Property tax rates hot-button issue

One day before the internal deadline for the Maui County Council Budget and Finance Committee to come up with its version of the county budget, council members heard from the public about a major bone of contention with the mayor’s proposed budget for the next fiscal year – his increases in real property tax rates.

About a dozen testifiers appeared before the council Thursday night to speak against Mayor Alan Arakawa’s proposal to increase tax rates for all property owners except homeowners.

“Continuously increasing the real property tax fees will only diminish our properties’ ability to compete in a price-sensitive resort destination market,” said Lisa Paulson, executive director of the Maui Hotel & Lodging Tax rates Association. “If property tax rates do need to be raised, the proposed category increases need to be more fairly distributed across all classifications.”

The mayor’s budget proposal for the 2014-15 fiscal year that begins July 1 increases the tax rate for hotels and resorts from $9.15 per thousand dollars of assessed value to $10.25 per thousand. Homeowners’ current tax rate of $2.75 per thousand dollars of assessed value would stay the same.

Other testifiers who spoke in opposition to the proposed tax rate increases included members of the Maui Chamber of Commerce, the American Resort Development Association, the Maui Hotel & Lodging Association and private bed-and-breakfast owners.

“When people ask me if they should get a permit for a bed-and-breakfast, I want to tell them, ‘Absolutely not, it’s not worth it, don’t do it,’ ” said Sharyn Stone, who owns a bed-and-breakfast in Paia.

She went on to cite many reasons. As a bed-and-breakfast, she had to give up her homeowner tax rates and exemptions and instead pay a “commercialized residential” tax rate, which is currently $4.50 per thousand dollars of assessed value. The mayor’s proposed increases would bring it up to $4.75.

Additionally, she said she is not allowed to sell her bed-and-breakfast business, and she is unable to refinance her home, due to restrictions of her real property tax classification.

“This time next year, if nothing changes, I will lose everything I have worked for,” said Stone.

On Monday, council Budget and Finance Committee Chairman Mike White proposed a version of the budget that seeks to keep all property tax rates at current levels, at least for now.

“Over a 10-year period, all other categories (except homeowners) have had tax increases amounting to $855 million,” said White after hearing from testifiers Thursday. “The homeowners’ category, which represents roughly half of our population and 31 percent of the value of total Maui properties, has been taxed an increased amount, over a 10-year period, of $15 million.”

“The challenge is trying to find a balance that’s acceptable, I’m concerned about adding taxes to those categories that have been carrying the burden for the past 10 years,” he said.

White has said that if property taxes need to be raised, the council should look at the homeowners’ category first.

White’s proposed budget for fiscal year 2014-15 calls for $551 million, $23 million less than Arakawa’s proposal. The mayor’s proposal includes millions in funding for nonprofit groups as well as for expanding departmental staff and services. The committee chairman’s budget, on the other hand, seeks to cut budget proposals for new staff, equipment, supplies and premium pay.

The internal deadline to come up with a proposed budget is tonight, though the committee did reserve Saturday if needed to finish its version of the budget. The council has a June 10 deadline to pass a budget or the mayor’s budget will take effect.

* Eileen Chao can be reached at