuable social services they provide to various segments of our population," said Ivan Lui-Kwan, city director of budget and fiscal services.
If passed by the full council, Bill 7 would not go into effect until July 1, meaning the organizations still have to pay taxes this year.
"This will give us a year to determine how to adjust to the loss of revenue," Lui-Kwan said.
Councilman Charles Djou said he wanted to make sure passing the bill would not encourage the city to tax other thrift shops.
"I am concerned that there are a lot of thrift shops out there that don't necessarily just provide job training or drug rehabilitation — namely virtually every school out there that has a thrift shop."
Councilwoman Barbara Marshall worried about singling out two organizations that are "high-profile and serve so many people in such dire need."
Councilman Romy Cachola warned that granting exemptions to specific organizations would open the floodgates. "I can see in the long run that we'll be spending a lot of money (to determine which organizations to assess) and the revenue stream will not be there," he said.
The budget committee also passed a bill that would raise rental fees for the Blaisdell Center and Waikiki Shell, with revisions that raise the fee for nonprofit organizations by only 5 percent. The bill now goes before the full council.
