Oahu’s "Residential A" class was created to raise property taxes on second homes, not primary residences, and includes only properties valued at $1 million or more.
Property owners who have a home exemption for their primary residence are not in this class, regardless of the amount of their home’s valuation.
The creation of this Residential A class allows the city to raise real property tax revenues without affecting true owner-occupants with a home exemption. The real property assessment notices that were sent out on Dec. 15 included a notice and reference to the ordinance section for the new Residential A class.
The July 30 editorial calling for tax relief for certain Residential A class property owners ("Homes tax mess needs fixing," Star-Advertiser, Our View) gives the impression that there are many residents with properties in the Residential A class who would have been eligible for a home exemption. We question this assumption. There are about 7,400 properties in the Residential A class, but the city knows of only a few homeowners who may have been eligible for a homeowner exemption for fiscal year 2015 but failed to file for an exemption.
The home exemption is not new and is the most popular of all real property tax exemptions. In fiscal year 2014, there were more than 138,000 home exemptions, which is more than 85 percent of all real property tax exemptions. Information on the home exemption and forms are available on the Real Property Assessment Division website.
While the number of real property valuation appeals has increased, the 2,100 appeals filed for the 2014 property value assessments included 522 appeals filed by a single condominium project. This outlier skews the number of appeals, and makes it appear higher than normal. The same property owner also filed more than 500 appeals in fiscal year 2012, and did not prevail.
If these outliers are removed, the number of appeals has been stable in recent years, averaging about 1,600 per year since fiscal 2011. The number of appeals has actually decreased compared to fiscal 2007 and 2008, when the appeals exceeded 6,000 per year.
It is true that some property owners have seen increases in the valuations of their property due to market increases, but the application is fair.
The city’s real property assessment methodology is uniformly applied to all properties:
Each property is separately assessed using the cost and sales-comparison approaches to value, as required by city ordinance.
Valuation is based on comparable sales that are most similar to the subject property.
Internal audits are conducted to ensure that assessment values are in compliance with standards established by professional appraisal and assessment organizations.
Property owners are allowed to file appeals regarding the assessed value of the property, the classification of the property, and the amount of exemption allowed.
The Board of Review, consisting of private citizens, decides on appeals of assessments. These processes ensure that the city’s valuations are fair and transparent.
The editorial says taxing expensive second homes at a higher rate is legitimate tax policy if the availability of exemptions for owner occupants is clearly and broadly articulated, and property valuations are fair and transparent.
The city meets these criteria, and believes that the Residential A class should be considered a legitimate tax policy that protects owner occupants from tax increases.
