Nine bills designed to curb property tax exemptions and create new tax categories that would make it easier for the City Council to raise rates on some targeted groups of owners were passed by the Council Budget Committee on Wednesday.
But a 10th bill, which would have lumped bed-and-breakfast establishments and transient vacation units into the hotel and resort tax classification, was shelved after strong opposition was given by B&B owners and others.
Nearly all of a series of bills designed to either reduce or eliminate existing exemptions for certain groups were met with at least some opposition from organizations representing those who receive the breaks.
Kiersten Faulkner, executive director of the Historic Hawai‘i Foundation, testified against Bill 35, which would eliminate tax exemptions given to the owners of historic commercial properties who promise to preserve them.
Faulkner said the estimated $130,000 that could be generated on the seven historic properties identified by the city represents a "minuscule amount" when considering the importance of promoting the preservation of historically significant landmarks, she said.
Dennis Tanimoto, president of the Hawaii Credit Union League, gave testimony opposing Bill 36, which would allow the Council to reduce the existing 100 percent exemption given on properties owned or leased by federal or state credit unions.
Because credit unions are owned by their members, "a tax on credit unions is a tax on its members," Tanimoto said.
Mark Oto, government relations director for the Hawaii Medical Service Association, opposed Bill 39, which would allow the Council to reduce the existing 100 percent exemption given on properties owned by nonprofit medical indemnity or hospital service associations. Other affected organizations might include Hawaii Dental Services and Kaiser.
Oto warned that added taxes, especially now when insurance carriers are facing other challenges, "would be detrimental to efforts to control and reduce costs of the health care system."
Organizations representing time-share properties, meanwhile, raised objections to Bill 43, creating a separate tax classification for such properties, which are currently within the hotel and resort class.
Henry Perez, a representative of the America Resort Development Association and general manager of Hilton Grand Vacations Club, said Maui County’s time-share class is taxed at a much higher rate than hotels and resorts even though there is no evidence that time-share units use significantly more government services than hotels and resorts.
Perez said that, contrary to what some believe, time-share owners pay transient accommodations taxes that are somewhat comparable to those paid by hotel and resort owners, although such taxes are calculated differently for time shares from how they are calculated for hotels and resorts.
At the end of an all-morning session, the Budget Committee voted to advance nine property tax reform bills, including Bill 42, which creates a new tax class for so-called "Residential A" properties, defined as a single-family home or condominium with an assessed value of more than $1 million. The properties do not qualify for a homeowner’s exemption.
Several committee members said they may want to look at making the amount of the assessed value that triggers moving a property into the category higher than $1 million.
The committee deferred Bill 37, which would have moved bed-and-breakfasts and transient vacation units from the residential class into the hotel and resort category.
The proposal received strong opposition from TVU and B&B owners who argued that not only would the move harm the visitor industry, but it would also penalize those who own legal visitor accommodations when many TVUs and B&Bs operate illegally and would not be affected by the changes.
Several Council members said they want to address the issues related to TVUs and B&B separately. Since 1989, no new TVUs or B&Bs have been approved. But one proposal now being discussed would allow more such units to operate legally while another would create a new tax class for them.
Council Vice Chairman Ikaika Anderson said, "Whether it’s taxing, or different issues bringing them into compliance, we really need to look at the issue as a whole rather than piecemeal."
