A bill doubling the threshold value that a house needs to be before getting thrown into the Residential A property tax category was deferred by the City Council Budget Committee Wednesday after Caldwell administration officials warned that the move would cost the city $47 million in annual revenue.

Council Budget Chairman Joey Manahan, however, said he and colleagues want to do something to help local property owners and renters who are being severely impacted by their home being pushed into the $1 million-plus tax classification.

The Residential A tax category is now comprised of residential properties that do not qualify for owner-occupant home exemptions and carry assessed values of more than $1 million. Residential A property owners pay at a substantially higher tax rate than standard residential property owners.

Bill 4, introduced by Councilwoman Carol Fukunaga, would raise the minimum value of Residential A properties to $2 million. She said Council members are hearing from a growing number of constituents who either own or rent properties now valued at more than $1 million.

“Many properties that are older residences are now exceeding that threshold and for those who are renting those properties are really getting caught in a tremendous squeeze,” Fukunaga said. “This is a bill to help us keep residents and families in Hawaii.”

Councilman Tommy Waters said a majority of the residences in his East Honolulu district are valued at more than $1 million.

But city Budget Director Nelson Koyanagi said raising the threshold to $2 million would remove 83% of the roughly 14,440 parcels now in Residential A, causing the city to lose about $47 million in annual revenue.

With employee costs continuing to increase and property tax assessments showing no increase in values, with the loss in revenue, he said, “we would have a hard time balancing the budget and continuing to pay for the current level of services.”

Koyanagi said if the threshold value was raised to $1.2 million, about 6,000 properties would be removed from the Residential A category which would cost the city about $19 million in revenues. At $1.5 million, about 9,800 properties would be removed from the category, which would cost city coffers about $34 million, he said.

“Once you start raising the threshold, properties start dropping out rather quickly,” Koyanagi said.

Even an increase in the threshold to $1.1 million would remove 3,749 properties and cost the city about $11 million in revenue, Real Property Assessment Division Administrator Steven Takara said.

Manahan asked budget officials to calculate how much other tax categories would need to pay to make up for the lost revenue. “Show us some of the offsets and perhaps we can come back and look at the bill again,” he said.

Honolulu Board of Realtors Executive Director Suzanne Young testified that in today’s real estate market, homes valued at $2 million or more are considered luxury, not those priced at $1 million.

Homes $1 million to $2 million are typically owned by local residents whose families have held them for years while their renters are usually “local residents who are middle class, working families trying to make ends meet.”

Community advocate Natalie Iwasa said the Residential A category hurts renters such as her own family. “Renters have the same needs and wants as homeowners,” she said, noting that more than 44% of Hawaii residents rent.