Tax watch: Honolulu property taxes

On July 10, 2013, Mayor Kirk Caldwell proposed ten property tax bills. All ten bills passed the first reading at the Honolulu City Council.

Since all ten bills are under consideration, let’s take some time to look at the property tax proposals. You can and should read the 2013 Honolulu City Council bills for yourself in PDF format here. I’m not a lawyer or tax expert, so if I’ve misunderstood any of the bills, please let me know!

First, let me state that I think all laws and all taxes should be 1) fair and reasonable, 2) easy to understand, and 3) easy to comply with. You decide whether the current real property tax code, and these property tax proposals, meet these standards.

1. Bill 34: Amends the exemption for charitable purposes, including labor unions and federal credit unions. No exemption percentage stated. My opinion: what is the intent of this bill? It appears to re-word the existing code, without any changes.

2. Bill 35: Cancels the real property tax exemptions for historic commercial real property dedicated for preservation. Currently, 50% of the value of the designated historical site is exempt from real property taxes. My opinion: “designated historical sites,” unless they are nonprofit community or cultural organizations, should pay the assessed property tax rate.

3. Bill 36: Adjusts the amount of real property tax exemptions for federal or state credit unions. Currently, credit unions pay the minimum $300 real property tax. My opinion: credit unions are a business and should pay the assessed property tax rate.

4. Bill 37: Adds transient vacation and bed-and-breakfast units to the “hotel and resort” real property class, raising the real property tax rate from $3.50 (residential) to $12.40 (hotel and resort) per $1,000 net taxable property. My opinion: this could discourage entrepreneurial individuals and families. It may also decrease income and general excise taxes, if homeowners choose not to offer vacation rentals because they can’t afford the almost 300% increase in property taxes.

5. Bill 38: Cancels the real property tax exemptions for dedicated lands in urban districts. My opinion: I need more information about “dedicated lands in urban districts.” How much land is currently dedicated? Can the lands be considered “public service”?

6. Bill 39: Adjusts the amount of certain real property tax exemptions for nonprofit medical and hospital indemnity associations. No exemption percentage stated. My opinion: nonprofit medical and hospital facilities are a public service.

7. Bill 40: Repeals the “in lieu of” home exemption for low-income taxpayers over age 75, limiting the home exemption to $120,000. Currently, low-income taxpayers age 75 have a home exemption of $140,000; low-income taxpayers age 80 have a home exemption of $160,000; low-income taxpayers age 85 have a home exemption of $180,000; and low-income taxpayers age 90 have a home exemption of $200,000. My opinion: undecided. My sympathy for elderly low-income residents is tempered by my support for a simplified and fair tax code.

8. Bill 41: Adds “residential-multifamily” as a new general real property class. Currently, multi-family properties are taxed at the single-family tax rate of $3.50 per $1,000 net taxable property. No tax rate stated. My opinion: what is the intent of this bill? How is a single family property shared by multiple families different from a multifamily property? Do residents of multifamily properties use less or more government services than residents of single family properties?

9. Bill 42: Adds “Residential A” as new general real property class for homes with assessed values of $1 million or more; and for homes that are not owner-occupied as the principal home. My opinion: this is unfair. Part-time residents pay the same property taxes as full-time residents, but use less government services. In effect, they are already paying a higher tax rate. And if they rent their home, they are paying more taxes in the form of personal income and general excise taxes.

10. Bill 43: Adds “time share” as a new general real property class, including condominium units used as time share units. No tax rate stated. Currently, time shares are assessed at the “hotel and resort” rate of $12.40 per $1,000 net taxable property. My opinion: what is the intent of this bill? Time share owners and visitors already pay a higher tax rate than full-time residents, but use less government services. FYI Maui’s “time share” class is assessed the highest rate in the state, at $15.50 per $1,000 net taxable property.

Please think about these property tax issues and how they may affect you and your neighbors, whether or not you live in Honolulu. If you feel strongly about an issue, speak out! Talk to your family and friends, let your Honolulu Councilmember know about it, and write letters to the local newspapers.

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18 Comments on “Tax watch: Honolulu property taxes”

  1. Marco Says:

    Hello mates, good article and nice urging commented
    at this place, I am genuinely enjoying by these.

  2. Write more, thats all I have to say. Literally, it seems as though
    you relied on the video to make your point.
    You definitely know what youre talking about, why throw away your intelligence on just posting videos to your blog when
    you could be giving us something informative to read?

    • Thank you for your comments and for reading my blog. I admit I just read the news article, I didn’t watch any videos. My goal is to start conversations and keep everyone thinking. aloha!

  3. Natalie Says:

    Aloha Rachelle, In addition to the “in lieu” of exemption, we have a real property tax credit for low-income people. The two systems cause confusion for the elderly and are inefficient. One of the main differences between the two programs is that property owners are allowed to have more than one property under the “in lieu of” exemption. The “in lieu” of exemption should be repealed, and those truly in financial need can apply for the credit.

    Bill 41 adds a new class, so that when rates are set, they can be higher for apartment building owners. These properties tend to be assessed at higher values. In addition, they also do not qualify for the homeowners exemption of either $80k or $120k.

    Bill 34 needs work, but basically what the administration is trying to do is separate the charitable nonprofits from the other nonprofits so that the charitable organizations get the highest exemption.

    • Natalie, thank you for clarifying the bills and reading my post. I thought that the “in lieu of” exemption was only for elderly low-income residents; and I don’t think it’s fair that rates would be higher for apartment building owners (bill 41). The property tax system is more complicated than it should be, and I wish they would simplify it. aloha! Rachelle

      • Natalie Says:

        You’re welcome. The “in lieu of” exemption is for low-income elderly homeowners. Many of them would also qualify for the low-income credit, which is not age based.

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  6. Just asking if the proposed property tax increase rates are being pushed by the fixed rail system’s financial shortfall?

    • Natalie Says:

      I don’t think we’re there quite yet. The push will come in the form of the continued .5% GET surcharge.

    • Hi Accessible Aloha, I don’t know how Honolulu will spend the additional money raised by “Residential A.” I believe it will be spent on city programs in general. Do you think the city will reserve property tax revenue for rail? Thanks for your question and for reading this blog! aloha, Rachelle

      • Natalie Says:

        Real property taxes go into the general fund, which support the regular operations of the city. The tax increase did go to anything in particular, and they are not held in reserve. Each year, however, there is an “unspent” amount that carries to the next.

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