Oahu property owners unhappy over significantly higher tax bills based on a tax rate 71 percent above last year are demanding relief from the Honolulu City Council.

The Council Budget Committee on Wednesday deferred two measures that would have allowed owners of the roughly 7,400 properties in the newly created Residential A tax class a one-time break to pay at last year’s rate if they receive a homeowner’s exemption this year.

Budget Chairwoman Ann Kobayashi, however, promised that she and her committee will look into ways to ease the burden for those affected, especially those who have lived in the same house for years.

Council members received oral and written testimony from more than a dozen affected property owners. Many property owners this week are recognizing the ramifications of being placed in the Residential A tax class because tax bills were sent out by the city last weekend.

On Sept. 11, the Council voted to create the Residential A tax class, made up of those residential properties with assessed values of $1 million or more.

The intent was to shelter owners of lower-priced homes and those living in their homes, commonly referred to as owner-occupants,from higher tax rates. To do so, the Council carved out "investment" properties valued at $1 million or more and placed them into the Residential A class with the intent of raising the rates on them.

Mayor Kirk Caldwell’s administration backed the move.

Owner-occupants in $1-million-plus homes are excused from paying the Residential A class tax if they apply for and receive the homeowner’s exemption. But many weren’t aware of that requirement.

They include lifelong Manoa resident Joyce Eshima.

In an email to Kobayashi and the Honolulu Star-Advertiser, Eshima said she was stunned to learn her property tax is jumping to $9,100 this year from $4,500 last year because her home was placed in the Residential A class. Eshima, who became owner of the home when her mother died, said she thought exemptions were available only to elderly property owners and didn’t know she was eligible for one simply for living in the home.

She said many of her friends and neighbors also didn’t know about the standard homeowner’s exemption.

"If I had known the ramifications of being in that class, I would have filed an appeal or filed the appropriate exemptions," Eshima wrote.

In June, the Council adopted tax rates for the current tax year that kept the Residential class rate at $3.50 per $1,000 of assessed value while upping the Residential A class rate to $6 per $1,000, an increase of 71 percent.

But like Eshima, owner-occupants of $1-million-plus homes testifying Wednesday said they did not previously apply for or receive homeowner’s exemptions and did not comprehend the ramifications of not doing so for this year until recently.

Gregory Valen told the Budget Committee that he moved into his Kahala home during the spring, making him ineligible to file for a homeowner’s exemption on the home this year based on current city law. As a result, he will be paying about $18,000 based on the higher tax rate for those in the Residential A tax class.

If he were still in the common Residential tax class, he would be paying $7,000, he said.

Valen said the city should allow him to get an exemption on his Kahala property for the number of months this year that he is living there. Instead, he said, he essentially must wait a year to obtain a new exemption.

Recently retired and 65, the $18,000 property tax is "58 percent of my Social Security check," he said.

The resolutions under consideration Wednesday both pointed out that owner-occupants seeking a new homeowner’s exemption have only until Sept. 30 annually to do so — only 19 days after the Council created the new class and months before those in Residential A were informed they were in the class when they were sent their annual tax assessment cards in December.

Councilman Stanley Chang, who along with Ikaika Anderson were the two Council members who opposed the creation of the Residential A class last year, introduced one of the resolutions. Chang said the issue was a matter of fairness since many homeowners who, for whatever reason, were eligible for exemptions but did not get them, were now being penalized for not doing so.

"Basically we have a lot of people who’ve been overpaying the city for years, potentially," Chang said. "And you’re saying that we’re going to penalize these people for having made a charitable contribution to the city for, essentially, how many years."

City Budget Director Nelson Koyanagi testified against the resolutions on several grounds.

The new revenues brought in by the Residential A class were projected to be $33 million.

It’s unclear how many in the class would qualify for a homeowner’s exemption, Koyanagi said.

But each homeowner in Residential A would get a $2,500 break on the amount of taxes he or she would have to pay on the first $1 million of their assessed value. So if all 7,400 in the category got the exemption, it would cost the city $18.5 million, he said.

The resolutions may be, by themselves, technically the wrong way to change an ordinance, such as issuing new tax bills, extending deadlines and waiving penalties, he said.

Additionally, there’s the issue of equity, Koyanagi said.

"We’re isolating certain property owners," he said, noting that the concept of property tax exemptions has existed for many years.

"Residential A is a new classification … but the ability to get a homeowner’s exemption was always there," he said.

Deputy Budget Director Gary Kurokawa said homeowners may appeal the assessed values issued by the city, but not their rates.

Even when a home is destroyed by fire or some other calamity, current law requires a property owner to pay at the same rate for the year, Kurokawa said.

Allowing for midyear exemptions, as proposed by Valen, would require much additional staff time to process and wreak havoc with city revenues and the way the city budgets its money, he said.

Kobayashi said she doesn’t envision the Council passing legislation giving all Residential A property owners a one-year break as is called for by the resolutions, citing the concerns raised by Koyanagi and Kurokawa.

But she and colleagues will look for ways to address the impacts on affected homeowners, especially those like Eshima who may have been eligible to receive a homeowner’s exemption for years but did not claim it.

Kurokawa acknowledged that many owner-occupants don’t know they are entitled to a homeowner’s exemption, despite educational efforts by the Real Property Tax Assessment Division.

There are about 250,000 residential properties on Oahu, Kurokawa said. About 150,000 to 155,000 receive homeowner’s exemptions, he said.