Editorial: Beware consequences of deferred property taxes
BRUCE ASATO / APRIL 3, 2020
The threat of the coronavirus as well as the unprecedented travel and social restrictions have negatively impacted businesses in the Waikiki area.
Seeking a way to ease the economic burden of the coronavirus lockdown, two City Council members introduced a bill that would allow affected Oahu businesses to defer their property taxes. It’s a generous impulse and a starting point for discussion. But realistically, it doesn’t seem feasible right now.
Bill 41, introduced by Ann Kobayashi and Carol Fukunaga, would allow property tax deferrals for eligible businesses forced to close because of the emergency. The option also would apply to property owners who allowed deferral of lease and rent payments from businesses on their property that had to close.
There is no doubt that many businesses need relief. Forced to close through no fault of their own, they are confronted with fixed costs — mortgage, rent, property taxes — that they are losing the ability to pay.
It certainly won’t help the economic recovery if scores of already struggling businesses are evicted or foreclosed on because they can’t make the regular payments.
Gov. David Ige has imposed a moratorium on evictions of tenants on residential and leased properties. The Council adopted a resolution that urges Ige to issue another moratorium “on all commercial and residential tenant evictions and homeowner mortgagor foreclosures.”
That’s worth considering. But for the city to forego property tax revenue raises complications. Property taxes are the city’s primary source of revenue, and it pays for basic nondiscretionary needs, including roads, sewers, garbage pickup and the like. Some of the money helps pay for services critical in this time of crisis: first responders, including police officers, firefighters and paramedics.
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Bill 41 as currently written would cast a pall of uncertainty on city finances. Thousands of Oahu businesses could qualify. And the bill doesn’t specify how long the property taxes could be deferred.
It’s possible that limited property tax relief can be offered, if the amounts are kept at manageable levels. With Mayor Kirk Caldwell planning to allow some businesses to reopen soon, such a scenario might work. Otherwise, the city could find itself in the same boat as the state — stuck with a serious budget shortfall and forced to make hard choices about cutting services and/or employees.
