Institute endorses three Maui property tax relief bills

The Grassroot Institute’s Jonathan Helton testified that all three of the bills were good but also that they all needed improvement

The Maui County Council decided on Tuesday to consolidate into one measure three separate bills that sought to provide tax relief to Maui property owners affected by the Aug. 8 Maui wildfires.

In written and oral testimony presented to the Council, Grassroot Institute of Hawaii policy researcher Jonathan Helton said all three of the bills were good, but Bill 102 was the best because it provided tax relief to all properties — not just homes — and it extended relief for the longest period of time.

Helton recommended that all those provisions be in whichever of the three bills the Council moves forward.

He said property owners who lost their homes or businesses should not have to fear that they could lose their lands to foreclosure because they couldn’t pay their property taxes.

The three bills discussed were:

>> Bill 91 (2023), which would have granted tax relief in fiscal 2025 and possibly fiscal 2026 to owners of properties destroyed or damaged by the fires.

>> Bill 95 (2023), which would have exempted from the property tax in fiscal years 2024 and 2025 all residential properties in the Lahaina burn zone and residential properties that were damaged or destroyed in Upcountry and Kihei. It also would have provided tax relief to hotels and short-term rentals that have been offering shelter to residents displaced by the fires.

>> Bill 102 (2023), which would have extended tax relief to properties that were destroyed or damaged by the fires, from the second half of fiscal 2024 through the first half of fiscal 2027.

County administration officials told the Council that the new consolidated bill likely could be ready for hearing later this month.

To see Helton’s oral testimony, click on the video below. Or read the accompanying transcript below.

10-31-23 Jonathan Helton testifies to Maui County Council

Jonathan Helton: Aloha, Chair and Council Members. Can you guys hear me?  

Councilmember Yuki Lei Sugimura: Yes. 

Helton: All right, so my name is Jonathan Helton, and I’m a registered lobbyist with the Grassroot Institute of Hawaii. We are an organization that promotes policies that would lower the cost of living in Hawaii and expand economic opportunities. So, in my role as a policy researcher, I focus a lot on county policy.

I wrote a report earlier this year that detailed different policies that the counties could look at to provide property tax relief. I know Maui has a very good property tax model that we’ve been referring to in some of our testimonies to the other counties. But I’d like to comment briefly on bills 91, 95 and 102.

So, the Institute believes that these bills are definitely a step in the right direction in providing tax relief to property owners whose properties were affected by the fire. We obviously do not want any situations in which a homeowner or a business owner loses their property to foreclosure because they were unable to pay their property tax either through the loss of livelihood or something else.

So, in my written testimony, I mentioned that Bill 102 is probably our, would probably be our preferred avenue for getting that property tax relief to the property owners. But we would support any of these bills, and I would just like to kind of add three things so, no matter which bill moves forward, just three things to keep in mind.

Number one, we would support tax relief for all classes. So, not just residential but for commercial, agricultural, industrial. If you had a piece of land and the building was destroyed or damaged, then you should be eligible for property tax relief. 

Second of all, we would support, whether you do it now or you do it in May, retroactive tax relief for properties that were not completely destroyed — as in, what the mayor waived property taxes for — but properties that were damaged and may be made uninhabitable by the fires. So, retroactive property tax relief for this fiscal year.  

And then the final thing is we would support this tax relief to remain in effect for several years, as it will likely take several years for cleanup and infrastructure rebuilding before people will be able to go back in and reconstruct residences or businesses.

So, tax relief for all classes, retroactive tax relief for damaged properties in fiscal 24, and several years of relief. Either bill, whichever bill goes forward, that’s what we would support being in that bill. 

And with what time I have left, I do want to mention some of the specifics of Kauai’s program that benefits long-term affordable rentals. So, what Kaua’i does is they offer two things to owners of long-term affordable rentals: 

The first thing is they tax those properties at the same rate at which they tax homestead properties. And so, for the current fiscal year, that’s $2.59 per thousand, which is a much lower rate than if those properties were taxed in Kauai’s residential class. I don’t remember the rate for it, but it is higher. 

And the second thing Kauai does for those properties is it gives them the same 3% assessment cap it offers to owner-occupied or homestead properties. And I realize Maui does not have an assessment cap, and there’s pros and cons there. But that’s kind of what Kauai has done to incentivize long-term affordable rentals.

So, happy to answer any questions.  

Sugimura: OK, so it sounds like you have the bill that member [Gabe] Johnson was asking, I think, earlier. So, if you could share that or somebody share that — appreciate it. 

Anybody have any questions? Who has a question? OK, Ms. Paltin has a question for you. I can’t see you on the screen. Sorry. 

Councilmember Tamara Paltin: Thank you, Chair. Thank you, Mr. Helton. 

One thing, the first thing I wanted to clarify on your point two where you said now or May,  retroactive for this fiscal year. Does that include also about penalties that may have been assessed if it wasn’t paid? 

Helton: Yes, ideally, any retroactive tax relief would cover penalties as well. I think that’s addressed in I think all of those bills is that penalties would be waived going forward, but they should be waived retroactively as well. 

Paltin: And so, then, if the penalties are retroactive and the relief is retroactive, that’s why you’re saying it doesn’t matter if we do it now or in May. 

Helton: Yes. Of course, if the County did it before the — I think it’s February is when the next round of tax bills are due — so, for the second half of FY 24, if bills were passed now, that wouldn’t have to be retroactive. Obviously, it would, either way, if it’s now or May, it has to be retroactive for the tax bills due Aug. 20. 

Paltin: And then, when you’re seeing that, the incentive portion for STRs [short-term rentals] to convert to long-term rental, is that included in what your testimony was? My bill 95 had some incentives. 

Helton: Yes. I didn’t touch on that in the testimony. I think that’s something we would absolutely support. I know that the way the incentive is being set up will require county staff to do a little bit more work, but I didn’t address that in writing, but we would support that as well. 

Paltin: So, what you’re talking about, whether now or in May, you’re not addressing that towards the incentive portion of it, you’re saying? 

Helton: Right. That was kind of the more comprehensive one. I am not as well informed about the specifics of the incentive for hotels and STRs. So, I can’t exactly speak to that. 

Paltin: Okay. And then the other, the last question I had was, when you’re speaking to the affordable long-term rental, is it going by HUD [U.S. Department of Housing and Urban Development] fair housing, HUD fair market values for rent based on bedroom size? 

Helton: I would imagine that’s how Kauai has it set up. I don’t know off the top of my head. I can send you guys the county code that addresses that, though. 

Paltin: OK Thank you. 

Sugimura: Any other questions? Seeing none. OK, thank you very much. 

Helton: Thank you.  

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