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Hidden homes get big tax breaks

The city is lax with public-view rules for 250 historic homes getting property tax exemptions

By Rob Perez

POSTED:
LAST UPDATED: 11:54 p.m. HST, Sep 12, 2010


The city is giving major property-tax breaks to nearly 250 owners of historic homes -- forgoing nearly $1 million in annual revenue -- without adequately enforcing key requirements of the exemption program.

The biggest breaks are going to owners of homes with assessed values of at least $1 million, saving them thousands of dollars in taxes each year.

But some of the homes cannot be seen or are barely visible from public streets despite a requirement that reasonable visual access be provided. Failing to meet that requirement undermines one of the main public benefits of the taxpayer-subsidized program.

Owners of homes lacking visual access are supposed to allow the public onto their property at least 12 days a year for "visual visitations," according to city regulations. Yet no homeowner to date has been required to comply with that provision.

The city acknowledged that its oversight of the program has become inconsistent over the years because of a shortage of staffing and training. It said it doesn't have the resources to be able to check homes annually to ensure compliance.

And even though the city inspects each property before deciding whether to grant the 10-year, automatically renewable exemptions, the Star-Advertiser found several cases approved within the past few years in which the public views of the dwellings were completely or largely obscured.

City files show the city did not raise the view issue with any of those owners. All had signed exemption applications stating that reasonable visual access would be provided. They also certified, as all applicants do, that the pre-exemption taxation level was a material factor threatening the continued existence of their historic homes -- a certification the city doesn't verify.

WHO IS ELIGIBLE

A home must meet several key requirements to qualify for city property-tax breaks:

» Home must be on the State Register of Historic Places.
» Public must have reasonable visual access to home.
» If home not visible from public area, homeowner must allow the public to come onto the property for "visual visitation" at least 12 days yearly.
» Homeowner must certify that paying pre-exemption property taxes is a material factor threatening the continued existence of the historical property.
» Dedicated use of property can't change during exemption period.

Sources: City records and data

"This is benign neglect," Tax Foundation of Hawaii President Lowell Kalapa said of the city's lax oversight. "They're neglecting to enforce the standards that they themselves have set."

The idea behind the visual access is to give the public the opportunity to see and appreciate the aesthetics of Honolulu's historically significant dwellings, which can be costly to maintain. In return, the homeowners pay only $300 in annual property taxes -- regardless of the value of the property -- if they get the full exemption. Most do.

That $300 flat rate -- it was only $100 until this year -- is among the most generous historic preservation incentives offered to homeowners in the country, according to a Star-Advertiser review of a 2007 state-by-state survey by the National Trust for Historic Preservation. The neighbor islands have their own programs, but few homeowners on those islands take advantage of the exemptions.

On Oahu, the Star-Advertiser found about 20 examples of homes that were getting the tax breaks even though the public views were largely obscured. Most of those homes were assessed for more than $1 million. Some were approved for exemptions as recently as late last year.

Sightlines to the homes were blocked or obscured by high walls, thick tree and plant growth, other residences or the topography of the neighborhood. Some dwellings were hidden from view on private roads or at the end of long driveways, with signs warning against trespassing.

At 3115 Noela St., where the main residence at the foot of Diamond Head was assessed for more than $3 million and a second one was valued at nearly $2 million, the ownersreceived exemptions in November even though the dwellings were hidden behind a solid wall of vegetation fronting the property. When the Star-Advertiser went there last month, the shrubbery was so thick one could barely see a fenced-in tennis court just on the other side. From a narrow driveway, a tiny corner of a roof line was visible -- and little else.

BY THE NUMBERS

240: Approximate number of Oahu homeowners who benefit from the program
$262.5M: Total value exempted
$900,000: Property taxes foregone by city
$300: How much a homeowner pays annually if receiving full exemption
10: Number of years in the exemption period, automatically renewable

Because of the exemption, the tax bill for the main residence falls to $300 this year, compared with more than $11,000 in 2009, according to city records. The tab for the second dwelling also drops to $300, compared with $6,700 last year.

Both homes are owned by the Zadoc Brown family, a prominent kamaaina clan noted for, among other things, its support of Hawaiian history projects.

After the family received a certified letter from the Star-Advertiser last week inquiring about the visual-access issue, a member e-mailed the newspaper to indicate that both homes were now visible from the street. The vegetation fronting the property had been substantially cut, opening views to both homes.

A family representative did not respond to a subsequent request for comment.

Poor oversight of the exemption program adds a new wrinkle to a recent controversy over the city's handling of property tax issues. The city came under fire last month because of changes made to classifications for about 240 property owners. The city changed the classifications from residential to commercial or industrial to address concerns about equity from nearby property owners. The changes resulted in tax bills increasing fourfold for affected residents.

The city is "balancing the budget by taking from the poor and giving to the rich -- quadrupling taxes on homeowners in industrial and commercial areas while providing generous tax exemptions to historic homes," said government watchdog activist and database developer Holly Huber.

Huber customized a database of city property tax records and provided it to the newspaper, enabling the Star-Advertiser to perform a computer-assisted analysis of the exempted historic homes. Using that as a guide, the newspaper went to the neighborhoods and discovered the sightline problem.

Prompted by the Star-Advertiser's findings, the city said it intends to review all historic-home exemptions for compliance. Those found violating the regulations risk losing their exemptions and could face payment of back taxes. The city also said it plans to train staff and provide checklists to ensure compliance.

The intent of the exemption program, created in the mid-1980s under Mayor Frank Fasi, is considered worthwhile by many preservationists and others. Preserving historically significant homes is seen as beneficial for the overall community, fostering greater appreciation of Hawaii's past. It also is seen as beneficial for specific neighborhoods, helping maintain stability and property values.

Hawaii is the only state in the country that offers property-tax exemptions for historic residences statewide, according to Kiersten Faulkner, executive director of the Historic Hawaii Foundation. "This really is something to be proud of and protect," she said.

Theoretically, homeowners who save money on their property taxes can use those savings toward the high cost of preserving the homes, which must be on the State Register of Historic Places before qualifying for the exemption program.

But if the dwellings aren't visible to the public, the community benefit is significantly undermined, according to historic preservation experts.

"That weakens the requirement for public access," said Bob McCullough, associate professor of historic preservation at the University of Vermont. "It's a very important issue."

The majority of Oahu's exempted homes are easily seen from public streets, serving up a tapestry of distinctive architectural styles over the past century.

And while the newspaper found visual-access problems with homes at a wide range of assessed values, the problem seems more pronounced at the high end.

Of the 10 exempted historic residences with the highest assessed values, for instance, half had views that were obstructed enough to raise compliance questions, according to the Star-Advertiser review.

Among those benefiting from the program is acting Mayor Kirk Caldwell, who saw his property tax tab drop from nearly $5,500 in 2005 to $100 in 2006, several years before he started working for the city.

Caldwell, whose home was featured last year in a walking tour of historic Manoa dwellings, noted that the city has not received any complaints about the lack of visual access or lack of enforcement for the program. The city says it typically monitors the program through the complaint process and that the responsibility for complying with the requirements is on the homeowner.

But because the rules haven't changed in 25 years, Caldwell has directed the city to work with the historic foundation and others to review the regulations, especially pertaining to visual access, to ensure that preservation is balanced with public benefits.

"Any person interested in Hawaii's history, especially its architectural history, should have visual access to these properties," Caldwell said in a statement.

Although the view to Caldwell's home is partly obscured by trees, he said he believes his home fully complies with the letter and spirit of the law.

University of Hawaii law professor Jon Van Dyke, who also is getting the exemption, likewise said his Round Top Drive home meets the spirit of the law -- even though it's at the end of a private roadway and not visible from Round Top. A neighbor demanded that a Star-Advertiser reporter and photographer leave the private roadway recently as they were searching for Van Dyke's residence.

Van Dyke said the 1920s-era home is visible from parts of Kahala, Waikiki and atop Diamond Head, where, miles away, he once spotted his residence after hiking to the top of the world-famous landmark. "You can definitely see it if you know where to look," he said.

Van Dyke also said he and his wife frequently host functions at their residence, giving those in attendance the opportunity to see it. "We've done our best to adhere to the spirit of the law," he said.

Lynn Lalakea also is trying her best to adhere to that spirit.

After getting the Star-Advertiser letter inquiring about visual access, her 83-year-old husband, Thomas, cut big chunks from the hedges blocking the view of their historic home from Dowsett Avenue. "We like the new look," she said. "People are commenting about how beautiful our home is."

Not in plain sight

Homeowners who get major property-tax breaks from the city for their historic residences are supposed to ensure that the public has reasonable visual access to the homes from public property. When the Star-Advertiser visited some higher-end properties last month, the obstructed views raised questions about whether such access was available. Here's what we found among exempted properties with assessed values of at least $1 million:


2251 Mohala Way, Manoa
» Assessed value: $1,036,400
» Owner: Edward K. Chung III, Patricia A. Chung
» Home size: 1,649 square feet
» Year built: 1922
» Homeowner comment: The home, which also has an Armstrong Street address, is better viewed from that street. The residence was featured a few years ago in a walking tour of Manoa homes.
Property taxes:
2001: $1,406
2002: $1,495
2003: $1,719
2004-2009: $100 annually


3300 Tantalus Drive, Tantalus
» Assessed value: $1,137,500
» Owner: Thirty-Three Hundred Tantalus LLC
» Home size: 6,758 square feet
» Year built: 1952
» Homeowner comment: The Liljestrand House is open to the public and financially difficult to sustain, an owner said. A lawyer representing the owner said the property is in full compliance with all applicable statutes, rules and regulations pertaining to property taxes. No information, however, was provided on when the house is open to the public.
Property taxes:
2001: $2,368
2002: $3,161
2003: $3,783
2004: $4,515
2005: $4,976
2006: $9,222
2007: $5,860
2008: $4,471
2009: $4,585
2010: $300


4191 Round Top Drive, Tantalus
» Assessed value: $1,278,300
» Owner: Jon Van Dyke, Sherry Broder
» Home size: 4,824 square feet
» Year built: 1919
» Homeowner comment: The residence is visible from parts of Kahala, Waikiki and atop Diamond Head. Many functions also are held there, allowing attendees to see the home.
Property taxes:
2001-2009: $100 annually
2010: $300


1947 Judd Hillside Road, Manoa
» Assessed value: $1,309,600
»
Owner:
Martin D. and Dorothy C. Eichelberger
» Home size: 1,676 square feet
» Year built: 1933
» Homeowner comment: Although the home is on a private road and has a sign indicating such, the owner says the public is allowed to go onto the road to view the residence. "Anyone can walk or drive on the street," said Martin Eichelberger.
Property taxes:
2001-2009: $100 annually
2010: $300


2954 Hibiscus PlAce #2, Diamond Head
» Assessed value: $1,249,100
» Owner: M. Robert Chaffee Jr., Paul Sklansky
» Home size: 1,561 square feet
» Year built: 1939
» Homeowner comment: Although the home is on a private road with a sign warning against trespassing, people interested in viewing the home are allowed to drive or walk on the road. "Such visitors have never been stopped in the past, nor will they be in the future," Chaffee wrote in an e-mail. The home also is visible from a distance from various vantage points, including lookouts on Diamond Head.
Property taxes:
2005: $3,744
2006: $4,934
2007: $6,318
2008: $100
2009: $100
2010: $300


33 Pilipu PlAce, Kailua
» Assessed value: $1,602,900
» Owner: Allan Cadgene
» Home size: 5,926 square feet
» Year built: 1928
» Homeowner comment: The owner could not be reached for comment. The home can't be seen from the beginning of this private road. The city says people can go onto private roads to view historic homes unless the owners already have designated days for viewing.
Property taxes:
2005-2009: $100 annually
2010: $300


2726 Hillside Ave., Manoa
» Assessed value: $1,849,100
» Owner: Kirk Caldwell, Donna Tanoue
» Home size: 2,928 square feet
» Year built: 1917
» Homeowner comment: The residence is visible from Hillside and Oahu avenues and from a public right-of-way along one side of the property. Visitors were welcomed to the home as part of the 2009 Historic Homes Walking Tour in Manoa.
Property taxes:
2001: $1,991
2002: $2,190
2003: $2,467
2004: $2,726
2005: $5,479
2006: $100
2007: $100
2008: $100
2009: $100
2010: $300


1942 Judd Hillside Road, Manoa
» Assessed value: $2,623,700
» Owner: Marsha A. Bohnett Trust
» Home size: 5,268 square feet
» Year built: 1926
» Homeowner comment: The owner could not be reached for comment. The residence is further up this private road. The city says people can go onto private roads to view historic homes unless the owners already have designated days for viewing.
Property taxes:
2001: $812
2002: $751
2003: $771
2004: $833
2005: $1,329
2006: $1,762
2007: $1,665
2008: $1,665
2009: $1,731
2010: $797


3115 Noela St. #2, Diamond Head
» Assessed value: $1,769,300
» Owner: Ka Lei Noela LTD Partnership
» Home size: 1,180 square feet
» Year built: 1964
» Homeowner comment: The home is now visible from Noela. The hedges were recently cut to open the view.
Property taxes:
2002: $3,338
2003: $3,162
2004: $3,086
2005: $3,545
2006: $6,020
2007: $7,850
2008: $7,566
2009: $6,711
2010: $300


2954 Hibiscus Place #1, Diamond Head
» Assessed value: $2,136,500
» Owner: Robert Simyar Trust
» Home size: 2,700 square feet
» Year built: 1939
» Homeowner comment: Although the home is on a private road with a sign warning against trespassing, people interested in viewing the home are allowed to drive or walk on the road. The home also is visible from a distance from various vantage points, including lookouts on Diamond Head.
Property taxes:
2005: $3,983
2006: $4,939
2007: $7,192
2008: $100
2009: $100
2010: $300


247 Dowsett Ave., Nuuanu
» Assessed value: $2,482,500
» Owner: Thomas K. and Carolyn C. Lalakea
» Home size: 4,821 square feet
» Year built: 1940
» Homeowner comment: Prompted by the newspaper's inquiry, the hedges fronting the property were cut to open the view from Dowsett Avenue.
Property taxes:
2001: $3,840
2002: $4,518
2003: $5,382
2004-2009: $100 annually
2010: $300


1612 Alewa Drive, Alewa Heights
» Assessed value: $2,768,300
» Owner: Frederick Brossy family
» Home size: 6,528 square feet
» Year built: 1939
» Homeowner comment: Although the home can't be seen from Alewa Drive, the owners for years have allowed the public to drive up the long, sloping driveway to view the home, according to Fred Brossy, whose children own the home. That was part of the agreement when the home was placed on the State Register of Historic Places, Brossy said. There's no sign at the foot of the driveway, however, indicating the public has such access.
Property taxes:
2001-2009: $100 annually


3115 Noela St. #1, Diamond Head
» Assessed value: $3,101,400
» Owner: Zadoc Brown family
» Home size: 4,278 square feet
>> Year built: 1948
» Homeowner comment: The home is now visible from the street. (The hedges fronting the property were cut after the newspaper inquired about obstructed views).
Property taxes:
2002: $6,428
2003: $6,668
2004: $7,097
2005: $8,214
2006: $11,240
2007: $14,396
2008: $14,382
2009: $11,130
2010: $300


5329 Kalanianaole Highway, Aina Haina
» Assessed value: $3,605,800
» Owner: Richard K. and Susan M. Mirikitani
» Home size: 2,457 square feet
» Year built: 1936
» Homeowner comment: Advertises free public tours, hosts school, community events, rents property for weddings, has website detailing historic significance.
Property taxes:
2001: $8,045
2002: $6,614
2003: $7,537
2004-2009: $100 annually
2010: $300


3065 Diamond Head Road, Diamond Head
» Assessed value: $5,737,500
» Owner: Kaluahole Land Trust
» Home size: 4,105 square feet
» Year built: 1937
» Homeowner comment: The home is in full compliance with exemption regulations. It is completely visible from the beach, and officials said that satisfied the visual requirement.
Property taxes:
2001: $10,847
2002: $11,666
2003-2009: $100 annually
2010: $300


2616 Pali Highway, Nuuanu
» Assessed value: $6,915,700
» Owner: Holy-Eye LLC
» Home size: 7,040 square feet
» Year built: 1904
» Homeowner comment: The public can come onto the property from 10 a.m. to 5 p.m. the first Sunday of each month to view the home, which is used for Buddhist services and meditation classes.
Property taxes:
2001: $27,780
2002: $28,466
2003: $32,771
2004: $35,119
2005: $35,339
2006: $35,550
2007: $23,381
2008: $100
2009: $100
2010: $300

CORRECTION: The 2010 property-tax tab for Kirk Caldwell's historic Manoa home is $300. A chart in a previous version of this story  said it was $100.






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