LIHU’E — Some tax-relief measures need to be reworked to bring the kinds of relief Kaua’i taxpayers crave, critics of the measures told members of the Kaua’i County Council yesterday. Walter Lewis, a retired attorney who lives in Princeville, and
LIHU’E — Some tax-relief measures need to be reworked to bring the kinds of relief Kaua’i taxpayers crave, critics of the measures told members of the Kaua’i County Council yesterday.
Walter Lewis, a retired attorney who lives in Princeville, and Kekaha surfboard maker Bruce Pleas, said a proposal to increase tax exemptions for folks who own and live in their homes from $48,000 to $60,000 was way too small.
Lewis and Dr. Ray Chuan of Hanalei also opposed a proposal that would provide a first-year, 30-percent credit on tax bills to property owners — landlords who don’t occupy their homes, for instance — who promise not to sell their homes for 10 years.
Councilwoman JoAnn Yukimura defended that proposal, saying it could thwart speculation and allow long-time property owners to keep houses they don’t occupy.
But Chuan said the measure would lead to an explosion of vacation rentals on the North Shore and throughout the island, drying up affordable-housing opportunities.
The criticism came during public hearings the council members held on six property-tax-relief measures at the historic County Building.
A separate proposal called for the approval of bonds of up to $39.3 million for new public-improvement projects, $3.5 million for re-funding Kaua’i County Department of Water bonds, and $12.1 million for re-funding other county bonds.
All the tax-relief measures will be referred to the council’s finance committee for further review.
If the measures are found to have merit, committee members and members of the full council may vote on them later.
Council Chair Bill “Kaipo” Asing said three of the measures were nothing more than “house-cleaning” of bills to enable officials in the Kaua’i County Finance Department to better serve the public.
“These are proposals from the real-property-tax office so that they will enable them to do their work faster, and they (the paperwork) will be more accurate,” Asing said.
Lewis and Chuan saw it differently, and felt the public hearings offered a way to make what they believed would be positive changes for tax-payers, as long as some of the language in some of the bills was changed.
Lewis said the bill proposing a hefty, 30-percent tax credit for the first year plain won’t work.
“I don’t see the need for a 10-year provision,” Lewis said. “The key question, I think, is the use of the property, not whether the property is covered by a 10-year lease.”
He said the bill is inconsistent with the direction county leaders should be taking related “to taxation of property used in vacation rentals,” and that “its terms in any case should be clarified.
“If the property is used for vacation rentals, it should be taxed as a vacation rental,” he said. “If it is not used for vacation rentals, it should not be taxed as vacation rentals.”
Yukimura noted, however, that the provision, if adopted, would protect folks who have owned such properties for a long time, but have had difficulty paying the mortgages or the property taxes because the buildings are not occupied all the time.
Using the units as vacation rentals also may not necessarily mean the owners will be able to come up with enough funds to pay yearly tax bills, she added.
If the units cannot be used successfully as vacation rentals or as long-term-rental units, they may need to be sold, Lewis recommended.
Yukimura said selling such units may not be the best option for Kaua’i families.
“I think you have misunderstood the plight of many local families who are either on the Mainland working or who are at school, and want to come back and live on the land eventually, and for whom they don’t see selling the property as a really viable option,” Yukimura said.
The situation she described is a limited one, Lewis contended. And if that is the case, Yukimura asked Lewis how he would forge a solution.
“I leave that (a solution) to the learned council,” Lewis said.
North Shore resident Mike Dyer said the proposal seemed well-intentioned, but a little fuzzy.
In fact, the proposal could set up a class of property owners “with a special reward for simply not selling their property,” Dyer said.
Yukimura said the proposal is not intended to help every property owner, but will help those who don’t qualify for benefits enjoyed by those who own their homes and live in them.
Chuan said adoption of the proposal could spell huge problems for those trying to get a handle on vacation rentals. Critics contend use of homes as vacation rentals brings transients into neighborhoods, and significantly cuts short the availability of rental units for residents.
“If this bill were to be given a title, it would be entitled ‘a bonanza for vacation rentals,'” Chuan said.
“This is not a theory. You do a Google search on vacation rentals in this state. How many listings do you find on Kaua’i? One hundred and sixty-five thousand, second highest in the state.”
The bill would provide a 30-percent credit for the first year of “dedication,” although in subsequent years, the property tax will be based on its assessed value, as long as any tax increases shall not exceed 3 percent over its preceding year.
This second method of taxing wouldn’t kick in during certain situations.
For instance, if improvements are made and they increase the fair-market-value of the property, the tax would be increased based on the fair-market-value of the improvements, plus up to 3 percent.
The second method of taxing would not kick in either, if the property is damaged by fire, waves, earthquakes, flooding, wind, natural disasters or accidents. In this case, any increase in taxes due to repairs or reconstruction shall be limited to 3 percent per year over the taxes for the tax year following the least assessment of the undamaged property.
The second method of taxing also would not kick in if the size of the existing floor area is increased, in situations where omitted improvements are added to the rolls, or where the owner of the property has died.
In other matters, Pleas contended the proposal to increase the basic homeowners’ exemption from $48,000 to $60,000 was not enough, in light of highly-accelerated house prices.
He said with the median house prices on Kaua’i reaching $700,000, one should “take that percentage of increase, and that is what the maximum increase that our exemptions should be.”
Councilman Jay Furfaro said the proposed $12,000 exemption increase seems small “at first flush,” but senior citizens will be the biggest beneficiaries of the proposal, if adopted.
“The exemption gets multiplied to the point where you are age 72, you would actually get an exemption that is about $150,000,” Furfaro said.
Many of the seniors who are property owners qualify for other exemptions based on certain disabilities, including loss of hearing, he said. But if they lose a spouse, they lose that exemption, Furfaro said.
“So, therefore, the intent was to give a larger home exemption (to seniors),” he said. Pleas said that, at the same time, young home owners should not be forgotten in the legislation.
Other tax measures that were the subject of public hearings included:
. A bill to limit taxes on properties used for long-term affordable rentals;
. A bill to clarify filing-process deadlines, remove a sunset provision, and allow qualified property owners who live in their homes to receive the benefits of a permanent-home-use exemption and circuit-breaker-program discount simultaneously;
. A bill to allow taxpayers to receive the benefits of the permanent-home-use exemption and circuit-breaker credits simultaneously;
. A bill to change the deadline from Sept. 1 to Dec. 31 to apply for certain exemptions, as a way to standardize the filing of papers for certain tax-relief programs.
