Posted on: Thursday, November 11, 2004

Tax relief set for Big Island homeowners

By Kevin Dayton
Advertiser Big Island Bureau

HILO, Hawai'i — James Morlock watched aghast as property values in his Kapoho neighborhood in Puna soared, driven skyward by speculators buying and selling in a hot real estate market.

A Mainland investor bought a house near Morlock's in a rural Puna area near the ocean three years ago for $85,000, and sold the property last year for $235,000, Morlock said. That sale pushed up county valuations of property in the area, which in turn boosted property taxes for many homeowners.

That worries Morlock, 58, who is concerned he will be hit with larger tax bills in years to come as he prepares to retire.

"The prices are crazy, it's insane what's going on in Kapoho, and it doesn't do me any good because I don't want to sell," he said. "I want to live there."

In an effort to deal with those concerns, the Big Island County Council gave unanimous final approval yesterday to three measures designed to offer tax relief to homeowners alarmed at increasing property values and tax bills.

One measure, Bill 175, would limit increases in the county's assessed values of owner-occupied homes to no more than 3 percent a year, regardless of how much the market value of the homes might increase. The properties would once again be assessed at market value when the owner-occupants sell.

County property taxes are calculated by multiplying the tax rates by the assessed values of the homes and land being taxed, so the bill would slow the increases in property taxes in a rising real estate market.

County Director of Finance William Takaba said that measure would cost the county about $2.2 million in lost tax collections the first year.

A second bill approved yesterday would increase the existing $40,000 tax exemption for owner-occupied homes, exempting another 20 percent of the assessed value of each home from county calculations for tax purposes.

To use a simplified example, an owner-occupied home with an assessed value of $100,000 is now allowed a $40,000 exemption, meaning the taxable value of the home is $60,000. The county then multiplies the tax rate by the taxable value of the home to calculate the taxes owed.

Under Bill 174, that same home would be granted an additional exemption equal to 20 percent of the assessed value of the property.

Using the same example, that would amount to an additional $20,000 exemption, meaning the taxable value of the home would drop to $40,000, which would reduce the total tax bill.

The bill would cap the additional 20 percent exemption at $80,000 per home.

Takaba estimated that measure would cost the county about $1.75 million in lost tax collections the first year.

Another tax-relief measure, Bill 176, would allow homeowners to dedicate their property for residential uses for five-year periods, freezing the assessed values on the properties for those five years.

Currently, owners who want to dedicate their homes for owner-occupant uses must dedicate for 10 years. Only about 1,600 of the county's 33,000 owner-occupied properties have been dedicated, and the change is meant to make the dedication more flexible to encourage more people to dedicate.

Each of the bills was proposed by Mayor Harry Kim's administration, and Kim is expected to sign them into law.

Morlock said he has dedicated his home for residential use for 10 years, but worried that his assessed value will increase at the end of the 10 years as he is retiring or preparing to retire. He asked the council for additional protection beyond the bills passed yesterday.

"I just want some protection against these speculators that I basically view as carpetbaggers," Morlock said. "I don't think that property taxes should be used as a form of extortion to force one to sell one's land, and that could happen."

Reach Kevin Dayton at (808) 935-3916 or kdayton@honoluluadvertiser.com.