West Hawaii accounts for two-thirds of property tax burden

HILO — Are Hawaii County property taxes high? Depends whom you ask.

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 property taxes that will be collected from the entire county this coming fiscal year, according to a West Hawaii Today analysis of the property assessments used to determine the coming year’s budget. Add South Kona’s District 7, and a full two-thirds of the county’s property tax burden falls squarely on the west side of the island.

Property taxes likely won’t be raised this election year. Mayor Billy Kenoi has proposed a no-new-taxes budget that the County Council will tackle next week. The council so far has been reluctant to raise taxes this year, either.

A public hearing on the tax rates is set for 5 p.m. Monday in Hilo, followed by a 6 p.m. public hearing on the entire budget. Public testimony also will be accepted via videoconference from the West Hawaii Civic Center and council offices in Waimea and Pahoa.

The analysis showed Districts 1 through 6 — Hamakua, Hilo, Puna and Ka’u — contributed about 5 percent each to the total tax burden. Per capita property taxes, the property taxes divided over each district’s population, range from a low of just $374.83 in Puna, to a high of $2,639.31 in North Kona.

The analysis was conducted by taking the property assessments in each of the nine property classifications in each of the nine council districts, multiplying them by the tax rate for each classification and totaling them for each district.

Kenoi said just taking the property assessments of the two highest districts results in their accounting for 49 percent of total values. He said that’s a decrease from last year, when those districts accounted for 56 percent.

“Clearly, Districts 8 and 9 have all of our largest employers,” Kenoi noted, “plus many in the residential class. That determines a lot of the values.”

Is it fair? That also depends whom you ask. West Hawaii’s property values tend to be higher than on the east side of the island because of the resorts and absentee owners, two categories that face a higher tax rate. Buildings — and residents — on the east side of the island also tend to be older, resulting in a lower tax burden.

“I’m not necessarily an advocate of a strict accounting of property taxes being returned to the district where they’re generated,” said Kohala Councilman Pete Hoffmann, whose district ranks second in paying 20 percent of the county’s taxes. “For better or worse, we’re all in this boat together.”

A study by the International Association of Assessing Officers released last month makes 40 recommendations that could make the county’s system of property assessments more streamlined and more responsive to changes in property values. The County Council and administration so far haven’t tackled the recommendations, and it’s not known if changes would bring more parity to tax collections.

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 property owners and elected officials often have a hard time understanding it, said Hoffmann, who pushed for the $40,000 study.

Hoffmann said he plans to ask for a council-administration committee to begin discussing the issue as soon as the budget is complete.

South Kona Councilwoman Brenda Ford, whose district came in third, paying 16 percent of the taxes, said she thinks the system needs work. She’s not in favor of raising taxes this year, she added.

Ford said she can understand why land assessments are higher in certain areas of the county, but she can’t understand why nearly identical buildings would be taxed differently depending on where they are located.

“I personally believe we have inequities between the way that we tax on the west side and the way that we tax on the east side,” Ford said.

The mayor and County Council last raised taxes in 2010, in a budget that included tax rate increases of 28 percent for buildings and 12 percent for land in the residential class that covers most of the county’s second homes and part-time residents. That’s an additional $2 in tax per $1,000 of value for the buildings and $1 for the land.

A full 82 percent of the $5.6 billion in taxable value of that category was in the four council districts covering West Hawaii — Ka’u, South Kona, North Kona and Kohala. The four districts accounted for 76 percent of all property value in the county that year.

Other property categories that saw tax increases were buildings on agricultural zoned land, which faced a 32 percent rate increase, and apartments, which saw a 22 percent increase. It’s not known how much extra revenue those increases brought in, but Deputy Finance Director Deanna Sako said the county budgeted an additional $23 million for the increase.

Kenoi points out “we collect less taxes today,” due to dropping property values, from $225.9 million when he took office to $198.5 million with the new budget.

He also notes property owner appeals of their assessed values have come down considerably during that same time. Only 543 appeals were filed this year, compared to 1,010 last year.

Bottom line: “The council is responsible for adjusting the rates,” Kenoi said. “Our job is to make sure the valuations are fair.”

DISTRICT TAXES POPULATION TAXES PER CAPITA

DISTRICT 1 $10,213,694 17,805 $573.64

DISTRICT 2 $10,350,734 17,845 $580.04

DISTRICT 3 $12,299,756 20,225 $608.15

DISTRICT 4 $9,535,602 16,173 $589.60

DISTRICT 5 $9,393,921 25,062 $374.83

DISTRICT 6 $12,891,958 22,076 $583.98

DISTRICT 7 $31,495,766 21,544 $1,461.93

DISTRICT 8 $60,221,124 22,817 $2,639.31

DISTRICT 9 $39,626,155 21,532 $1,840.34

TOTAL $196,028,710 185,079 $1,059.16

Source: West Hawaii Today analysis of assessment and tax data provided by Hawaii County Finance Department; population figures from U.S. Census Bureau