HILO — An independent study of Hawaii County’s property tax policies found evidence of what some West Hawaii residents have been complaining about for years —there are big differences in how much tax people pay for what appear to be similar properties.
The County Council is about to tackle some of the perceived inequities as it addresses 40 recommendations made in a 99-page report by the International Association of Assessing Officers. The council Finance Committee takes the first step Tuesday when it hears a presentation from a working group of two former council members, top Finance Department officials and representatives from the public.
The meeting begins at 2:30 p.m. Tuesday at the West Hawaii Civic Center. The public can also participate through videoconference from council chambers in Hilo, the Hawaiian Ocean View Estates Community Center and the Pahoa and Waimea council offices.
Former Kohala Councilman Pete Hoffmann, who has been trying to get someone to look at the tax structure for years, succeeded in getting $40,000 budgeted for the study. Now he hopes the new council will carry on the work.
“All of this is going to take an extended period of time. It’s not going to happen overnight,” Hoffmann said. “I hope the new council appreciates the significance of the issue.”
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 and elected officials often have a hard time understanding it, Hoffmann said.
A 3 percent cap on annual increases in valuation also adds to the discrepancy, because the property is brought up to its true value when it’s sold. That means identical property could have hugely different values, depending on how long it’s 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.
The working group has prioritized the 40 recommendations. Kohala Councilwoman Margaret Wille is sponsoring a resolution that also will be heard Tuesday to create a new task force with basically the same structure: two council members, finance director, real property tax administrator and three members of the public. The group would submit quarterly reports with recommendations to the council. The group would disband Nov. 30, 2014.
“It’s a first step. Let’s not dilly-dally. We’re serious about this, and it’s very important,” Wille said. “Let’s do this methodically and do it well and do it in a transparent manner.”
Finance Director Nancy Crawford agrees a task force is needed. She envisions a larger group, however, with experts in law and tax exemptions contributing to the conversation.
“We’re all in agreement that we want to have a committee that takes a look at the code and the process and the recommendations,” Crawford said. “(But) we’re not going to enter into major tax code reform on the recommendations of a group of seven people.”