City Council members are irate that, unbeknownst to them, the city administratively reclassified about 250 residential properties from Waipahu to Kapahulu, jacking up some homeowners’ property taxes by more than 300 percent.
"I don’t recall ever sitting down or having one conversation, one memo, one iota that this reclassification was occurring," said Council Budget Chairman Nestor Garcia on Friday.
He said he would have remembered "something that was going to hit this many people this deep in the pocketbook."
Council Chairman Todd Apo said the Council members should have been advised beforehand.
"Had we been informed, we could have, either through a new law or via the budget bill, created some form of relief for this situation," he said.
By today, owners of formerly classified residential properties must pay the first installment of quadrupled property taxes or face late penalties.
Last year the city reclassified some residential properties in areas zoned commercial or residential to commercial or industrial use. Some owners received letters from the city in December informing them of the reclassification but had no clue it would result in a huge jump in taxes.
Acting Mayor Kirk Caldwell defended former Mayor Mufi Hannemann’s administration on the issue, saying, "The change in classification of these apartment properties was not the result of any policy decision on the part of either the Hannemann or Caldwell administrations."
Rather, it was because city real property assessors were just doing their job of classifying properties according to "highest and best use" when they uncovered a "gap group" of apartment properties that legally should have been classified as commercial because they sit in business zoned lands, he said. Single-family homeowners complained they also were affected.
Caldwell said the issue was discussed publicly with the Council early this year, and a new law was passed in July allowing property owners to dedicate their properties as residential for five years and to rededicate them every five years thereafter.
Apo said the city administration is "twisting this a bit."
Apo said the bill came up as a way to offer relief to residents who already were paying the higher commercial tax rate while living on property classified to be taxed at the lower residential rate, not the other way around.
"There was never any presentation or discussion about changing these people’s taxes from residential to commercial or industrial," he said. "Not about this kind of flip."
Apo said there might not be anything the Council can do at this point, since taking an action midbudget might create an unbalanced budget.
"Clearly we could have dealt with this situation had we known about it," he said.
Garcia also believes extra effort should have been made to notify people about what was coming, saying, "When people get a notice about reclassification in the mail, that doesn’t mean much to the average person. The bottom line is tax liability. That’s when it really hits them between the eyes."
As budget chairman, he said, he will address the question of how the process of reclassification came about with the city administration.
One resident of Stanley Street saw his tax bill jump from $2,335 last year to $10,552, a 350 percent increase.
Taxpayers can call the city Treasury Division at 768-3980 to arrange for a structured tax payment plan.
The deadline for filing the dedication form is Sept. 1, but that will only change the tax rate for next year and not the current year.