Taxes will fall dramatically next year for some needy Hawaiian families — and maybe a few others — who trace their property and ancestry to 19th century Hawaiian kingdom land grants.

Despite concerns about the unknown impact to Honolulu's treasury and the potential for abuse, the City Council yesterday unanimously approved a flat $100 annual tax on land linked to such properties.

The decision was wonderful news to La'ie resident Dawn Wasson, who said her family received title to their land seven generations ago but had lately run up a $32,000 tax bill and was in danger of losing their home.

"Our families can't afford this," she told the council. "To you, it is about money. To Hawaiians, it is about our existence."

The new tax exemption applies to parcels zoned for homes or farming that include any portion of kuleana lands — property granted to native tenants after King Kamehameha III proclaimed the 1848 Mahele that created Hawai'i's first system of private land ownership.

To qualify for the tax break, the land must be owned partly or wholly by a lineal descendant of the person who received the original title from the kingdom.

State Office of Hawaiian Affairs trustee Rowena Akana said the agency had identified only two families that appear to qualify, but said others may soon come forward.

"Hawaiians are very proud, and most will not admit they can't afford to pay their taxes," she said.

The tax break is necessary to prevent Hawaiians from losing land to skyrocketing property values and taxes, Akana said.

But neither she nor city tax officials could say how many families, or how much property, might eventually qualify — or how much tax revenue the city would be giving up.

The council agreed informally to revisit the issue in a year or so to determine whether the system is effective or abused.

EMOTIONAL ISSUE

Council members stoically endured a short spurt of verbal abuse before voting 9-0 to support the tax break.

While La'ie resident Wasson urged support for the measure, her son Harry angrily objected to a provision for a $200 annual fine on any owner who does not report any change that would disqualify them from receiving the exemption. He also objected to property taxes in general.

"This land has been in our family since before the Mahele, and still you guys are pushing us to pay property taxes," he fumed at the council in an expletive-filled outburst. "I don't support this bill. You guys are trying to kill off the Hawaiians, and this is Hawai'i. This is our land."

Councilman Donovan Dela Cruz, who sponsored the tax break, later said Harry Wasson's words showed how tense and emotional issues connected to land ownership and rising tax bills can be.

Councilman Charles Djou said he strongly supported the intent of the tax break, but that it may become necessary to limit such exemptions to low-income families or to create other restrictions.

He noted after the vote that the measure contains no limits on the size of a property or the wealth of the owner.

And it contains nothing to prevent a rich descendant of a long-forgotten grantee who sold their property from purchasing it now to take advantage of the nominal tax rate.

"It's possible that will happen, but I don't know if it will be a problem," he said. "I hope some of those unknowns become known and we can further refine the legislation in the future."

Dela Cruz agreed there could be problems but stressed the importance of helping legitimate owners who face insurmountable tax burdens.

"There are people who will breathe a little easier because they can keep their kuleana lands in the family," he said. "But at the end of the day, we have to provide government services, and property taxes are our main source of funding."

LEGAL PRECAUTION

To help ward off criticism — and any legal challenges — that might allege the tax break unjustly discriminates against non-Hawaiians, the council removed a reference to Hawaiians from the measure before approving it.

Councilman Todd Apo, who called for the change, noted that all residents of the kingdom were referred to as Hawaiians during the 19th century, regardless of their ethnic ancestry.

The measure defines kuleana land as property "granted to native tenants," but Apo said that does not necessarily create an ethnic definition.

The kingdom's Land Commission awarded 8,421 kuleana claims to hoa'aina, or native tenants, between 1850 and 1855, according to OHA.

The awards totaled 28,658 acres, but some land was unsuitable for farming or much more was later lost to unscrupulous land agents or aggressive foreigners, the agency said.

A genealogical link to the original grantee can be verified by OHA or through a court order, and property owners will be responsible for any costs associated with verification.

The city expects to collect about 41 percent of its $1.8 billion operating budget from property taxes next year.

Reach Johnny Brannon at jbrannon@honoluluadvertiser.com.