Kauai property tax changes could lower payments by 31%
By Diana Leone
Advertiser Kaua'i bureau
LIHU'E, Kaua'i — Sweeping changes proposed for how Kaua'i County assesses its real property values could lower taxes an average of 31 percent for many resident homeowners, county staff told the Kaua'i County Council yesterday.
Under the plan, resorts and hotels could see their taxes climb an average of 24 percent, said Eric Knutzen, facilitator of the Real Property Tax Committee that worked on the plan more than a year.
The proposed tax system overhaul, initiated by the late Mayor Bryan Baptiste, is being watched with interest by other Hawai'i counties, Knutzen said.
The plan's vision is a property tax system that is equitable, clear and simple, Knutzen said.
The proposal as written would be "revenue-neutral" — not bringing in any more or less total tax income, Knutzen said. In addition to changing how assessments are made, the plan calls for changes in property tax rates.
The key change is taxing buildings at a rate three times higher than that of land.
This reflects studies that show it is the type of building on a property that determines the demand for county services — such as police and fire protection, roads, parks and rubbish removal — not the land itself, Knutzen said.
The plan would reduce the number of property tax categories from eight to four: residential, resource lands, general and resort.
category breakdown
Under the residential category, affordable long-term rentals would be encouraged by offering landlords the same tax rates as homeowners. Landlords would not be eligible for homeowner exemptions, however.
Farmland and conservation land would fall in the resource lands category, which would see an average tax burden reduction of 65 percent from current rates. Actively farmed land — producing food, fuel or fiber — would have lower tax rates than idle land.
The general category would include both commercial and industrial property and vacant land of any zoning category.
Hotels and time-share condominiums, as well as short-term rentals to visitors would be in the resort category.
According to Knutzen's presentation, the plan is structured to:
short-term solution
That 2 percent per year cap, which appears as the permanent home use, or PHU, credit on tax assessments, was a short-term solution to the problem of rising property values raising long-time Kaua'i residents' tax bills, Knutzen said.
The new system would end the cap, but help homeowners more by increasing property tax exemptions for owner-occupied homes to $300,000 for owners 59 and younger; $325,000 for those 60-69 years old; and $350,000 for those 70 or older, said Kim Hester, Kaua'i County's supervising appraiser.
The current exemptions are $48,000, $98,000 and $120,000, respectively.
The plan also would boost an additional exemption for a low-income household to $55,000, if the annual gross income of the household is $50,000 or less.
Councilman Ron Kouchi said he believes the quickest way for homeowners to see how the proposal would affect their property taxes is to "take your assessment card from the mail and subtract $300,000 and see what that would mean to your special case."
Kouchi noted that people with larger houses would continue to have higher taxes, "based on ability to pay."
Reach Diana Leone at dleone @honoluluadvertiser.com or 808-245-3074.
Reach Diana Leone at dleone@honoluluadvertiser.com.
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