Though revisions tighten compliance, generous tax breaks are still allowed
POSTED: 1:30 a.m. HST, Jun 10, 2011
The city has revamped the program for giving major tax breaks to owners of historic homes, but some taxpayers say the revisions still are too generous and fundamentally unfair.
Acting Mayor Douglas Chin signed a bill Wednesday that is designed to clarify ambiguities in the tax exemption program and enable the city to better monitor compliance, partly through hiring two new auditors.
Under the new program, most homeowners getting the exemption still would pay $300 a year in property taxes — regardless of the value of their home. The break saves many owners thousands of dollars annually.
The law was enacted in response to Star-Advertiser stories last year that revealed major enforcement gaps in the program. Among other things, the newspaper found exempted homes — many valued at roughly $1 million or more — that were largely hidden from public view, despite a requirement that the public have reasonable visual access.
The new law requires owners of hidden homes to allow the public onto their property 12 days each year to view the residences from the outside.
Chin said cleaning up abuses in all tax exemption programs is a priority for the city.
Bill 3 took effect Wednesday. When it was heard by the City Council, testimony was largely supportive.
Proponents said the exemptions were critical to helping owners offset the high cost of maintaining their residences while encouraging the preservation of important parts of Hawaii's past.
"These physical remains of the past act as landmarks in our history and anchors for our future," Amy Blagriff of the local chapter of the American Institute of Architects said in written testimony to the council. "Many of these anchors have been lost in the course of Hawaii's rapid changes over the past three decades, and we need to ensure that strong, active measures remain in place to preserve our cultural heritage."
But critics have questioned why the city is giving one of the most generous historic-home tax breaks in the country during tough budget times. They also said the break shouldn't be a flat amount, but linked to how much is spent maintaining the residences.
Holly Huber, a community activist who pushed for reforming the system, said key requirements of the old law have been gutted, including one in which homeowners had to stipulate that they essentially couldn't afford the pre-exemption property taxes.
Permitting owners of multimillion-dollar mansions to pay the same $300 minimum tax as owners of small cottages is fundamentally unfair, Huber said.
"This isn't reform," she said. "This is appeasing special interests."
Natalie Iwasa, an accountant, said owners who use their historic homes for commercial purposes shouldn't be allowed to get the exemption. Yet the new law permits such enterprises.
About 250 homeowners get the exemption, costing the city roughly $900,000 in forgone tax revenue.
When the city did drive-by checks on those properties in response to the Star-Advertiser stories, it found roughly half not in compliance with the program's regulations. The city blamed lax enforcement over the years on a lack of resources and training.