A “stakeholders” task force to recommend ways to make the Hawaii County property tax system more fair has become mired in controversy even before it has been formed.
A resolution introduced in December to establish the task force will be heard for the fifth time July 10, following accusations of politics that have led the sponsor, Kohala Councilwoman Margaret Wille, to say she may step down as a member of the task force if the County Council persists in changing the proposed makeup of the committee.
“I thought we had it approved and everything was fine,” Wille said Thursday. “We had it where three members of the public who had knowledge and skill and would be objective would be on it, where it was not a political process. If this is going to be a political deal and more looking out for a particular constituency. … That’s not the basis I wanted to be on it.”
The proposed task force is one of 40 recommendations in a 99-page March 2012 report by the International Association of Assessing Officers. A working group of former Kohala Councilman Pete Hoffmann and former Ka‘u Councilwoman Brittany Smart, along with top Finance Department officials and representatives from the public, prioritized the recommendations.
Wille had inherited the project from her predecessor, Hoffmann, who had convinced the council to pay $40,000 for the study.
Agriculture exemptions and the possible abuse of them will be the first order of work for the task force.
First, however, the task force has to be created. In order for that to happen, the County Council has to approve the makeup.
Hilo Councilman Dennis Onishi has been pushing for the council to change the makeup. First he suggested it have nine members of the public, one from each council district, in addition to representatives of the council and administration. Then other council members suggested it contain only representatives of the administration.
In particular, Onishi objected to three members of the public being named by Wille and Finance Director Nancy Crawford to be on the task force. Wille said she and Crawford have been working together to put the task force in place. One of the named members, Stewart Hussey, is a Hilo real estate appraiser active on the Hilo Downtown Improvement Association. The other two, Hilo real estate agent Jan Mahuna and Bob Price, were on the original working group.
Other council members have expressed similar opinions as well, saying they have been hearing from constituents who wonder why they weren’t allowed to apply.
“I’m hearing there are concerns about politicizing the process, but anything that comes before us can be categorized that way,” said Council Chairman J Yoshimoto.
Resolution 18, after numerous amendments, defines the task force as Wille, Onishi, Crawford, Real Property Tax Administrator Stan Sitko, Real Property Assistant Administrator Lisa Nahoopii, Deputy Corporation Counsel Ryan Kanakaole and three members of the public, one each to be selected by Wille, Onishi and Crawford.
The task force, once formed, will tackle discrepancies and perceived inequities in how the county values property for tax purposes and the rates applied to the property classifications. With nine property classifications and a variety of exemptions for everything from age to disability to length of ownership, the system has become so complex that property owners often have a hard time understanding it.
A 3 percent cap on annual increases in valuation also adds to the discrepancy, because the property is brought up to its true value only when it’s sold. That means identical properties could have hugely different values, depending on how long the property has been owned by the same person.
“The uniformity in effective tax rates potentially afforded by annually valuing property at its market value is undercut by the effects of the relief measures on net taxable values,” the report says. “Based on the limited information available to us, there is a remarkable variation in effective tax rates among similarly situated properties.”
The average difference between tax rates among the island’s population concentrations designated by the U.S. Census Bureau exceed 300 percent, according to the report.
Not only are property taxes uneven, they’re also comparatively low, the report says. Hawaii County’s owner-occupied property rates are generally less than 0.2 percent of property value, compared to a more typical rate of 1.3 percent in other areas of the country.
Council members, however, are hoping the task force will find a way to lower taxes by making them more equitable. North Kona Councilwoman Karen Eoff and Puna Councilman Zendo Kern emphasized that the task force can bring in subject-matter experts to help the core group understand specific issues. The main thing, they said, is to get the task force moving.
“If we nitpick this too far, it will never happen,” Kern said.