Bill would tweak old-house tax cut

A proposal to change the property tax break given to owners of historic homes is advancing in the City Council, although lawmakers said they hope to work with homeowners and state and county agencies to potentially head off any steep tax increases.

"The intent is not to just drastically increase the tax or do away with the exemption," said Councilman Romy Cachola, who introduced the proposal. "The intent is to make things fair."

Bill 55-10, advanced Wednesday by the Budget Committee, proposes to change the property tax on a historic home to a percentage of the property’s assessed value or to some to-be-determined amount likely to be higher than the current $300 minimum real property tax.

Council Chairman Nestor Garcia said he held Wednesday’s public hearing so all parties could work together on possible solutions.

Honolulu has about 240 properties that qualify for the city’s minimum real property tax under the historic homes program, which aims to preserve properties by giving owners financial incentive to maintain the historic quality of their houses.

Council members acknowledged the proposals were introduced following a series of Star-Advertiser reports revealing significant gaps in oversight of the program. The city has said monitoring has loosened over the years because of a lack of resources.

Acting Budget Director Michael Hansen said Mayor Peter Carlisle has asked the department to perform a cost-benefit analysis of the program and determine whether there are areas where enforcement and transparency can be increased.

The Star-Advertiser investigation showed many owners falling short of a requirement that they provide the public with reasonable visual access to the dwellings. It also found the city did not verify the homeowners’ certifications that the pre-exemption level of taxation was a "material factor" threatening the existence of the homes.

Public records show that many of the exempted homes are owned by corporate executives, lawyers, physicians, architects and others in well-paying professions, raising questions about whether the pre-exemption taxes imposed such a financial burden.

Many owners of the higher-end exempted homes also own other properties on Oahu, according to city records.

Garcia said he hoped to talk to the state Historic Preservation Division as well as with the members of the Hawaii State Association of Counties to see whether there is a way to establish specific rules for maintenance and inspection, including a more hands-on inspection process that could include walking through the house or examining maintenance receipts and records.

On Wednesday the Budget Committee heard from nine owners of historic houses, all of whom testified that the tax credit is badly needed to help them keep up with the maintenance of their properties.

"My full-time job is taking care of my home," said Tiare Richert-Finney, who owns a 92-year-old property in Nuuanu. "I use that tax credit to help maintain my home, and I spend way more money than that tax credit is (worth)."

Kaimuki resident Willis Yap, whose family owns three Hawaii-style bungalows, said that in the two-plus years his homes have been dedicated as historic, he has spent thousands on termite treatments, new floors, painting and windows.

"I like the idea of the tax break because I do get to spend the money on maintenance," Yap said.

The proposal now goes to the full Council at its Nov. 22 meeting for the second of three required readings.