Property valuations by city spur disbelief, derision

When Lambert Wai received a notice from the city regarding the value of his Gail Street home, he was stunned.

The city pegged the assessed value — used to calculate his 2014 property taxes — at $2.7 million, more than double last year’s total. The new assessment meant his tax bill would increase 150 percent, or by more than $5,000, to about $9,100.

"I went ballistic," said Wai, 93, who has lived in his Diamond Head-area home for 35 years. "That’s nuts."

The retired insurance executive isn’t the only Oahu property owner to think the city numbers are nuts.

More than 2,100 have appealed their valuations, a 41 percent increase from last year, according to city figures.

And the appeals don’t even reflect any of the backlash triggered recently from the higher tax rates for a new "Residential A" classification for certain Oahu homes. Residences with assessed values of $1 million or more are now taxed at a rate nearly 75 percent higher than others if those residences are not occupied by owners or the owners are not getting an owner-occupant tax break. The higher rates weren’t set by the city until June, well past the mid-January deadline for filing appeals.

The assessed-value increases, which vary from neighborhood to neighborhood, mean some homeowners, like Wai, now face paying thousands of dollars more in property taxes this year. In some cases the tab has more than doubled.

Homeowners started getting their bills this month.

The surge in formal challenges to assessments has added to a backlog in appeals.

The city told one Gail Street homeowner that appeals from as far back as 2012 are still pending.

Other than to provide the appeal data to the Hono­lulu Star-Advertiser, the city did not respond to repeated requests since Thursday for comment for this story.

The increase in appeals comes at a time when Oahu housing prices have reached record territory.

After nearing all-time highs earlier this year, the median sale price of a single-family house hit $700,000 in June, breaking a 7-year-old record, according to the Hono­lulu Board of Realtors. The June median was 3 percent higher than the year-earlier one.

Appraisers for several local companies say the increase in appeals has been fueled in part by dramatically higher assessments in select Oahu neighborhoods, such as Kahala and Diamond Head, where out-of-state buyers are paying top dollar for high-end properties.

"There’s a lot of speculative fever from foreign buyers," said George Hao, owner of George Hao & Associates.

Hao said homes that sold for $2 million several years ago are commanding prices of about $5 million today. He added that the city’s assessments tend to be about a year behind the market.

On Gail Street several homeowners said they suspect the city used the highest sales prices for Diamond Head homes — ones that aren’t truly comparable to theirs — to calculate assessments, resulting in artificially inflated values for their neighborhood.

The inflated assessments will generate more tax revenue for the city, they said.

"This is pure manipulation," said Gail Street homeowner Michelle Matson, whose residence was assessed by the city at nearly $3.2 million, a 92 percent increase from the prior year. Her 2014 tax bill based on the higher amount is about $10,700, compared with $5,400 in 2013, according to the city’s online records.

Frank Jordan, Matson’s neighbor, said the new assessment for his family’s residence — owned by his wife and their daughter — was nearly $3.6 million, a 65 percent jump from last year. When he received the city’s notice with the new number, "I thought, ‘They’re crazy,’" Jordan said.

Based on the higher assessment, the Jordan’s property tax bill this year tops $12,000, compared with $5,800 last year.

Like Wai, the Jordans, Matson and a handful of other Gail Street homeowners filed appeals with the city.

To settle those cases, the city in May offered assessments that were roughly $500,000 to $1 million less than the original ones, the homeowners said.

Wai said he accepted the city’s offer, but the Jordans and Matson did not.

"It’s such an unfair system," Wai said, "but it’s not worth fighting because it will be a protracted fight."

Matson said the revised assessment that the city offered her — about $2.8 million — was still significantly more than the $2.17 million value that an appraiser came up with after doing a formal appraisal, which included inspecting the home and using valid comparable sales.

Like Jordan and Wai, Matson said she believes the city is intentionally skewing valuations to generate more tax revenue.

"What other reason could there be?" she asked.