Plans floated to balance proposed tax hike

Second homes, commercial and industrial property and hotel/resorts would bear more of the property tax burden in order to give homeowners and farmers less of a rate hike, under proposals to be heard Monday as the County Council takes its final vote on the budget.

Puna Councilwomen Eileen O’Hara and Jen Ruggles want to adjust Mayor Harry Kim’s proposed 6.5 percent rate, which he seeks to apply across-the-board to all property classes except affordable rentals.

Under O’Hara’s plan, second homes, commercial and industrial properties would be raised 8.5 percent and hotels and resorts 8.3 percent. The agricultural class would go up 2.7 percent and the homeowners’ property tax rate would increase 3.3 percent. Conservation property would remain at the 6.5 percent hike proposed by Kim, and, like Kim, O’Hara proposes no tax rate hike for the affordable rental class.

Ruggles’ amendment makes similar rate shifts, only more so.

She says her scenario of tax rate increases plus exemptions will cause almost 88 percent of property owners to pay less tax in the long run.

The exemptions, if passed, would become effective a year after the tax hikes kick in.

“The exemption system shields low- and mid-range property values while allowing those who can afford it to pay a little more,” Ruggles said in a statement.

O’Hara said she’d rather not have to raise property taxes at all, but most of the additional costs imposed on county operations are passed on by the state or are otherwise outside county control.

The council has until June 30 to pass the budget or the mayor’s budget as presented takes effect July 1, under the county charter.

“We can stand back and do nothing and then it goes into law, or we can tweak it to make it, for lack of a better word, more compassionate,” O’Hara said in a telephone interview Friday.

The next step, O’Hara said, is an analysis and revamp of the tax code, which she sees as antiquated and cumbersome.

“If we do it right, we might not have to do any more raising of rates; we might even be able to lower rates and lower the burden on homeowners,” she said.

Hilo Councilman Aaron Chung would like to see that happen. He’s filed an amendment that’s more aspirational than actionable, asking the council to declare its intent and the mayor to prepare to return next year to the current tax rate schedule.

That would give property owners just one year of the higher rates.

“At least we’re stating our intent,” Chung said in a telephone interview Friday.

“Over the next year, we should be looking at other ways of generating revenue other than property tax increases.”

Chung said he plans to follow up on that aspiration in the coming year, to evaluate ways to generate revenue and cut costs.

Chung’s amendment is similar to one sponsored by former Kohala Councilwoman Margaret Wille and passed by the 2013 council.

The proposal, made in the face of a 10 percent hike proposed by former Mayor Billy Kenoi, died quietly in council archives, with no further action by the council or mayor.

“It’s unfortunate that when I made the same point, it was talk the talk and we think we’ve got something done,” Wille said in a telephone interview Friday.

Wille followed that initiative with a years-long attempt to create revenue by removing loopholes from agricultural tax exemptions, an effort that ultimately couldn’t get council support.

The council is scheduled to hold a special meeting on property tax rates (Resolution 213), Kim’s proposed $491 million operating budget (Bill 11) and $197 million capital budget (Bill 12), starting at 9 a.m. Monday in Hilo council chambers. The meeting will be videoconferenced and public testimony will also be taken from the West Hawaii Civic Center, Pahoa council office, Naalehu state office building and the old Kohala courthouse.

Email Nancy Cook Lauer at ncook-lauer@westhawaiitoday.com.