Bill 42: Homeowner exemptions more fair than assessment caps

The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the Honolulu County Council Budget Committee on July 25, 2023.
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July 25, 2023
9 a.m.
Honolulu City Council Chambers

To: Honolulu City and County Council, Committee on Budget
Councilmember Radiant Cordero, Chair
Councilmember Matt Weyer, Vice Chair

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

RE: Bill 42 (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 42 (2022), which would impose an 8% assessment cap on properties in the Residential tax class.

In general, the Institute appreciates that this measure intends to protect homeowners from large increases in their property values. However, we do not believe the cap should be set to a figure lower than the 8% proposed in the bill.

Restrictive assessment caps are known to distort the housing market by incentivizing long-time homeowners to stay in one house, no matter their living space needs. These assessment caps also drive up the cost of homeownership for individuals and families looking to purchase their first home.

Homeowner exemptions serve as a fairer way to provide tax relief to all homeowners, but such exemptions could be modified to change over time, so as to provide increasingly higher tax relief when assessments increase by a large amount.

We also want to correct an error in our previous testimony.

Previously, we had confused the growth in assessed value for all real property in the county with the growth in assessed value of the Residential class. We reported that the assessed value of the Residential class increased by 5.45% annually, on average, from fiscal 2014 to 2024. In reality, that 5.45% figure refers to the average increase in the assessed value of all properties in the county.

We have corrected this error. As a result, we have verified that the Residential tax class’ gross assessed value increased by 4.98% annually, on average, between fiscal 2015 and 2024.

The assessed value of the entire tax class increased by more than 8% in only two years during that time period, fiscal 2023 and 2024, when it increased by 8.13% and 9%, respectively.

Because the number of parcels in the Residential class fluctuated between fiscal 2015 and 2024, we also thought it helpful to report the change in gross assessed value divided by the number of parcels. This measurement gives a better picture of how the assessments have increased for individual properties. Figure 1 compares the average assessed value of parcels in the Residential class to changes in that value.