The overall assessed value of Oahu’s taxable properties failed to go up and has gone flat for the first time in more than a decade, according to numbers released by the city’s Real Property Assessment Division.

Property taxes are the city’s largest source of income so the news, while not a surprise, is unsettling as a new mayoral administration is set to take over.

As it does each December, the city this week is sending property notices to roughly 297,000 property owners providing them the assessed value of their properties for the 2021 tax year.

Overall, the aggregate assessed valuation for the island in 2021 is $279.28 billion, a 0.3% dip from the current year’s record high of $279.99 billion.

That may not seem like much. And assuming no change in residential property rates as promised by elected officials, the flat values mean a majority of the island’s residential property taxpayers are likely to see little change when they get their tax bills next year.

But from the city’s perspective, the overall assessed value picture translates to less revenue and yet another financial obstacle that Mayor-elect Rick Blangiardi will need to face when he takes office Jan. 2.

Last month, Acting Budget Director Manny Valbuena told the Honolulu City Council that the Caldwell administration is struggling with a $400 million shortfall in the city’s annual operating budget. Valbuena pointed to the anticipated drop in property taxes, projected declines in hotel room and other tax revenue, and the need to come up with $140 million to $160 million in rail operations expenses as the key reasons for the shortfall.

The current fiscal year’s operating budget is $2.9 billion and the city projected receiving $1.4 billion in property taxes.

Some other key takeaways from this year’s assessed values:

>> The overall value of the properties in the hotel-­resort tax classification declined by 16.1%, showing the severe impact the COVID-19 pandemic is having on Oahu’s visitor industry. “Obviously, occupancy went down,” said Steven Takara, administrator of the City Real Property Assessment Division. The drop appeared to come from throughout the hotel-resort sector and was not the result of decline in values of any particular geographical area or type of visitor accommodation, he said.

That dramatic dip in the valuations in the hotel-resort class plays a key role in the anticipated drop in property tax revenue. According to 2020 RPAD figures, hotel-­resort valuations comprised only about 6.5% of the aggregate assessed valuation. But Takara noted that those in the category pay at a rate $13.90 per $1,000, significantly larger than the $3.50 rate paid by standard residential property owners. As a result, the hotel-resort class contributes 16.7% of the property taxes received by the city.

While the raw numbers don’t include appeals, exemptions or other adjustments before the assessed values are certified, a 16.1% drop in the $237.3 million in 2020 value amounts to a drop in taxes paid by the category of about $38 million.

>> Values of properties in the Residential and Residential A tax classifications actually went up, albeit by a minuscule 0.7%. Urban Honolulu, the North Shore and Koolaupoko (Kahuku to Kaaawa) saw drops in value while Leeward Oahu, Central Oahu, Wahiawa and Windward Oahu saw increases. (See map.)

>> Commercial class properties collectively increased in assessed valuation by 2.4% while Industrial class properties decreased by 0.9%.

Jaymes Song, a Realtor associate at Better Homes and Gardens Real Estate Advantage Realty, noted that the city’s valuations go up through the end of September and include both condominium and single-family homes.

“The numbers are more or less in line with what we were seeing up until that point,” Song said “In the fourth quarter, however, we are seeing a surge in prices for single-family homes on Oahu to record highs. Prices for condos, meanwhile, have been stable and flat for most of the year.”

That dichotomy in values among single-family and condominium properties may explain why certain residential zones saw increases and others saw decreases, Song said.

“The drop in the urban zones may be because that’s where the highest concentration of condos are,” he said. “The market for condos hasn’t been as hot as houses for many reasons.”

A similar phenomenon appears to be happening in New York City, the Bay Area and other parts of the U.S., Song said.

“Because of the lockdowns and since many have been working remotely from home, some decided to leave the crowded cities in pursuit of more space — a backyard, room for a home office or their kids to virtually learn and to get away from people and elevators,” he said. “There are other factors affecting Oahu, including the travel bans that caused a dramatic decline in foreign and vacation-­home buyers.”

Residences in Leeward and Windward Oahu consist largely of single-family homes, Song said. “Super tight inventory for houses from Kapolei to Kailua have caused bidding wars and pushed up prices in many neighborhoods. Leeward is attractive for some as it has some of the most reasonably priced homes on the island.”

Takara suggested that figuring out why certain residential zones increase or decrease is a nuanced question.

“Each zone has many different neighborhoods and market areas,” Takara said. “Neighborhoods may have increased or decreased (in) value which may offset areas within the same zone. The percent change is a collective or aggregate percent. Thus, there is no definitive explanation of the 2021 percent increase or decrease pattern. New development markets such as Kakaako, Hoopili, and Koa Ridge are each parts of their respective zones. Other areas of the zone may be different according to the activity of new projects or neighborhoods.”

How much a taxpayer pays each year generally is calculated by multiplying the value of a property by a rate that’s set each June by the Honolulu City Council. Actual tax bills are then mailed to property owners in July.

Assessed values for 2021 are based on how much the city estimated the properties were valued on Oct. 1, and are derived from sales of similar property through June 30.

If the rate for a property’s tax classification is unchanged by the Council, property owners seeing little or no change to the assessed value on their rate notices would signal they will pay about the same in taxes come July.

Property owners who don’t receive their assessment notices by Dec. 31 are advised to call 768-7000 or visit either of the Real Property Assessment Division offices at 842 Bethel St. or Room 206 at Kapolei Hale.

Those with questions should call the Appeal Hotline at 768-7000 between 7:45 a.m. and 4:30 p.m. daily. Inquiries also can be made via email to bfsrpmailbox@honolulu.gov.

The appeal period is between Dec. 15 and Jan. 15. Hand-delivered appeals are being received and accepted by 4:30 p.m. on Jan. 15 while mailed appeals must be postmarked that day. Appeals also may be filed online at realpropertyhonolulu.com by 11:59 p.m. on Jan. 15.

Appeals are not accepted via email or fax machine.

A $50 deposit is required for each appeal. Checks should be made payable to City and County of Honolulu.

Oahu Property Tax Map by Honolulu Star-Advertiser