2 views on property tax

Former U.S. Rep. Charles Djou said Friday that if elected as Honolulu’s mayor, he would work to scrap the city’s Residential A tax category, which requires anyone with properties worth $1 million or more and no homeowner exemptions to pay higher taxes.

Mayor Kirk Caldwell, whom Djou is trying to unseat in the Nov. 8 general election, said he is willing to consider adjusting the definition of Residential A to help middle-class families but thinks the category needs to be kept to help pay for the city’s existing programs and services while ensuring residents living in the one house they own are shielded from higher taxes.

The two men appeared at a Honolulu Board of Realtors breakfast forum at the Honolulu Country Club. Questions asked of the candidates focused largely on housing issues.

“The Residential A tax bill was a mistake, period,” Djou told the audience, adding that he would have voted against the measure if he were on the City Council when it was approved in September 2013. Caldwell signed the measure two weeks later.

Starting in 2014, under a budget package introduced by Caldwell and approved by the Council, those owning properties classified as Residential A have been taxed at a rate of $6 per $1,000 of assessed value while those in the standard Residential category have seen their rate stay the same at $3.50 per $1,000. Those with $1 million-plus homes who carry an owner-occupant homeowner exemption stay in the common Residential category.

Djou said that a $1 million home on the mainland might be a luxury home, “but here in our community a million-dollar home isn’t exactly a mansion,” he said. “A million-dollar home is not way out of the realm of what a typical family has.”

Djou said his own in-laws’ Hawaii Kai home, purchased 40 years ago for $150,000, is now approaching $1 million.

The threshold amount should be raised to $3 million “at the minimum,” he said. Longer-term, he would like to “get rid of” the Residential A category and reduce the number of property tax categories. He said that as a Council member, he worked with former Mayor Jeremy Harris to shrink the number of categories so that property owners paid only two rates.

Since his time on the Council, he said, city officials have “unnecessarily complicated the … real property tax code again.”

Caldwell described himself as a strong proponent of Residential A and “someone who is willing to look at adjusting it” to help those with homes that have crept into the $1 million-plus category.

Taxing nonresidents

The city has been able to maintain a $3.50 rate for those who own and live in a single property during the four years he’s been mayor, “and I want to keep it at that level,” Caldwell said. “You can’t just squeeze money out of a stone.”

Bond raters have praised the city for its ability to raise revenues while containing costs. “The city budget has not grown substantially under the four years I’ve been mayor, but we need to find the revenue somewhere. And there is some fairness about raising the tax on those who don’t live here, who own a home over a million dollars, don’t have an exemption and live offshore,” he said.

“We can give them a break if we want to, and at some point we’re going to have a serious discussion about what happens to the rest of us when we have challenges on revenues.”

The city could implement a tiered approach where those at the $1 million level would pay less than those whose properties are valued higher, he said.

There are some 8,800 homes now in the Residential A category out of an estimated 250,000 residential properties Oahu-wide. Caldwell said while his opponent is willing to make some adjustments, “to do away with it and someday promise that you’re going to adjust the tax rate and somehow get more money out of less tax, that may sound good but that ain’t reality, folks.”

In response to protests from homeowners who saw their property tax bills jump significantly, the Council approved a one-time break for those who could claim a home exemption but had not done so. But proposals to either raise the $1 million threshold for Residential A or create a tiered system, recommended by the latest tax review commission, have so far failed.

Looking at last 4 years

In recent forums featuring the two candidates, Djou has challenged voters to consider whether their lives were better than they were when Caldwell became mayor four years ago. On Friday, Caldwell fought back by claiming that they were.

Djou said homelessness has gone up, controversies have erupted in the Police and Fire departments, and the Ethics Commission’s executive director was pressured into resigning while the city’s housing policies have floundered and the rail project is now billions of dollars over budget and years behind schedule.

“I want you to look and consider these issues facing your city government, and I want you to quickly ask yourself, right now, Is our city better off today than it was four years ago? And how you just answered it in your head, right now, in a nutshell should summarize how you should vote in this upcoming,” Djou said.

Caldwell said since he became mayor, unemployment has gone down, tourism has gone up and construction is booming.

Meanwhile, “our bond rating is one of the best we’ve ever had,” Caldwell said. Both of Honolulu’s bond raters called the city’s budget conservative and consistently balanced as well as overseen by a strong management team, he said.

“Things are going well in terms of our economy,” and the city is continuing to invest in roads, sewer lines, parks, rail and other infrastructure that are needed for badly needed housing stock to be built, he said. “I want to make the city more city to keep the country more country.”

Both candidates also played to the Realtors by talking about their real estate experiences.

Caldwell said that as a practicing attorney who worked in real estate law, he represented the Board of Realtors. “I enjoyed doing the legal work for all of you, and so it’s nice to come home to the board and talk story with you a little bit,” he said.

Djou recalled that his mother was a Realtor and that as a teenager he was tasked with placing “open house” signs to help out. He quipped that he’s since graduated to become a politician who puts up candidate yard signs.