Bills 14, 26 and 31 (2023): Property tax credits provide only temporary relief

The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the Honolulu City and County Council on April 19, 2023.

April 19, 2023
10 a.m.
Honolulu City Council Chambers

To: Honolulu City and County Council
      Councilmember Tommy Waters, Chair
      Councilmember Esther Kiaʻāina, Vice Chair

From: Grassroot Institute of Hawaii
           Ted Kefalas, Director of Strategic Campaigns

RE: Bill 14, Bill 26 and Bill 31 (2023) — RELATING TO REAL PROPERTY TAXATION

Comments Only

Dear Chair and Committee Members:

The Grassroot Institute of Hawaii would like to offer its comments on Bill 14 (2023), Bill 26 (2023) and Bill 31 (2023), all of which would provide a one-time tax credit to certain property owners.

The Institute believes all of these measures would be useful in offsetting the county’s higher property tax bills, based on the most recent property assessments.

We do, however, want to offer specific comments on each proposal.

>> Bill 14. The Honolulu Department of Customer Services has estimated that this one-time tax credit of $300 would provide 151,749 Oahu homeowners approximately $45.5 million in tax relief.[1]

>> Bill 26. This legislation would provide qualified homeowners age 65 or older with a one-time tax credit of $500, instead of the $300 proposed in Bill 14.

The Institute believes both Bill 14 and Bill 26 would provide effective short-term relief. However, we ask that the Council pair the one-time reforms in either of these measures with permanent changes to ensure that homeowners and other property owners are not robbed of this relief in the future.

Further, unless the Council moves forward with other relief measures that would take effect in fiscal 2024, there would be room to increase the value of the credit in Bill 14 to more than $300.[2]

A $380 credit for all qualified homeowners would effectively zero-out the higher assessments and proposed rates that the Residential property class is likely to face.

>> Bill 31. This bill would create a one-time tax credit of $300 for any property owner who owns a long-term rental property that is leased out for a period of at least 12 months, provided that the property owner applies for the credit by Sept. 1, 2023.

This measure is intended to extend relief to owners of rental properties, especially properties that are valued at $1 million or more and fall into the Residential A class.

We support the intent of this measure, but note that it may prove difficult to administer since city administration may need to process thousands of applications in a narrow window of time.

A simpler policy may be to adjust the rates on Residential and Residential A properties for fiscal year 2024 and change the classification of long-term rentals for future tax years, either by exempting long-term rentals from Residential A or by creating a new class specifically for such rentals.

Also, as written, the bill is unclear as to whether owners of multiple long-term rental properties are eligible to receive only one $300 credit or one $300 credit for each of the long-term rental properties that they own.

Thank you for the opportunity to testify. Sincerely,

Ted Kefalas
Director of Strategic Campaigns
Grassroot Institute of Hawaii

[1]Commitments to affordable housing, public safety highlighted as Mayor Blangiardi submits proposed budget for 2024 fiscal year,” Honolulu Department of Customer Services, March 2, 2023.
[2]  “Administrative Overview, Fiscal Year 2024 Budget,” Department of Budget and Fiscal Services, Dept. Communication 158, March 6, 2023, p. 9.

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