Council to take up bills changing property taxes

The Honolulu City Council starts discussion Wednesday on a variety of bills aimed at making the property tax system more equitable.

The bills are based on recommendations made by the city’s 2014 Real Property Tax Advisory Commission.

Here are the key proposals.

>> Bill 34 would create a Commercial A tax category that would consist of commercial properties assessed at $1.5 million or more. It’s likely that those in the Commercial A category would be taxed at a higher rate than those in the standard commercial tax class.

>> Bill 35 would create a new transient accommodations tax category that would include bed-and-breakfast establishments, transient vacation units and various other operations on lands zoned for residential that rent units for fewer than 180 days.

>> Bill 33 would redefine the Residential A category to include all single-family and condominium homes in residential zones that do not have a home exemption, regardless of their value. Currently, only those without home exemptions and valued at $1 million or more are placed in Residential A, which is taxed at a higher rate than those in the standard residential class. Bill 32, however, allows Residential A properties valued at less than $1 million to be taxed at the same rate as those in the standard residential class.

>> Bill 27 would increase the minimum tax, the amount that many properties with various exemptions pay, to $1,000 from $300.

Other measures would have a negative effect on special groups of property owners. Under Bill 28, owners of historic residential properties would pay tax on half the value of the property, rather than a flat $300 annually.

Bills 29 and 30 would eliminate exemptions for Oahu’s for-profit child care centers and credit unions, respectively.

Bill 31 would do away with a provision that allows properties dedicated for agricultural use for one year to be taxed at a lower rate, but keeps lower rates for those who promise to use their property for farming for longer periods.

Ray Kamikawa, chairman of the seven-member tax commission, said the bills appear to track the recommendations his group issued.

“As far as I’m concerned, we’ll leave it up to the Council to hold hearings and decide on each measure — whether they should be adopted or amended,” said Kami­kawa, a former state tax director.

Gary Kurokawa, the city’s deputy director of budget and finance, said his agency is in the midst of analyzing the effects of each of the measures.

“There are some that would assist (the Real Property Tax Division) but a few that need further review,” Kuro­kawa said.

Expected to generate heated debate are the measures dealing with the controversial Residential A class and a possible transient accommodations category.

Those in the Residential A category found themselves paying a rate of $6 per $1,000 of valuation this year, compared with the $3.50-per-$1,000 rate paid by those in the standard residential class. That’s about 71 percent more.

Several people have also already submitted written testimony against Bill 33, describing it as unfair or discriminatory.

Meanwhile, several people have submitted written testimony in opposition to Bill 35. Among them are members of the Hawaii Vacation Rental Owners Association, who argue it’s wrong to carve out a tax class just for their properties when the city has not allowed new vacation rental permits for a number of years.

Any of the 13 bills that pass would take effect July 1, 2016.

For links to the texts of Bills 27 to 39, go to bit.ly/2015CCHNLBillsLink.