Less than a week after Mayor Kirk Caldwell and City Council leaders closed the book on a contentious 2014 budget season, they are agreeing to look at ways to raise more revenues.
City Budget Director Nelson Koyanagi told the Council Budget Committee on Wednesday that the administration is amenable to developing more ways for the city to generate additional revenues to pay for services.
Likewise, Council Budget Chairwoman Ann Kobayashi said she wants to begin the process of setting up “revenue enhancers” that can be used for the next budget year. Kobayashi said the exercise is necessary because raises given to city employees in recently approved collective bargaining contracts could have an effect on next budget year’s expenditures.
Koyanagi said the administration is already looking at dividing the residential classification that, for the upcoming 2014 budget year, taxes all residential property owners at a rate of $3.50 for every $1,000 of assessed tax value.
Splitting residential properties into different categories would give the city more options, said Deputy Budget Director Gary Kurokawa, longtime head of the Real Property Assessment Division. “Different tax rates can be assigned to different classifications. For example, the residential class today includes a whole slew of properties, including apartments and different types of investor units, and some units that are not really occupied on a regular basis.”
Kurokawa said creating more tax categories won’t automatically mean higher taxes for some classes, but it does give more options to the Council, which has to establish property tax rates annually.
The administration also wants to take a hard look at gathering all properties that offer visitor accommodations and assessing them at a uniform rate, Kurokawa said. Hotels, bed-and-breakfasts and time-shares now run the gamut of property tax classifications, he said.
From 1980 through the 2009 tax year, residential property owners were split into three categories: improved residential, unimproved residential and apartment classifications. In 2009, all three were combined into one residential class.
In 2011, then-Mayor Mufi Hannemann and the Council pushed through a bill that split residential homeowners into owner-occupants and absent property owners. Owner-occupants were given a $3.42 per $100,000 rate while the second group paid a higher rate of $3.58 per $100,000.
Amid much criticism and unintended consequences, that system was repealed in 2012 in favor of once again returning to a single residential class.
The administration is also re-evaluating a slew of exemptions given to property owners from senior citizens and historical residences to nonprofits and credit unions.
A 2011-12 Real Property Tax Advisory Commission urged the city to conduct a review of tax exemptions, some of which have been on the books since before 1978, when the state collected property taxes.
It also recommended that the city repeal all exemptions given to owner-occupants and instead offer higher tax credits for those who truly cannot pay. The commission also recommended that the city clamp down on the number of nonprofits eligible for tax exemption and the size of the exemption.
Kobayashi said the city has wrestled for years to find a means of taxing owners of investment properties more than owner-occupants without hurting renters.
One idea is to create a new category for owners of properties worth $1 million or more who don’t have a homeowner’s exemption.
Council Vice Chairman Ikaika Anderson said he’s willing to look at measures the administration suggests to raise revenue as long as Council members are consulted first.
In March, Council members summarily squelched a Caldwell proposal to increase the city’s fuel tax by 5 cents per gallon after they first learned about it from media accounts, he said.
Anderson said he wants the Council to consider creating a new real property tax category for out-of-state investors.
