The "gap group" saw tax bills quadruple and many say they never got notice from the city
POSTED: 1:30 a.m. HST, Sep 2, 2010
LAST UPDATED: 11:46 p.m. HST, Sep 14, 2010
City Council members took the first steps to providing immediate help for a "gap group" of 247 residents who saw sizable increases in property tax bills due to a reclassification of their property from residential to commercial/industrial.
The Council yesterday advanced four bills aimed at addressing the situation.
Lawmakers and the city administration scrambled to draft the legislation last week, after Council members learned of the gap group whose property tax rate quadrupled from a year ago.
Council members previously said they were never notified by the city -- while former Mayor Mufi Hannemann was in office -- that the reclassification was occurring and had they known, they could have acted to address the affected property owners.
Kirk Caldwell, the city's managing director who took over as acting mayor upon Hannemann's resignation to run for governor, said city real property assessors were just following city ordinances and classifying properties according to "highest and best use" when they uncovered the gap group of apartment properties that legally should have been classified as commercial because they sit in business-zoned lands.
"They were trying to correct former errors of the assessments and made those changes this year," Budget Director Rix Maurer III told Council members yesterday. "I don't think that we should beat them up for trying to do the right thing."
Affected properties were in areas including Kalihi, Waipahu, Kapahulu and Moiliili.
One of the apartment buildings belongs to Councilwoman Ann Kobayashi's family.
Kobayashi, who recused herself from voting on the measures, said she did not recall seeing the notice saying the property was being reclassified, but added that many residents in the area had not seen the tax rate change for decades and did not expect it to change this year.
Some affected residents said they received the reclassification notice, but there was no indication that the tax bill would quadruple, changing the tax rate from the residential rate of $3.42 per $1,000 of valuation to the commercial/industrial rate of $12.40. Maurer said in the future, such notices should include an explanation of how a property owner's tax bill would be affected.
City officials also suggested Council members should have known of the potential reclassification problem because similar concerns were raised as early as January, during discussion of Bill 6.
That proposal, which was passed by the Council, allows property owners to dedicate their properties as residential for five years and to rededicate them every five years thereafter. Council members said that bill aimed to offer relief to residents already paying a higher commercial tax rate while living on property classified at the lower residential rate, not the other way around.
Under the law, those property owners, some of whom received notice in December, had no alternative but to pay the higher property taxes for this year.
Councilman Romy Cachola, who first raised the issue last month, criticized the administration, saying it was trying to lay blame on the Council, when the city should have known about the gap group and notified the Council.
Proposals advanced yesterday would provide a refund or cash rebate, including interest, to affected taxpayers and remove the need to dedicate properties as residential in commercial- or industrial-zoned areas and bases property taxes on use.