A judge has ruled against a motion by Hawaii’s four counties to block a question on November ballots asking voters whether they want to amend the Hawaii Constitution to allow the state to tax investment property.

In ruling for the state, 1st Circuit Judge Jeff Crabtree said Friday that the counties didn’t meet the standards required for granting a preliminary injunction, including a requirement that they are likely to win in the case. Rather, he said the counties are unlikely to prevail.

Hawaii’s four counties are suing, arguing that the ballot question is unlawfully vague and that the Legislature didn’t follow proper procedures in passing the measure.

The bill, which was overwhelmingly approved by state lawmakers, instructed the ballot question to be phrased as follows: “Shall the legislature be authorized to establish, as provided by law, a surcharge on investment real property to be used to support public education?”

The counties are arguing that the word “surcharge” is misleading because it doesn’t make clear that it is really a tax, while the term “investment real property” is ambiguous and undefined.

But Crabtree said during a Friday hearing at Kauikeaouli Hale in downtown Honolulu that the question didn’t appear to rise to the level of being unlawful.

“I do not find the proposed language is deceptive,” he said. “Is the language as thorough and definitive as one would like? No. … This language is not as clear as it could be. That said, (the statute) does not require that the proposed constitutional amendment contain a detailed description of all the issues and possible effects connected to the proposed amendment.”

Crabtree expressed skepticism toward several of the arguments that Honolulu Corporation Counsel Donna Leong made during oral arguments. At one point Leong suggested that the parameters of the proposed constitutional amendment were so broad as to allow revenue generated from a state property tax to go toward projects only tangentially related to education.

“The question arises as to whether a road that leads to a public school — does that support public education?” she said. “Or does a drainage canal that runs through a parcel of land with multiple uses that includes a public school support public education?”

Crabtree interjected, “So this is really a Department of Transportation stealth bill?” he asked, generating laughter in the courtroom.

As the hearing neared its end, state Attorney General Russell Suzuki surprised city officials, and seemed to confuse matters, when he argued that the surcharge referenced in the ballot measure wasn’t a “property tax.”

There “is no confusion that the surcharge is not a property tax. It is a state tax that is calculated upon the property tax,” he said in support of the language of the ballot question.

Leong called Suzuki’s reasoning on the terminology “baffling” in comments made after the hearing and said the counties will consider their options in the case.

“We are disappointed in the court ruling today, but we are determined to be sure that the voters in the November election are fully informed as to the language and the consequences of the constitutional amendment that is being proposed by the state Legislature,” said Leong.

The battle ahead

With Crabtree’s ruling, the political battle over the ballot question is set to intensify. In addition to opposition from the counties, business interests are joining together to urge residents to vote “no” on the proposed constitutional amendment. A group calling itself the Affordable Hawaii Coalition has formed a political action committee and drawn up flyers arguing that a new tax will raise the cost of living in Hawaii.

“What we end up with is really unknown and there are no guardrails to this amendment to limit what the Legislature is ultimately able to do once this amendment goes through,” said Colbert Matsumoto, chairman and president of Island Holdings, and a representative of the coalition who attended the hearing. “That is the concern that our group has.”

Currently, the state Constitution allows only the counties to levy real property taxes. If a simple majority of voters approves the changes to the Constitution in November, it will then fall back to the Legislature to determine whether it wants to raise property taxes in support of public education and to work out the specifics of the tax — or as the state prefers to call it, the surcharge.

While House Speaker Scott Saiki has said there is no legislative intent as to what property might be taxed if the ballot measure passes, the Hawaii State Teachers Association, a major supporter of the measure, has advocated for taxing second homes valued at more than $1 million.

“Today was a victory for Hawaii’s keiki,” said HSTA President Corey Rosenlee in a statement released after the hearing. “Hawaii has become a haven for outside millionaires and luxury developers who treat our aina like a commodity. If the 1 percent want to call Hawaii home then they should be giving back — and that starts with paying their fair share to ensure our children get the quality education they deserve.”