COMET: Property tax credit program ‘gutted’ by council

WAILUKU – A grass-roots group that pushed for the creation of the “circuit breaker” property tax credit program in the late 1980s has returned to the Maui County Council and is expressing its unhappiness with changes made to the program in the last budget go-round.

The Committee for Equitable Taxation, or COMET, which formed in 1988 amid skyrocketing property values and taxes, has sent letters to council members calling for the panel to scale back changes approved several months ago that it says “gutted” the program by imposing more qualifying restrictions.

The property tax credit program was designed to help prevent those with limited incomes from being taxed out of their homes due to rising assessments beyond their control. Longtime COMET leader William Tavares said the program protects residents from those “pillaging our coastlines,” who buy land and properties at high prices, and increase the assessments on neighboring properties, many of which could be owned by longtime local families.

“They have gutted it,” he said of the new rules.

Tavares recalled how decades ago the group worked with council members, who approved the program.

“We worked so hard to get this,” he said.

The group is now disgusted with what the current council has done, Tavares said, adding that “we intend to make this an election-year issue.”

All council members will be up for re-election next year.

Co-chairmen of the group, Tavares of Kuau and John Blumer-Buell of Hana, said residents who own more than one property and with homes valued at more than $400,000 will no longer qualify for the credit.

According to the county, there were 225 circuit breaker applicants last fiscal year with gross building values of more than $400,000 – which will not qualify for the credit under the new terms. Tavares indicated that $400,000 homes are common these days and do not represent luxury properties.

Council Budget and Finance Committee Chairman Mike White acknowledged receiving Tavares’ letter and “appreciates his thoughts.” However, the council member feels it is “prudent to first obtain data on the impact of the circuit breaker revisions” before having his committee review the tax credit measure again.

He explained that the goal of the tax credit changes was to reinforce “the philosophy that only individuals with limited means of paying their real property taxes should qualify for a tax credit from the county.” He said that many of the revisions were based on recommendations from the Real Property Tax Division to eliminate those unfairly receiving tax credits.

White produced photos from the Department of Finance that showed lavish homes with swimming pools that received the circuit breaker tax credit. He said that homeowners with properties valued in excess of $5 million were receiving tax credits of up to $18,000 per year. Other homeowners had multiple real estate holdings and some had luxury homes, White said.

For the current fiscal year, which still is operating under the old rules, 1,039 people qualified for the program with an average savings of $1,255 each, according to county statistics. The program will cost the county an estimated $1.3 million in lost revenue.

The council member said that the eligibility requirements “are still very generous,” allowing homeowners with less than $100,000 in income to pay no more than 2 percent of their income toward property taxes. On Oahu, only homeowners with less than $50,000 in annual income can qualify for a tax credit and can expect to pay up to 4 percent of their income toward property taxes, he said.

The “circuit breaker” allows those who qualify for a homeowner property tax credit and whose real property taxes exceed 2 percent of their adjusted gross income to apply for the program. In the spring, the council changed the program by tightening qualification requirements.

Under the current rules, adjusted gross income includes all title holders; under the old terms, it was possible for only one title holder and his or her income to apply to circuit breaker qualification.

Households with combined incomes of $100,000 or more do not qualify for the circuit breaker. Those who own homes with building values of more than $400,000 also do not qualify.

Mayor Alan Arakawa vetoed the council’s bill on April 19, saying he understood its intent to eliminate abuse but noted that there were problems with the measure. He cited how an elderly couple could have their son’s name on their deed for estate planning purposes but would no longer qualify for the credit.

The council overrode the veto.

County Communications Director Rod Antone said Monday afternoon that the Department of Finance has received many complaints, “more than they ever had before.” The complaints included ones from those with fixed incomes who have been on the circuit breaker for years but who no longer qualify because they own a small property on the Mainland. And as the mayor forecast, some elderly residents are complaining that they do not qualify because their children are on the title for estate planning purposes.

Tavares commended Arakawa’s actions, saying COMET has “great appreciation for the mayor’s stance on the issue.”

He questioned why the county could not investigate those property owners who may be abusing the program rather than changing the rules.

White countered that while investigating potential offenders seems logical, many of those who are abusing the tax credit program actually are doing so because it is legal.

“It is unfair, but it is not illegal,” he said. “Therefore, we must continually review our tax laws to ensure that only those who need tax relief qualify for subsidies. Residents must remember that tax credits are not free and should only be disseminated in a prudent manner.”

Tavares acknowledged that COMET’s rebuttals come months after council action was taken; he mentioned having some health issues during that time.

Blumer-Buell said that the council committee should have contacted COMET about the changes.

White acknowledged that the committee “did not specifically contact” COMET on the proposal but noted that meeting agendas were available in advance and that the amendments have been pending in the committee since August 2011.

Applications for the circuit breaker with the new rules are being accepted through the end of the year for fiscal 2015, which begins July 1.

* Melissa Tanji can be reached at