The Hawaii Supreme Court heard oral arguments Thursday on whether to invalidate a question on the November general election ballot asking voters to give the state the power to tax investment property to support public education.

Supreme Court Chief Justice Mark Recktenwald said that the court would take the matter under advisement after listening for more than an hour to arguments from attorneys for both Hawaii’s four counties and state Attorney General Russell Suzuki. The court is expected to quickly rule.

Currently, only the counties have the power to tax property. The ballot question asks voters whether they want to amend the Hawaii Constitution to allow the state to levy a surcharge on investment properties to support public education.

The question, which has already been printed on ballots, specifically states, “Shall the legislature be authorized to establish, as provided by law, a surcharge on investment real property?”

Attorneys for Honolulu, Maui, Kauai and Hawaii counties have argued that the wording of the question is unlawful because it’s unclear and misleading. They say the word “surcharge” obscures the fact it would be a tax and that “investment real property” isn’t defined. Further, they argue that the clause “as provided by law” is confusing and vague.

“The average voter would not even know what a surcharge is. Some voters don’t even know what real property is,” Honolulu Corporation Counsel Donna Leong told the court.

While justices appeared concerned at times about interfering in matters involving the Legislature, asking county attorneys what deference the court should afford state lawmakers, they also seemed to grow frustrated when trying to get answers from the state about the ballot question’s meaning.

Associate Justice Paula Nakayama asked if she bought a home for her daughter to live in, whether that would be considered investment property. Suzuki said that it would be left up to the Legislature to define that term.

“So how is a person supposed to vote on this?” asked Nakayama.

“How do I know as a voter that that’s not going to be taxed?”

“Then I think you should probably vote ‘no,’” Suzuki responded, surprising some in the courtroom and prompting laughter.

Clause issues

Several justices also took issue with the clause “as provided by law,” saying that it seemed to suggest that the Legislature was already afforded the power to tax property in support of public education. Suzuki said that it meant that the Legislature would determine the surcharge in the future. But Nakayama noted that the word “provided” was in the past tense.

Recktenwald and other justices seemed less concerned with the use of the word “surcharge.”

“Doesn’t the phrase surcharge, as commonly understood, wouldn’t that indicate to the voters that someone is going to be potentially liable for paying more, which is kind of the bottom line?” asked Recktenwald. “It’s not hiding the fact that someone is going to have to pay more … whether it’s called a surcharge or a tax.”

However, the state’s argument that the term “surcharge” is sufficiently clear was complicated when Suzuki argued that a surcharge is not actually a property tax. He went even further to argue that the Legislature actually has the power to impose a surcharge on real property and that it did not require an amendment to the state Constitution.

Suzuki also argued that the Hawaii Supreme Court should not be hearing the petition in the first place, saying there is “no extraordinary circumstance here to allow this court to review the matter,” which is facing an appeal in a lower court.

Several justices seemed to bristle at the argument.

“Even if it is plainly invalid, you are suggesting that a court should wait, allow the public to do it, and in this case even allow the Legislature to enact the statute and then a year and a half, two years later, with an appeal we invalidate it?” asked Associate Justice Richard Pollack. “That is in the public interest?”

With early voting already underway, the Supreme Court is expected to rule expeditiously in the case. In the event that the court does invalidate the ballot question, any votes cast on the matter won’t count.

The Supreme Court’s decision to hear the petition followed a Sept. 7 ruling by 1st Circuit Judge Jeff Crabtree in which he rejected a request by the counties for a preliminary injunction blocking the ballot question. Crabtree said the counties didn’t meet the standards for granting a preliminary injunction, which include a likelihood they would prevail in the case. While he said the language of the question wasn’t as clear as it could be, he didn’t think it was deceptive or rose to the level of being unlawful.

Attorneys for the counties then took the unusual move of filing a “petition for extraordinary writ” with the state’s highest court.

The counties’ legal challenge to the ballot measure, which overwhelmingly passed the state Legislature this year, is part of a broader political fight over whether the state should have the power to tax real property to support public education. County mayors have argued that if the measure passes it could end up cutting into their revenues and hurt their bond rating. They’ve joined forces with a coalition of powerful business interests and former Hawaii governors who are urging residents to vote ‘no’ on the ballot question. Their main argument is that if the state is given the power to increase property taxes, it will end up increasing the cost of living in Hawaii.

A teacher’s perspective

The Hawaii State Teachers Association, the measure’s major backer, has argued that the coalition is engaging in scare tactics. The teachers union, if the ballot measure passes, wants the Legislature to tax second homes valued at $1 million or more to raise revenue for public schools.

HSTA President Corey Rosenlee said after the hearing that he expected the court would rule in favor of the state, and said it had taken an enormous effort to get the question onto the ballot.

“Trying to change Hawaii to make sure we properly fund our keiki and our schools has not been easy, and if the court invalidates all the work that’s done at the Legislature, then what’s going to occur is we are just going to continue the process where we underfund our schools and underfund our keiki,” said Rosenlee.

The Legislature can take up the matter again during next year’s legislative session, tweaking the question’s wording, but the proposed ballot measure would have to pass another vote by lawmakers.

Leong said after the hearing that she is cautiously optimistic that the counties will prevail.

“As far as lawyers are concerned, we forget that the words that we use, lots of people don’t understand,” said Leong. “When I first took this job, I talked like a lawyer, and I realized that you have to use different words when you are talking to the average voter, when you are talking to the general public, so that people really do understand what you are talking about. In fact, a friend said to me the other day, ‘What’s real property?’ It’s as basic as that.”