The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the House Committee on Consumer Protection & Commerce on March 14, 2023.
__________
March 14, 2023
2 p.m.
Conference Room 329 and via videoconference
To: House Committee on Consumer Protection & Commerce
Rep. Mark M. Nakashima, Chair
Rep. Jackson D. Sayama, Vice Chair
From: Grassroot Institute of Hawaii
Joe Kent, Executive Vice President
RE: SB875 SD1 — RELATING TO THE COUNTIES
Comments Only
Dear Chair and Committee Members:
The Grassroot Institute of Hawaii would like to offer comments on SB875 SD1, which would allow counties to sell private property in order to pay unpaid civil fines related to that property after all notices, orders and appeals have been exhausted, provided that the county sells the property at not less than market value and that revenues received from the sale that exceed the fine amount are refunded to the property owner.
We applaud the bill’s addition of a safeguard against home equity theft through language that requires that the property be sold at market value and that revenues over the amount of the fine be returned to the homeowner. This is essential to protect homeowners who could otherwise lose their most valuable asset and their accumulated equity with little recourse.
However, even with this addition, we caution the committee that this bill may be premature. With a relevant case before the U.S. Supreme Court this session, the landscape of foreclosure may change over the next several months.
In addition, we are concerned that the counties might abuse the power that this measure would grant them. Numerous corruption scandals have been uncovered in county departments across the state, with several Honolulu county permitting officials pleading guilty to bribery charges in the past year[1] and a Maui wastewater official being sentenced just last month to 10 years in prison for accepting bribes.[2]
With favoritism and corruption so commonplace, what safeguards would exist to prevent counties from selectively using nonjudicial foreclosure against certain property owners while allowing others to keep their properties?
This measure’s effects might also fall most heavily on older individuals living on fixed incomes who do not have the resources to pay their fines, hire an attorney or otherwise navigate complicated legal and financial matters. According to the AARP, “tax authorities’ seizure of all of their home equity is nothing short of catastrophic” for older individuals.[3]
Further, we suggest the committee consider the effect that Tyler v. Hennepin County, Minnesota — the case currently before the U.S. Supreme Court — might have on the constitutionality of this measure.
In that case, Hennepin County sold Geraldine Tyler’s condominium for $40,000 to settle unpaid property tax debts. Tyler’s tax bill was only $2,300, and that the bulk of the $15,000 she owed was due to an accumulated $12,700 in interest and fees. After settling the $15,000 debt, the county refused to pay the difference back to Tyler.
She filed a lawsuit against the county alleging violations of the Fifth and Eighth amendments.[4] The issue at the heart of the case is whether selling a home to satisfy a debt to the government and keeping surplus value is an unconstitutional taking. Thus, it is likely that the Court’s decision will touch on the entire process of foreclosure and sale of a property to satisfy a county’s civil fines.
Under the circumstances, it may be best to wait for further guidance from the courts before changing the law regarding the counties’ power of sale.
Thank you for the opportunity to testify.
Sincerely,
Joe Kent
Executive vice president
Grassroot Institute of Hawaii
_____________
[1] Christina Jedra, “Honolulu’s Former Top Permit Inspector Pleads Guilty To Bribery,” Honolulu Civil Beat, Oct. 17, 2022.
[2] “Former Maui official sentenced for ‘outrageous’ role in state’s largest-ever bribery scheme,” Hawaii News Now, Feb. 8, 2022.
[3] Brief of Amici Curiae AARP and AARP Foundation Supporting Petition for Writ of Certiorari, Tyler v. Hennepin County, Minnesota, Sept. 22, 2022, p. 4.
[4] Christina Martin, “Government-sponsored home equity theft robs the elderly and poor of millions of dollars,” The Hill, Dec. 5, 2022; “Tyler v. Hennepin County, Minnesota,” Oyez, accessed Feb. 22, 2023.
