Homeowners whose property taxes increased significantly when the city reclassified their properties from residential to commercial/industrial would pay only the residential rate under a compromise proposal advancing in the City Council.
Residents who already have paid the higher tax bill or a portion of it under an installment plan would get back any overpayment through a refund or tax credit.
"I think the reason why we did what we did was to try to expedite a tax compromise — in whatever form that will come in," said Council Budget Committee C hairman Nestor Garcia.
The committee yesterday advanced Resolution 10-260, one of several measures hastily crafted last month to help the 247 affected residents in parts of Kalihi, Waipahu, Kapahulu and Moiliili. It goes before the full Council for final approval on Wednesday.
The problem was discovered in July. Residents had said they received notices last year of the reclassification, but there was no indication their taxes would quadruple. Reclassification calculated their taxes at the commercial/industrial rate of $12.40 per $1,000 valuation instead of at the residential rate of $3.42 per $1,000 valuation. One resident said his bill went from $2,335 to $10,552.
Council members previously said the city administration did not notify them that the reclassification was occurring and that, had they known, they could have acted to help the affected property owners. Administration officials said real property assessors were just following ordinances and classifying properties according to "highest and best use" when they uncovered the properties that legally should have been classified as commercial because they sit on business-zoned land .
Residents could have applied to have their property dedicated for residential use to claim the lower rate, but that would not have been effective until next tax year, leaving them with little recourse but to pay the higher bill this year.
Under the resolution, the residents would pay the residential rate of either $3.42 for owner-occupants or $3.58 for non-occupant homeowners.
The compromise tax rate, as well as the credit or refund, would be available only to those who already have applied to dedicate their property for residential use. Officials said 226 of the affected property owners had submitted the applications by the Sept. 1 deadline.
Residents also must certify that the property was in residential use during the last tax year.
The committee deferred a separate proposal, Bill 51-10, to specify that real property that is used as a residence is classified according to its actual use, and repealing provisions allowing for dedication of other classifications of property for residential use.
Garcia said he wants more time to study the measure and see whether the system should be re-examined. He floated the idea of a "blue ribbon" committee to study the city’s real property tax structure and propose alternatives.
"It’s not just taking a look at one part of the system, but everything — even the little things that maybe we might be able to address administratively, instead of having to have a bill," Garcia said.