Posted on: Friday, February 18, 2005

Council reviews bills to cut taxes on homeowners

By Robbie Dingeman
Advertiser Staff Writer

Some Honolulu homeowners could pay less for property taxes under a series of measures being considered by the City Council.

The proposals range from increasing how much of a home's value is exempt from taxes, to offering tax credits and restructuring the tax for those below a certain income level.

Retired federal auditor Thomas Yagi of Kailua is one of those living on a fixed income and looking for help.

"Every penny counts," he said. "Every year it goes up and we don't have any relief."

Yagi wants to see increased exemptions for homeowners, reduced rates and a limit on tax increases. He's lived in his home for 30 years with no intention of moving, so increased values don't offer him any benefit.

The latest measures are among several efforts across Hawai'i to address escalating property taxes as home values reach record highs.

On O'ahu, for example, the median sale price for a single-family home was more than $505,000 in January, a 26.3 percent rise over the $400,000 median a year earlier.

City figures show the total assessed value of the island's residential properties skyrocketed 26 percent in a year, meaning most homeowners' tax bills will rise unless the tax rate is lowered.

Councilwoman Ann Kobayashi heads the Budget Committee, which yesterday sifted through several tax relief proposals at a hearing.

She said she's most concerned about longtime residents, especially those on fixed incomes. "They don't want to sell; they don't want to move. But they don't want to be taxed out of their house," Kobayashi said.

She said in addition to considering tax relief for residents, the council must weigh how much revenue the city will lose under various tax proposals.

For example, a proposal to double the homeowner's basic exemption to $80,000 would likely cut $38 million in revenue to the city, according to Mary Pat Waterhouse, director of budget and fiscal services.

Kobayashi said the council will continue to study a proposal that would use income levels to limit the amount of real-property tax paid to 3 percent of a family's income.

Without income statistics for city taxpayers, Waterhouse said, "it's difficult for us to estimate what the impact would be" of that proposal.

Some homeowners wary of the increasing tax bills remain skeptical of the tax proposals.

Retired firefighter Abraham Aiona said government officials need to shift some of the tax burden off homeowners.

"I just wish they would raise the state sales tax," Aiona said. "To me, that would be the best relief for everybody. They would catch people from the homeless to the rich."

A Waimanalo resident, Aiona has seen his property values soar, in part because homes near the beach sell for a million-plus, which pushes up the values for houses like his that are closer to Kalaniana'ole Highway than the shore.

He said tinkering with the tax structure and the exemptions won't offer much help. "I think they should look at people like us who aren't planning on selling their homes," Aiona said. He encourages his friends to check the records of their elected officials and vote them out if they're not responsive.

Kobayashi sees two proposals gaining support. One would allow taxpayers below a certain income level — say $70,000 to $80,000 for a family of four — to limit the amount of tax they pay to 3 percent of their income. The other would allow the property tax rate to increase only by a set amount each year, similar to California's Proposition 13, she said.

She said the latter proposal would help longtime homeowners, who would know that their taxes would increase only by a fixed amount, say 4 percent a year.

Kobayashi said the council has heard from taxpayers from Wai'anae to Kahala. "They can't afford these huge increases in real-property taxes."

Reach Robbie Dingeman at rdingeman@honoluluadvertiser.com or 535-2429.