Proposed tax cut for Kauai homesteads and residences welcome, but other property owners deserve relief too

The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the Kauai County Council on March 22, 2023.

March 22, 2023
8:30 a.m.
Kauai County Council Chambers

To: Kauai County Council
      Mel Rapozo, Chair
      KipuKai Kualiʻi, Vice Chair

From: Grassroot Institute of Hawaii
           Jonathan Helton, Policy Researcher 

RE: RESOLUTION No. 2023-33 — Resolution Establishing the Real Property Tax Rates for the Fiscal Year July 1, 2023, to June 30, 2024, for the County of Kaua‘i

Comments Only

Dear Chair and Committee Members:The Grassroot Institute of Hawaii would like to offer its comments on Resolution No. 2023-33, which would establish Kaua‘i’s property tax rates for fiscal year 2024. 

The 10% rate cut proposed in this resolution for homestead and residential properties would help make Kaua‘i a little less expensive for many Kaua‘i residents, and we commend the Council and mayor for supporting it. 

That said, the Institute would like to offer some additional thoughts for your consideration as you weigh possible property tax rates for the upcoming fiscal year.

Regarding projected property tax revenues, the Council’s proposed budget for fiscal 2024 projects they will increase by about 17% compared to fiscal 2023. In fiscal 2022, Kaua‘i property tax revenues were up by more than 19% over the year before that.

In fiscal 2022, the county collected about $157.6 million in property taxes. For the upcoming year, it will collect almost $220 million, based on the rates proposed by this resolution — for an increase of more than $60 million in just two years.

Most of this increase is due to higher assessments on hotel and resort, residential investor and vacation rental properties. For the upcoming year, $28.5 million of the $32.3 million in projected new property tax revenues will come from those three classes. 

Therefore, we wanted to share several scenarios the county could use to reduce the tax bills of other property classes while still providing ample funding to the initiatives in the proposed budget. 

Scenario 1

This first scenario, outlined in the table below, would keep the proposed 10% rate cut for homestead and residential properties. 

It would also lower the rates on Kaua‘i’s commercial, industrial, agricultural and commercialized home use property classes so as to freeze the total revenues from these classes at the fiscal 2023 level.

Scenario 1: Targeted 10% rate cut + revenue freeze

This scenario would result in a “cost” to the county of roughly $5 million, which would leave the property tax revenues in the budget at about $215 million — still a large increase over last year’s $187.8 million.

Scenario 2

Another scenario we developed would extend the 10% rate cut for homestead and residential properties to all property classes except hotel and resort, residential investor and vacation rental. 

Scenario 2: Broader 10% rate cut

This scenario would lower projected revenues by just $3.7 million. Again, the county would retain sufficient funding for several of its projected spending increases. 

At the same time, many property owners would not see their tax bills differ much compared to the previous year, since both scenarios would essentially offset the higher valuations that the upcoming year’s tax bills will be based on. 

Under these scenarios, some property owners would pay higher tax bills, while others would pay lower bills compared to last year, depending on how much their assessments changed. Nonetheless, all properties would see savings from a lower tax rate, relative to the proposed rates. 

Scenario 3

This final scenario considers what would happen if Kaua‘i’s property taxes were to increase only as much as inflation has across the past year. 

Between February 2022 and February 2023, the United States experienced a 6% inflation rate. This has been especially problematic for families who’ve seen their cost of living increase much faster than their incomes. 

Under this third scenario, property tax revenues for fiscal 2024 would increase by roughly $13 million over fiscal 2023. 

This scenario is based on a 20% rate cut for the homestead, residential, commercial, industrial, agricultural and commercialized home use classes and a 5% rate cut for hotel and resort, residential investor and vacation rental classes. 

Scenario 3: Inflation-indexed revenue increase

This scenario would lower projected revenues to about $200.4 million — a 6.2% increase over fiscal 2023, which would approximate and help mitigate the past year’s inflation rate of 6%. 

In an upcoming report on property tax relief, the Grassroot Institute discusses numerous ways to provide homeowners, businesses and renters with relief — from rate cuts to home exemptions to tax credits. 

Kaua‘i already offers several generous property tax protections to homeowners, and we believe a rate cut is the simplest way to extend relief to all property classes. However, if the Council believes a more targeted form of relief is in order, we would be happy to assist in researching such a proposal. 

Again, we welcome the 10% rate cut proposed for the homestead and residential classes, and if you have any interest in extending further property tax relief to your constituents, we would be happy to work with you on identifying additional proposals that would achieve that purpose.

Mahalo for the opportunity to testify. 


Jonathan Helton
Policy Researcher
Grassroot Institute of Hawaii

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