Oahu property tax reform is long overdue.
The director of the city’s Budget and Fiscal Services says the "Residential A" property tax, in particular, is fair and transparent (Island Voices, Aug. 5) — but saying so doesn’t make it true.
Here are some facts:
» Residential Class A is not based upon use or zoning, but rather on the value set by the city and county’s tax assessor. The city, by applying a fixed rate to this tax class, created an unfair tax of $2,500 for all 7,300 owners in this class. One rental home assessed at $1,000,100 pays $6,000. An identical unit in the same use a few houses away is assessed at $999,900 and pays $3,500 in tax. This unfair $2,500 tax will go on forever, year after year.
» Notice of Class A and its impact was not explained to the 7,300 taxpayers who received their assessment notice in late November. The city failed to inform these taxpayers of a potential tax increase, which turned out to be 71 percent. The city knew an increase was coming so examples could have been provided. This increase is the whole reason the "Class A" was created. It also failed to advise these owners of the need to file a homeowner’s exemption by Sept. 30, 2013. This lack of effective notice denied the right of appeal to thousands of taxpayers. Some 1,650 parcels in Class A are valued within 10 percent of the arbitrary $1 million cutoff. Many more taxpayers, including homeowners, would have appealed if they had known the huge impact.
There are other unfair features of Oahu’s flawed tax process:
» The assessment process does not change the parcel’s value at the time of sale with the new recorded sales price. It also does not allow a new owner to obtain a homeowner’s exemption at the time of sale. Many other jurisdictions do this. One residential property sold for $22 million on Sept. 15, 2010, resold on Dec. 31, 2013, for $30 million, and is now assessed by the city at only $11.7 million. This delayed and inaccurate assessment is unfair to all other taxpayers.
» Increases in assessed value are not capped for homeowners. Is it fair to increase the assessed value, and, as a result, the tax, for a long-time homeowner when a megamillionaire pays $5 million or $10 million for the property next door?
» A $300 minimum tax is paid by a large number of nonprofit organizations and other individual taxpayers who qualify for the full exemption. Is it fair for a credit union or private school to pay only $300 in taxes for a property valued at $5 million or even $75 million? No, it isn’t. The city knows it and needs to fix it.
It is time the leaders of Oahu’s property tax process stop defending the status quo, rationalizing their prior decisions and tweaking this flawed process to generate more revenue.
Let’s stop spinning the message and start solving the problems with the current system.
The city should reverse the residential Class A decision, or, at a minimum, address the $2,500 unfair tax on the first $1 million of assessed value. It’s taken many decades for this flawed process to evolve and it will take several years to solve. So, let’s start property tax reform now.
