comscore Judge reverses decision, lets city’s property tax class for non-residents stand | Honolulu Star-Advertiser
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Judge reverses decision, lets city’s property tax class for non-residents stand

  • STAR-ADVERTISER / FEB. 2006

    Homes at Black Point.

  • STAR-ADVERTISER / JAN. 2010

    A home designed by architects Long & Associates, believed to be the first LEED certified home on Kahala Ave. A Honolulu ordinance that taxes homeowners at higher rates for million dollar homes that they don’t reside in full time will remain in effect after a state judge on Friday reversed his prior October decision that determined that the tax classification was unconstitutional.

A Honolulu ordinance that taxes homeowners at higher rates for million dollar homes that they don’t reside in full time will remain in effect after a state judge on Friday reversed his prior October decision that determined that the tax classification was unconstitutional.

After hearing new arguments from City Corporation Counsel Donna Leong, Judge Gary W.B. Chang ruled that the city’s Residential A tax classification did not discriminate against non-residents and fell within the powers of the city.

The new tax class was passed by the Honolulu City Council in 2013.

City Corporation Counsel Donna Leong said after the hearing that she was “very happy” with the judge’s decision.

“It’s a very significant decision for the entire city,” she said. “The tax revenues generated by this are about $39 million a year, so it is a very important piece of tax legislation. I can’t tell you how important it is for the city’s finances.”

About 20 property owners with parcels designated Residential A sued the city earlier this year, arguing that the ordinance was unfair and unconstitutional. Property owners who fall under the Residential A classification are taxed at $6 per $1,000 of assessed value, instead of the $3.50 per $1,000 that standard residential class owners pay.

Properties that are valued at $1 million or more and don’t have a home exemption are taxed at the higher rate. A home exemption is granted to residential owners who live in their homes.

Ray Kamikawa, an attorney for the property owners and a former state tax director, said that his clients would consider appealing the ruling.

In issuing his decision, Chang said that his reversal was based on a more in-depth review of the issues.

“Simply, the court, upon further study, came to a different conclusion,” he said.

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      • Except this tax is not fair. Just another way our leech elected bureaucrats take more money to cover their utter financial incompetence.

        Have you noticed over the past decades how many times our bureaucrats have whined about needing more money? So they either raid a money fund or enact some crazy tax.

        Then in a short time they are back whining for more money. The cycle never ends when it comes to taking from taxpayers.

        Fact of the matter is no matter how much money the city/state get in taxes, spending always rises to where they think they need more. Hold on to your wallets, wait until rail’s massive tax bite adds to the pension, infrastructure and educational money pits.

        • We should charge for what we residents provide just in our state income taxes. Absolutely tax non residents more to be here and they do rent their places to non tax paying folks that use Our Paid for services.

        • It’s actually very fair and it’s a good land-use policy. The higher tax-rate only applies to those who own vacation homes or investment properties in residential zoning. Oahu is facing a housing shortage crisis for local residents. We should disincentivized investors from buying up homes and turning them into illegal vacation rentals.

    • So again hard work and proper investing gets the BOOT while public assistance & food stamps are the way to go in the democratically
      destroyed Hawaii. Why work hard and save money or invest if they are going to double your taxes. Don’t wish this on anyone as of course those that own these properties will be RAISING THE RENTS and guess how many people RENT on this ROCK. I see a lot of increased rental notices going out this year. I know I will be raising the rents in order to pay the taxes so that’s 5 families with increased rental amounts of 20%. How about you are you going to absorb the double taxation, I don’t think many will absorb this giant increase of almost double the amount

      • Agreed, should tax them at a much higher rate to disincentivize investment property purchase by rich foreign and mainland inveestors. Help Oahu residents own property.

        • And if they can afford rent in an over million dollar house–I’m pretty sure they can afford the increase. I would like to see the $ go to affordable housing.

        • On Oahu, the home can be a single wall construction unit of 1200 sq foot or so and the tax appraisal can be well over 1 million depending on location- Look at Kailua near Lanikai and find a house for less than a million . Homes that were in the 4-500 thousand mark 5 years ago are now well over 1 million. + many properties have more than one house so if they double the taxes you can bet they will raise the rental amounts even on modest homes that were bought as rental properties. this is going to increase rents across the board for all of Oahu’s renters. What if you own a 5 unit apartment building
          where rents used to be 12-1500 per month as each tenant will have to pay 20% more in Rents. Not a good scenario for the tenants???

        • We need to push the City Council to raise the Residential A rate to the “highest” level to disincentivize investors from using these homes as vacation homes and “illegal” vacation rentals. I propose $18.00 per $1,000 of assessed value.

      • We pay a ridiculously higher tax, it’s a demotivating tax that screams get your money out of Hawaii. Capital gains and the regressive progressive income tax are already paid. Yes this tax is unconstitutional and so is our so called progressive income.

        Wake up debt controlled democratic loving people. Love Liberty.

        • Residential A is still half the typical property tax rate in most mainland cities. It would be better if it were more progressive, but something needs to be done to discourage the building of unaffordable investment properties at the expense of affordable housing for the working class.

  • “In issuing his decision, Chang said that his reversal was based on a more in-depth review of the issues.” Shouldn’t a thorough, in-depth, exhaustive review be made of every case the FIRST TIME? Judge Chang’s statement implies that he didn’t do a thorough job when he issued his first ruling. Is this his practice with all cases?

  • The ONLY good thing I can see here is for local residents, perhaps this will slow the rise of local’s property tax increases.
    NO, what am I thinking, This is Hawaii, They will continue to Tax the local population off the island. Good Job!!! NOT!

  • It’s constitutional to tax houses differently for residents rather than non-residents. We already have that. We also have classes already – over a certain age, blind. This is the same.

  • Absolute pure fiction this ruling – this will get overturned upon appeal.
    If the County and State were better money managers and allowed far less corruption and cronyism – there would be less need to tax everyone [residents and non-residents alike] into oblivion.
    Stay tuned – this will get both interesting and expensive … …. ….

    • You want to bet? This ruling is a done deal. The plaintiffs will need to pony up at least a million dollars to fight it. The City & County is prepared to go all the way to the Supreme Court if necessary.

  • This stinks to high heaven. What judge reverses their decision. Any judge with integrity and conviction sticks to their ruling and let’s higher Kurt judge the merits of an appeal. Bad enough the politicians have no integrity but now a judge? Very sad.

  • The issue should not be “non residents” but implement a tiered system so that the owner of a $1,000,001 property is taxed differently than an owner of a $20,000,000 property.

  • Bad law – this will only make the cost of rentals for the working people of Hawaii even higher. For those that think higher taxes are good, a “fair share”, or in any way beneficial – please educate yourself and cease the ignorance. There are a few great economics courses over at the UH through the adult education program. Please take one or two and rid yourself of your ignorance.

    • 100% agree. People don’t seem to comprehend the damage being done. They don’t even comprehend that EVERY LOCAL RESIDENT is now subject to this law under certain circumstances.

      Just as one example, lets take a local resident that decides to move out of Honolulu County and decides to lease his/her property here in Honolulu, that resident’s will now be subject to double taxation as soon as he/she leaves the county! This unfair law punishes everyone, even the locals that might want to hold on to their ownership for income supplementation or temporary relocation!

  • How does the Residential A rate work? A property assessed at $999,999 pays $3,500 in property tax. Does a $1,000,001 property pay $6,000 or is it only taxed at the higher rate only on the amount over $1,000,000?

  • Article is misleading as usual. Has nothing to do with out of state or in state owners.
    ALL HOMES OVER A MILLION DOLLARS WITHOUT HOMEOWNER EXEMPTION WILL FALL IN THIS CATEGORY.
    Only thing you can sue for is to be included in exemption, which if you do not reside there as your primary residence you will not qualify, just like Mortgage exemptions for only your primary residence nation wide. Ruling will not be overturned because it does not exclude anyone. Hawaii investors who rent out homes and reside in Hawaii will still pay this tax if home is valued over than 1 million. Good Law

    • Exactly right. Someone (a local) actually wrote the paper about a month ago complaining about what a hardship it will create. Their 90+ year old mom is in a assisted living facility paying $5000 a month and they count on the rental income from her house
      to offset the fees. Letter stated that no one else in the family needs grandmas house so they rent it out.
      Solution: Sell grandmas house for $1,000,000 and grandmas living expenses can be paid for the next 16 years.

      • Not acceptable if your relative requires medical care. You have no Aloha – please take this idea back to Florida and do not suggest this here as you do not know everyone’s situation. More often than not many kapuna require high cost medical care.

  • Agree. Its a good law. Kills me how cheap property taxes are here to begin with. In Florida, $1,000,000 home taxed about $20,000… with a homestead deduction available for a savings of about $2000. Would you all like that better? And you all get
    to collect much higher rents so the investors are really making a killing here.

    • You’re forgetting that HI also has a state income tax, FL does NOT. Someone with a $1-million dollar home pays way more in state income taxes than in property taxes by a landslide. Don’t kid yourself thinking that you’re not paying much!

    • Silly rabbit … in Florida you get a mansion on 10 acres for 1 million. In Hawaii you get a 60 yr old 1500 sq. ft home on a 5000 st ft lot in Kaimuki.

  • This has nothing to do with non-residents. It has to do with exemptions. Residents who live in their property can claim an exemption for that property only.

    So if you are a resident and own 2 properties or if you own 1 property and rent it out and it is assessed at over a million dollars you pay the higher rate. Because the assessment is based on the land and structure value, the house could be a tear down but the value of the land in Honolulu could easily push it over a million.

    What’s worse is that you have to file for the exemption before September 30 the year before the tax year you are claiming the exemption. If you wait until the property assessments come out in November you will be paying the higher tax for an entire year before you are eligible for the exemption.

    Also the million dollar amount is totally arbitrary. Why should someone who’s property is valued at $1,000,010 pay almost double the property tax of someone who’s property is valued at $999,990?

  • There two problems in the residential A property tax. 1) properties are appraise higher in area that have a lot of resales. These are usually in the older communities where there is a lot of resales. In areas where there are no resales, like apartment zones where rentals are really big,and there is little or no resales and the property value is appraised much lower. These rental properties with six to eight units should be appraise much higher than the residential properties with only one house.
    2) Lots of landlords with one or two units on their residential A property will now have to increase the rents of their tenants because the property taxes are so high. These properties use less of the city sewer and other services, yet these properties are being penalized by the city council and mayor.
    My property increased over 10 % last year and is now just over 1 million. Not fair.

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