LIHUE — There will be one new class on the county’s real property tax rolls next year.
A divided Kauai County Council approved a measure Wednesday that would create a new tax class called residential investor, which would apply to improved properties without tax exemptions that are worth at least $2 million.
Those properties, according to an amendment added by Councilman Tim Bynum and Councilwoman JoAnn Yukimura, would also restrict the tax classification to properties that are not being rented on a long-term basis.
The new tax class, Yukimura said, will provide the County Council and the mayor’s administration with revenue options that can replenish the county’s reserve fund, provide relief for some resident taxpayers, and help public transportation and affordable housing initiatives.
“To me, there’s a very logical nexus that these high-end properties are causing problems for affordability in our lower-end properties, and to be able to tax them — and that will be up to us during budget time — will give us another option on revenue that we need to look at,” Yukimura said. “There’s a nexus between affordable and these properties that are causing property values to go so high.”
About 199 properties on Kauai can be placed into this new tax class, Finance Director Steve Hunt said. If the tax rate was set at $7.05 — $1 more than the current residential tax class rate — the real property taxes from those homes could generate about $837,000 in additional real property tax revenues.
Councilman Tim Bynum said he wanted to limit the tax class to homes that are not being used as long-term rentals so no local families would be hit. Some residents, he added, may have inherited homes that are valued around $1 million or $2 million but operate them as long-term rentals.
“With this amendment, limiting this to 199 properties that are most likely sitting vacant — these are the super wealthy people, these are the stars who own homes here — I can support this bill,” Bynum said. “Given the parameters, we’re really talking about very wealthy people who choose to have their homes sit vacant.”
But not everybody agreed.
Councilmen Gary Hooser, Ross Kagawa and Mel Rapozo cast the dissenting votes against the measure. Council Chair Jay Furfaro cast a silent vote, which went toward the majority vote in favor of the new tax class.
“In another budget environment, I would look at this proposal more openly,” Hooser said. “I’m not in the mood, nor do I feel it’s in the best interest of this community, just to run around and find money to fill a hole. We need to get a plan from the administration about how they’re going to deal with this budget deficit, and it has to be more than just raising taxes.”
Rapozo agreed and said he was concerned about the unintended consequences of creating a new tax class.
“We rely so much on assumptions and I get nervous because of the real property tax fiasco that we ended up with … and we didn’t think it was going to impact people just the way it did. I’m worried about this because I just don’t know enough about who would be impacted and I’m very concerned about those who inherited property that may be vacant.”
The seven-member board also approved another tax measure that would reclassify vacant land previously classified as apartment — and allocated to the hotel and resort tax rate classification — to the tax class identified by the property’s zoning designation.
