The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the Kauai County Council on Dec. 18, 2024.
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Dec. 18, 2024, 8:30 a.m.
Historic County Building
To: Kauai County Council
Mel Rapozo, Chair
KipuKai Kuali’i, Vice Chair
From: Grassroot Institute of Hawaii
Jonathan Helton, Policy Researcher
RE: Bill 2940 — RELATING TO REAL PROPERTY TAX
Aloha Chair Rapozo, Vice-Chair Kuali’i and other members of the Council,
The Grassroot Institute of Hawaii offers comments on — and an amendment to — Bill 2940, which would modify the director of finance’s powers to “compromise” real property tax bill disputes and clarify the rollback provision for the home exemption and assessment cap.
First, the measure would give the director the power to “compromise” any disputed tax bill without approval from the county attorney or the Council, unless the compromise would reduce taxes on a single parcel for a single tax year by $5,000 or more, in which case Council approval would be needed.
Just to be clear, “compromise” refers to the ability of the finance director to negotiate a property tax bill downward in the case of a dispute.
Granting the director of finance this flexibility would make sense for smaller tax disputes — though the bill would also remove existing language that requires the director to prepare a statement any time a compromise is made, stating by how much the amount the taxes were reduced and the reasons why, which could be problematic in terms of government transparency.
Second, under the bill, any property owners found ineligible for the home exemption could have their real property taxes recalculated for previous years based on the tax class their parcels would have been under.
Further, if the owners are found to be ineligible for their home exemptions for the past three years, their assessment caps will be lifted and their properties will be assessed and taxed at full market value for those three years.
Grassroot understands that the intent of this measure is to clarify how the rollback provision applies to owner-occupied properties. But we are concerned that owners who lose their home exemptions and assessment caps for whatever reason, will see their properties reassessed and taxed at full market value and face a significant tax shock.
For example, an owner-occupied property valued at $1 million would receive the $160,000 home exemption, making the tax bill $2,175.60.[1]
If the property were reclassified as non-owner-occupied for the past three years, the owner would lose both the exemption and the assessment cap. Assuming the full market value of the property was $1.7 million each year without the assessment cap,[2] the tax bill would be $9,505.
The result? The owner would pay $6,526.80 for the three year period if the property were classified as owner-occupied, and $28,515 if it were classified as non-owner occupied.
This almost $22,000 difference could negatively affect many property owners, especially if they were to lose their home exemptions through an oversight.
Grassroot suggests amending the bill to impose a $5,000 cap on how much taxes can increase as a result of reclassification and loss of assessment cap.
This would allow the county to recoup some of what might have been owed while protecting property owners from sudden tax shocks.
Thank you again for the opportunity to testify.
Jonathan Helton
Policy Researcher
Grassroot Institute of Hawaii
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[1] “REAL PROPERTY TAX RATES FOR TAX YEAR JULY 1, 2024 TO JUNE 30, 2025,” Technical Branch, Real Property Assessment Division, Department of Budget and Fiscal Services, City and County of Honolulu, August 2024.
[2] The median home sale price on Kauai in September 2024 was $1,712,500. See: Wyatt Haupt Jr., “Home sales spike in final month of summer on Kauai,” The Garden Island, Oct. 31, 2024.
