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The Honolulu Advertiser
Posted on: Friday, February 17, 2006

Council's tax relief options down to 3

By Robbie Dingeman
Advertiser Staff Writer

THE STATUS OF TAX-RELIEF PROPOSALS

City Council members are continuing to propose ways to get tax relief to Honolulu homeowners. Several of these measures will be up for a final vote at a special meeting Thursday.

STILL MOVING

  • Increase the property tax exemption for owner-occupants beginning by upping the basic $40,000 to $80,000 (Bill 1-2005)

  • Expand the availability of a property tax credit so homeowners earning up to $50,000 could receive the break in 2006. This rejects an earlier proposal to raise the income limit to $75,000 (Bill 80-2005)

  • Establish a new way of setting property tax rates so your property tax bill does not increase from year to year except to adjust for increases in the city's fixed costs such as salaries, debt service and other benefit plans. (Bill 12-2006)

    STALLED

  • Increase tax exemptions for landlords who rent to low-income residents (Bill 3-2006)

  • Create new homeowner's rate classification for owner-occupants for property tax purposes (rewritten Bill 81-2005)

  • Establish one-time county tax credit for property owners; older homeowners would get a larger tax credit (Bill 82-2005)

    Source: City Council Budget Committee

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    Key City Council members yesterday narrowed the number of property tax-relief proposals being considered to three, and budget chairwoman Ann Kobayashi cautioned that relief will not be as big and far-reaching as some hope.

    Kobayashi is still pushing forward with proposals that would help all homeowners, not just the elderly or the poor or long-term residents. But she felt the need to rein in expectations.

    "We can offer discounts but we can't give away the store," Kobayashi said.

    The council Budget Committee postponed any action on Mayor Mufi Hannemann's tax-break concepts, which were among more than a dozen under consideration earlier.

    Kobayashi said the full council will take a final vote on the surviving measures at a special meeting Thursday. She said council members are working quickly to get their plan to Hannemann before he completes work on his budget proposal, due before the council by March 2.

    Councilman Gary Okino had pressed hope for larger increased exemptions to give homeowners a bigger break, but Kobayashi recommended stopping short of that.

    Instead she favored a more modest increase of doubling the basic exemption to $80,000, and offering a tax credit this year to homeowners earning up to $50,000 rather than up to $75,000.

    Kobayashi remains most optimistic about Bill 12, a move to change the way assessments are calculated as a longer-term solution, but the administration opposes that measure.

    The clamor for tax relief comes from Honolulu property owners stung by three years of double-digit increases in their property assessments and skyrocketing tax bills. City officials calculate that higher assessments mean the city will collect $125 million more in property taxes this fiscal year than last if the tax rates remain the same.

    Kailua resident Bob Grantham, who helped found the citizens group Real Property Tax Relief Now, favors the approach taken in Bill 12.

    "I do think that Bill 12 is really the way to go," Grantham said, because it takes the real estate market out of the calculation.

    "The market is the devil in all this." .

    That measure establishes a new way of setting property tax rates so your property tax bill does not increase from year to year except to adjust for inflation-related increases tied to the cost of basic city services.

    City officials testified yesterday against Bill 12. Real property tax administrator Gary Kurokawa expressed "serious concerns" about such a big change, instead favoring a new homeowner's classification with a rate that could be adjusted quickly to respond to market peaks and dips.

    City budget and fiscal services director Mary Pat Waterhouse said the administration prefers Hannemann's idea of a one-time tax credit of about $40 million coupled with a new homeowner's classification to favor residents over people who quickly buy and sell homes.

    Hannemann also wants $20 million to go into a rainy-day or reserve fund and the other $65 million to go toward such fixed costs as salaries and debt.

    "We feel that's a better way," Waterhouse said.

    Hannemann said through spokesman Bill Brennan that he wants to see the final version of the proposed measures before he would comment on yesterday's council action.

    And the mayor remains hopeful that he can work with the council to consider a separate homeowner's classification similar to that provided on the Neighbor Islands.

    "He still believes that holds out hope for residents who don't plan to sell their homes," Brennan said.

    Reach Robbie Dingeman at rdingeman@honoluluadvertiser.com.