The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the Maui County Council Committee on Zoning on Budget, Finance and Economic Development on April 6, 2023.
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April 6, 2023
9 a.m.
Maui County Council Chamber
To: Maui County Council Budget, Finance and Economic Development Committee
Yuki Lei K. Sugimura, Chair
Tasha Kama, Vice Chair
From: Grassroot Institute of Hawaii
Joe Kent, Executive vice president
RE: PROPOSED FISCAL YEAR 2024 BUDGET FOR THE COUNTY OF MAUI (BFED-1)
Comments Only
Dear Chair and Committee Members:
The Grassroot Institute of Hawaii would like to offer its comments on the proposed fiscal year 2024 budget.
In general, we appreciate Mayor Richard Bissen’s intent to use a fiscally responsible approach in formulating this year’s budget. The proposals to pay down unfunded liabilities, reduce reliance on debt financing and beef up the reserve fund are all prudent.[1]
We also appreciate his proposal to lower the tax rate on the first two owner-occupied home tiers. In tandem with a higher homeowner exemption that will apply starting fiscal year 2024, these rate reductions would provide Maui homeowners relief from soaring property assessments.
On the property tax front, we want to offer some suggestions that might assist the Council in looking at further ways to reduce Maui resident’s tax burden.
Higher property values have not been limited to houses. Nearly all property classes have experienced higher property assessments this year, so virtually all property owners throughout the county are looking at higher tax bills for the upcoming year, even though most rates are projected to remain the same. In total, Mayor Bissen’s proposed budget projects property taxes to increase by 24% this year compared to fiscal 2023, to $100 million.
Scenario 1: Extend the 10 cent-per-$1,000 rate cut
Our first scenario shows the effect of extending the mayor’s proposed 10 cent-per-$1,000 cut to apartment, long-term rentals (tier 1 and 2), agricultural, conservation, commercial, industrial and commercialized residential properties. Such a cut would provide these properties a total of $993,532 in tax relief.
Scenario 1
| Class | Net valuation | Rate[2] | Revenue |
| Owner-occupied | |||
| Owner-occupied, tier 1 | $14,407,927,854.00 | 0.0019 | $27,375,063 |
| Owner-occupied, tier 2 | $1,800,183,863.00 | 0.002 | $3,600,368 |
| Owner-occupied, tier 3 | $602,168,408.00 | 0.00275 | $1,655,963 |
| Non-owner-occupied | |||
| Non-owner-occupied, tier 1 | $10,732,572,451.00 | 0.00585 | $62,785,549 |
| Non-owner-occupied, tier 2 | $4,879,820,606.00 | 0.008 | $39,038,565 |
| Non-owner-occupied, tier 3 | $2,136,435,447.00 | 0.0125 | $26,705,443 |
| Apartment | $542,370,800.00 | 0.0034 | $1,844,061 |
| Hotel and Resort | $4,578,078,300.00 | 0.01175 | $53,792,420 |
| Time Share | $3,643,482,434.00 | 0.0146 | $53,194,844 |
| TVR-STVR | $17,930,342,132.00 | 0.01185 | $212,474,554 |
| Long-term rentals | |||
| Long-term rental, tier 1 | $1,681,170,346.00 | 0.0029 | $4,875,394 |
| Long-term rental, tier 2 | $175,038,962.00 | 0.0049 | $857,691 |
| Long-term rental, tier 3 | $66,696,300.00 | 0.008 | $533,570 |
| Agricultural | $1,644,549,489.00 | 0.00564 | $9,275,259 |
| Conservation | $313,911,249.00 | 0.00633 | $1,987,058 |
| Commercial | $2,978,210,708.00 | 0.00595 | $17,720,354 |
| Industrial | $2,318,002,247.00 | 0.00695 | $16,110,116 |
| Commercialized residential | $282,065,137.00 | 0.0043 | $1,212,880 |
Scenario 2: Revenue freeze
Our second scenario considers what would happen if the county froze revenues at fiscal 2023 levels for owner-occupied (tier 1 and tier 2), apartment, long-term rentals (tier 1 and 2), agricultural, conservation, commercial, industrial and commercialized residential properties.
This freeze would result in automatic rate reductions for each of these property classes, resulting in a tax reduction of about $10.2 million.
Scenario 2
| Class | Net valuation | Rate[3] | Revenue |
| Owner-occupied | |||
| Owner-occupied, tier 1 | $14,407,927,854.00 | 0.00186 | $26,839,693 |
| Owner-occupied, tier 2 | $1,800,183,863.00 | 0.00152 | $2,734,420 |
| Owner-occupied, tier 3 | $602,168,408.00 | 0.00275 | $1,655,963 |
| Non-owner-occupied | |||
| Non-owner-occupied, tier 1 | $10,732,572,451.00 | 0.00585 | $62,785,549 |
| Non-owner-occupied, tier 2 | $4,879,820,606.00 | 0.008 | $39,038,565 |
| Non-owner-occupied, tier 3 | $2,136,435,447.00 | 0.0125 | $26,705,443 |
| Apartment | $542,370,800.00 | 0.00244 | $1,322,376 |
| Hotel and Resort | $4,578,078,300.00 | 0.01175 | $53,792,420 |
| Time Share | $3,643,482,434.00 | 0.0146 | $53,194,844 |
| TVR-STVR | $17,930,342,132.00 | 0.01185 | $212,474,554 |
| Long-term rentals | |||
| Long-term rental, tier 1 | $1,681,170,346.00 | 0.00176 | $2,957,531 |
| Long-term rental, tier 2 | $175,038,962.00 | 0.00270 | $471,910 |
| Long-term rental, tier 3 | $66,696,300.00 | 0.008 | $533,570 |
| Agricultural | $1,644,549,489.00 | 0.00457 | $7,520,499 |
| Conservation | $313,911,249.00 | 0.00643 | $2,018,449 |
| Commercial | $2,978,210,708.00 | 0.00542 | $16,148,181 |
| Industrial | $2,318,002,247.00 | 0.00631 | $14,626,431 |
| Commercialized residential | $282,065,137.00 | 0.00361 | $1,018,316 |
Scenario 3: 50 cent-per-$1,000 rate cut
Finally, we consider the effects of a 50 cents-per-$1,000 rate cut for owner-occupied (tier 1 and tier 2). In addition to a 10 cent-per-$1,000 rate cut for apartment, long-term rentals (tier 1 and tier 2), agricultural, conservation, commercial, industrial and commercialized residential properties, this reduction would save the owners of these properties about $11.45 million in the upcoming year.
Scenario 3
| Class | Net valuation | Rate[4] | Revenue |
| Owner-occupied | |||
| Owner-occupied, tier 1 | $14,407,927,854.00 | 0.0015 | $21,611,892 |
| Owner-occupied, tier 2 | $1,800,183,863.00 | 0.0016 | $2,880,294 |
| Owner-occupied, tier 3 | $602,168,408.00 | 0.00275 | $1,655,963 |
| Non-owner-occupied | |||
| Non-owner-occupied, tier 1 | $10,732,572,451.00 | 0.00585 | $62,785,549 |
| Non-owner-occupied, tier 2 | $4,879,820,606.00 | 0.008 | $39,038,565 |
| Non-owner-occupied, tier 3 | $2,136,435,447.00 | 0.0125 | $26,705,443 |
| Apartment | $542,370,800.00 | 0.003 | $1,627,112 |
| Hotel and Resort | $4,578,078,300.00 | 0.01175 | $53,792,420 |
| Time Share | $3,643,482,434.00 | 0.0146 | $53,194,844 |
| TVR-STVR | $17,930,342,132.00 | 0.01185 | $212,474,554 |
| Long-term rentals | |||
| Long-term rental, tier 1 | $1,681,170,346.00 | 0.0025 | $4,202,926 |
| Long-term rental, tier 2 | $175,038,962.00 | 0.0045 | $787,675 |
| Long-term rental, tier 3 | $66,696,300.00 | 0.008 | $533,570 |
| Agricultural | $1,644,549,489.00 | 0.00524 | $8,617,439 |
| Conservation | $313,911,249.00 | 0.00593 | $1,861,494 |
| Commercial | $2,978,210,708.00 | 0.00555 | $16,529,069 |
| Industrial | $2,318,002,247.00 | 0.00655 | $15,182,915 |
| Commercialized residential | $282,065,137.00 | 0.0039 | $1,100,054 |
The scenarios outlined above are just a few suggestions for how the Council could provide tax relief.
The point of all of this is to say that the tax reductions proposed in the mayor’s budget are a good first step, but they should be supplemented with at least some relief to businesses, farmers and landlords.
Apartment and rental property owners faced with higher taxes can either take the hit themselves — which would reduce their spending on their other economic goals — or shift the burden to their tenants in the form of higher rents, which would increase the cost of housing for Maui renters.
Maui businesses and farmers — caught between high inflation, workforce shortages, and high prices for materials, energy and transportation — could either increase their prices to their customers, if their customers will be willing to pay the higher prices, or reduce their spending on wages, repairs, equipment or any other of the many costs of doing business.
No matter how you slice it, adding to the tax burden of these various property owners would have a depressing effect on Maui County residents.
In an upcoming report, the Grassroot Institute of Hawaii will present other ways Maui and our other counties in Hawaii can provide tax relief, from exemptions to tax credits to programs designed to benefit small businesses.
We would be happy to discuss these and any other out-of-the box tax ideas with the Council, and look forward to continued dialogue with you on this important issue.
Thank you for the opportunity to testify.
Sincerely,
Joe Kent
Executive vice president
Grassroot Institute of Hawaii
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[1] Melissa Tanji, “Mayor’s $1B budget request calls for a slight increase,” The Maui News, March 25, 2023.
[2] Rates rounded to the nearest thousandth.
[3] Rates rounded to the nearest thousandth.
[4] Rates rounded to the nearest thousandth.
