A report by the International Association of Assessing Officers takes Hawaii County to task for insufficient internal controls, oversight and cross-checking of property assessments, issues that could lead to inequities in how much taxes property owners are paying.
The 99-page report, the outcome of a $40,000 study requested by the County Council, makes 40 recommendations to address potential shortcomings in the current process.
West Hawaii residents have long complained about what they see as tax inequity.
Property owners in just two West Hawaii County Council districts — North Kona’s District 8 and Kohala’s District 9 — pay more than half the county’s property taxes, while Districts 1 through 6 — Hamakua, Hilo, Puna and Ka‘u — contributed about 5 percent each to the total tax burden, according to a West Hawaii Today analysis of property assessments used to determine the current county budget.
The report notes that Hawaii is one of only two states that does not have an independent oversight body, such as the state, over the counties’ real property assessment procedures.
Finance Director Nancy Crawford, in a response to the report, has cited lack of funding and staff to carry out some of the recommendations. For example, conducting a cyclic reappraisal of the county’s 140,000 taxable properties would cost about $10 million, she said.
Crawford also disagreed with some of the findings of the study, citing a misunderstanding on the part of auditors.
The 40 recommendations: Conduct annual analysis comparing effect of multiple tax rates to a single rate system. Annually analyze tax loss, shifting and other effects of exemptions, including assessment caps. Rewrite Chapter 19, the county tax code, to make it more clear and eliminate obsolete provisions. Require periodic review and inspection of properties granted exemptions. Finance Department should conduct a strategic planning exercise, increasing staff involvement, to set priorities for improvement. Real Property Tax Division should justify funding requests on a program or activity basis. Real Property Tax Division should prepare estimate of number and allocation of staff it needs. Real Property Tax Division should deploy appraisers on task, property type and market area basis rather than current geographical zones. Real Property Tax Division should institute internal controls so performance is in line with standards. Real Property Tax Division should establish continuing education of appraisers in mass appraisal and property tax administration. Property tax computer system should be upgraded and linked with current geographical information system and aerial photographic system to better inspect properties for compliance. Adopt ratio standards to ensure properties are uniformly appraised in relation to market value (horizontal uniformity) and at a fair percentage for both higher- and lower-priced properties (vertical uniformity). Implement a more definitive system of eliminating sales that are not valid arms-length transactions from ratio formulas determining uniformity. Develop procedures to eliminate outliers from ratio formulas determining uniformity. Ratio analysis should be conducted by market area and appraisal area, with results discussed with staff. Statistical elements should be added to enable proper interpretation of results. Develop a ratio study procedure and manual and train staff. Formalize supervisory review of appraisals and create annual report. Form a body independent from the Real Property Tax Division to review the quality of appraisals and techniques. Develop routine queries to compare market value changes on selling and non-selling parcels by market area and neighborhood. Review current data entry edits and security procedures to ensure they meet industry standards. Request all counties in the state to ask state Bureau of Conveyances to amend conveyance tax certificate to extract more usable information. Until the Bureau of Conveyances improves the tax certificate, the Real Property Tax Division should send confirmation letters to buyers and sellers to elicit needed data. Develop and implement a plan to verify the accuracy of each property record at least once every six years. Develop a regular property inspection cycle, at least once every six years. Allow the use of income data to determine value, especially for commercial and multifamily properties. Implement the updated agricultural land values developed by the Real Property Tax Division. Develop building cost modifiers to reflect differences in material and labor costs between the east and west sides of the island. Before moving to a combined land and building valuation system, meet with stakeholders to eliminate unanticipated problems. Institute a review cycle or require re-application for exempt property. Establish a stakeholder committee to review agricultural exemption policies and allegations of abuse. Conduct more frequent inspections and proof of income and eligibility. Institute procedures to verify residency of those taking homeowner’s exemptions through drivers license, voter registration or income tax records. Analyze the effects of the 3 percent value increase cap and review underlying policies for retaining the value freeze on properties remaining.
Incorporate sunset provisions into exemptions to force periodic review of underlying policies. Establish a stakeholder committee to identify problems related to tax relief and review options. Establish a stakeholder committee to determine ways to make the relationship between taxes and value changes more transparent. Eliminate the appeals filing fee for principal residences and make other changes to the appeals process. Make the first stage in the appeals process an informal appeal to the real Property Tax Division. Conduct an analysis to determine the cause of the increasing gap between delinquencies and delinquent tax collections to determine if there is a weakness in billing and and collection procedures. Develop a public relations manual, review and update staff public relations training, conduct more outreach efforts and formalize complaint handling procedures.