With serious work on the coronavirus-stricken county budget set to begin today, the County Council on Wednesday set up a property tax structure that would allow it to tax $2 million-plus second homes at a higher rate than other residential property.
The council also passed a resolution approving raises for the last bargaining unit of the eight unions representing county workers, a coincidence that didn’t go unnoticed by the public. Employee pay and benefits account for about 65% of the budget, and they are set to increase almost across the board this year, following statewide negotiations over the past several years.
“You say you can’t touch them, but you can,” said Stephanie Donoho, an administrative director for Kohala Coast Resort Association and former county tourism specialist who personally experienced the “furlough Fridays” during the Great Recession. “Those shared sacrifices must happen at the public sector as well.”
“Once you create the leanest government possible and you need to raise our taxes, then make it across the board,” she added.
The council voted 7-1 to pass Bill 169, with Kohala Councilman Tim Richards voting no and South Kona/Ka‘u Councilwoman Maile David absent, to approve the new tax structure.
Council members voting in favor stressed that the council is just setting up the structure, not setting new tax rates. The council begins working on the budget in a special meeting starting at 9 a.m. today and is scheduled to complete that work at a June 4 meeting. A public hearing is set for June 3 on property tax rates, which must be set by June 19.
“We’re not raising the taxes; we’re putting an option out there if we need to use it at some time,” said Hamakua Councilwoman Valerie Poindexter. “We need a list of things we can or cannot do. … That discussion is going to happen in coming weeks. … This may be one of the options or it may not.”
Bill 169 defines “residential tier two property,” subject to the tax to include homes, vacant land and condos with a net assessed value of $2 million or more that don’t have a homeowner’s exemption and are “classified as residential in consideration of the highest and best use of the land.”
Under Mayor Harry Kim’s proposed budget, those property owners would pay a rate of $14.60 per thousand in value on all value over $2 million, compared to the current tax rate of $11.10 per thousand. The homeowner rate is $6.15.
Richards, voting no, said the 930 affected properties of the island’s 140,000 parcels, most in three West Hawaii council districts, already account for almost 20% of property tax collections on the island.
“We are in a time of financial distress and crisis and any concept of raising taxes at all, I think is the wrong direction,” Richards said. “This is a time when we really want people to invest in our community.”
Kona Councilwoman Rebecca Villegas disputed the idea that people will be less likely to invest in Big Island real estate and luxury second homes if the property tax rates are increased because the island is “unique, it is so special and so amazing.”
“Our job is to represent everyone in this county and there’s a very diverse socio-economic playing field,” Villegas said.
Resolution 614, approving raises for 30-40 water safety officers, will add $591,039 to the mayor’s proposed $585.1 million budget for the fiscal year that starts July 1. That compares to $8.9 million more for police, $4.8 million more for firefighters, $1.1 million more for United Public Workers Unit 1 employees and $443,497 more for Hawaii Government Employees Association Unit 14 workers, all of which were previously approved.
Finance Director Deanna Sako said it wouldn’t be fair to oppose raises for one group when the others have already been approved.
“All of these started a long time ago in collective bargaining,” Sako said. “Whatever we do for our bargaining units, we will do as a group.”
The council also approved Resolution 255, which sets salaries for legislative employees. There are no raises, but additional steps are added to the higher end of job descriptions so in the future, long-term employees won’t stay “mired into a certain salary spot,” Council Chairman Aaron Chung said.
“It’s in no way to suggest that we’re looking at giving raises right now,” Chung said. “It’s a hell of a time to even talk about increases.”
