Recently the Kaua‘i County Council considered a proposal to present to voters a measure to amend the Kaua‘i County Charter to change a council member’s term of office from two to four years and to lengthen the present maximum of eight years for consecutive service. The proposal was dropped when some council members wisely recognized that the proposal was inappropriate, being a conflict of interest for the council itself to support action that would reduce their campaign expenses and risk of election and enlarge their allowable period to remain in office.
One member of the council was reported as defending the view that no conflict of interest was present — surely an untenable position.
What the council would be seeking by the proposal was public acceptance of the view that the council was performing its function so well that members should be rewarded by having to stand for re-election only every four years instead of the historic and prevailing two-year period.
I thought it might be of interest to review the council’s performance in an area I have examined in some detail and am generally familiar with — its handling of property taxes.
Under the charter, it is the council that has the principal responsibility for the structure of the tax. Once the administration tax office has made the required assessment of taxable properties, it is the function of the council to set the tax rates and other terms such as exemptions which will determine the impact of the tax of property owners.
How has the council met these duties? In 2004, under pressure from a community tax reform initiative, the council adopted for those with a homestead exemption, i.e. resident homeowners, a 2 percent cap on annual tax increases. Apart from this measure, until now all proposed changes in the law of any significance originated with the administration and the council passively accepted administration proposals to maintain existing rates.
Evidently, the council has felt over the last decade that with the 2 percent cap in place, it was all right to ignore the impact of changing economics on the county’s taxpayers. In 2004, total net taxable properties were assessed at $9.3 billion, and tax revenues were $53.1 million, of which homestead-class taxpayers paid $4.5 million, or about 8.5 percent. Values rose from $9.3 billion to $19.4 billion in 2008, when $90.7 million in taxes were paid, and have since declined to $15.3 billion in assessments and $81.2 million in taxes collected. With constant rates, taxes were pretty much in lockstep with assessments.
That prickly little 2 percent cap was also having its effect, but it was largely off the council’s radar.
With rates constant, as values were climbing the cap appeared to be limiting taxes paid by homestead exemption holders. However, when values began to decline in 2008, homestead-class taxpayers found their taxes still rising. In the years since 2008, total tax revenues were more than $25 million lower than the $90 million rate in 2008. Taxpayers in all classes other than homestead in this period shared that reduction, while homestead-class taxpayers because of the cap had their taxes climb by over $3 million.
By budget time this year, council members were vaguely perceiving the bare outline of these changes. Incidental to consideration of a proposed ordinance to increase exemptions for homestead-class taxpayers, the council chair offered an analysis which included a presentation purporting to show that homestead exemption holders had benefited by $70 million from the cap. These findings were fatally skewed by the assumption that rates would have remained unchanged without the 2 percent cap. To illustrate this fallacy, assume the cap had not been enacted. In 2004, homestead-class members paid $4.5 million. If rates had stayed unchanged, the homestead class would have paid $18.5 million in 2006. It does not seem likely that our politically astute, although financially challenged, council would have stood by and allowed this quadrupling of tax liability for persons constituting a majority of the voting power of the county. If the cap had not been enacted and the council had annually adjusted rates to keep homestead-class collections at 8.5 percent of the total, homestead-class taxpayers would have been better served.
When in March the mayor submitted his initial 2013 budget materials, he proposed that homestead-class taxpayers pay $9.9 million, or 12.6 percent, of the $78.3 million in projected collections. This amount would be over $3 million more than the case at the outset of the 2 percent cap, when homestead-class taxpayers paid 8.5 percent of the total.
In his May budget proposals, the mayor wanted slightly higher rates for two tax classes, which did not have a material effect on the undue burden being sought from the homestead class.
Council member Tim Bynum, with trepidations about the mindset of other council members, sought a modest $1 million tax reduction for the homestead class, which the council reluctantly accepted by a divided vote. The great majority of homestead exemption holders will get no benefit from this reduction, largely because of misguided accounting practices in dealing with the cap.
Throughout this process, the council did not display the virtues of perception and willingness to act to meet standards of fairness that would lead me to feel they have merited the trust that would be implied by bestowing them with four-year terms or relief from the current term limit law.
In other areas of stewardship of its duties, I similarly do not see the excellence of performance that would warrant the change sought — changes that would hobble voters’ ability to make timely replacements of council members who lose public confidence.
It was well that the proposal was dropped.
• Walter Lewis is a resident of Princeville and pens a biweekly column for The Garden Island.
