There will be no property tax credit for homeowners this year, and in fact, there’s very little chance property owners in any tax category will see their tax bills go down, following advice Tuesday from the county Corporation Counsel and Finance Department director.
The County Council is empowered to set property tax rates up or down each year, and there is a chance they will still do so, but tax bills won’t go down because the rate cut will be offset by increased property valuations.
And that’s how it should be, said Finance Director Deanna Sako, if the county doesn’t want to face reimbursing the federal government for $140 million in stimulus funding during the coronavirus pandemic.
“We still have to ensure taxes will continue to go up and we don’t decrease them in any way,” Sako said. “We do have to be able to show that the taxes overall were not reduced or that their funding was used to plug that hole.”
Sako added that federal regulations prohibit money going to assist specific taxpayers.
“We don’t want to be in a situation where we helped individual taxpayers,” she said.
Hilo Councilwoman Sue Lee Loy sponsored Resolution 291, authorizing a $250 credit to be applied to the August real property tax bill of property in the homeowner’s class, except for those that failed to pay any portion of due taxes, properties assessed at the minimum tax rate, or properties sold during the taxable year.
She withdrew her measure after the discussion.
“I feel it was an incredible teaching moment,” Lee Loy said.
Corporation Counsel Elizabeth Strance said the council can legally approve property tax credits through a bill, as a former council did when instituting a credit for solar water heaters. But she deferred whether the council should do so to Sako.
“You want to avoid unintended consequences,” Strance said.
Taxes are top of mind for many islanders because property values skyrocketed in the continuing hot housing market, and gas prices are at near record highs. The council is scheduled to consider a 10-cent reduction to gas taxes today, but its future looks bleak.
The tax office is currently certifying property values for the county’s 140,905 taxable parcels, of which 60,073 are in the homeowners class.
Property tax revenue, based on the latest valuations at the current tax rate, are expected to go up 12.9% or by $45.9 million, according to the $689.9 million preliminary proposed budget Mayor Mitch Roth released March 1. But because property in the homeowner class is limited to a 3% valuation increase annually until it’s sold, it’s expected that the other property classes will bear the brunt of that increase.
Roth will release an updated budget Thursday based on the certified values. Then it’s the council’s turn.
A special meeting on the budget is set for May 19, where Kohala Councilman Tim Richards is expected to present analyses and spreadsheets he’s been working on.
“I’m trying to put all our revenue streams and stack them against expenditures to come up with a thoughtful process,” he said. “I’ve done a lot of work on our budget looking at our tax rates … with the intention to have a talk story and look at all our revenue streams, all our expenses and try to have some balance in all this.”
Richards at first wanted to create a special subcommittee to go over them and come back with recommendations to the council, but was told timing would be tight for a spending plan that begins July 1. He subsequently abandoned that idea.
“Your timing for budget review would make the creation of that review (committee) very cumbersome,” Strance said.