Maui property taxes should rise and fall at the same proportion
Why is it necessary with each year’s budget cycle for the mayor to submit proposed property tax rates, which are then extensively reviewed by the County Council with significant public testimony? Each year this process wastes an enormous amount of effort and time, with decisions often based on politics rather than logic.
It is bureaucracy at its worst – a waste of time with dubious results. How many hours of meetings, staff reports and testimony went into this year’s decision to change the tax rate for time share from $15.50 to $15.55?
Maui County has 10 different property tax rates ranging from the homeowner rate of $2.87 (per $1,000 of assessed value) to $15.55 for time share. In contrast, California has one rate, which never changes – 1 percent of assessed value.
Property tax comprises almost 40 percent of the county’s income and must match the demand created by each year’s budget. If overall assessments rise 5 percent and rates remain the same, property tax income would increase by 5 percent. If assessments remain at the prior year’s level and it were necessary to increase property tax income by 5 percent, rates would have to be adjusted upward to provide this increase.
However, each year the arduous review of Maui County tax rates results in changes to some rates with other rates not changing or changing by different percentages. For instance, this year’s residential rate remained at $5.75 while the apartment rate increased from $6.20 to $6.40. What was the change in circumstance that caused this action? Was the apartment rate mistakenly too low the prior year vis-a-vis the residential rate?
My point is that if it is determined that rate A should be twice rate B this year, then it should be twice the rate next year. In other words, from one year to the next the rates should remain proportionately the same. If the hotel and resort rate increases by 5 percent, then so should all other rates.
My proposal is simple: Each year all rates will rise or fall the same proportion, determined by the demand of the budget. As the council deemed this year’s rates correct, use these rates as the basis for future years. Every five years the individual rates could be reviewed by the council (or an independent commission) and necessary changes made. Interestingly, it is often testifiers who say they are willing to pay their fair share, but if their rate is to go up 5 percent then all other rates should also go up by this percentage – exactly what I am proposing.
The fact that there is little rationale why conservation tax rates are $6.25 versus $6.05 for agriculture is exactly why so much time is spent justifying these rates each year. Adding to the facade of this ongoing process of refining rates to the second decimal point is that assessments cannot be appealed unless the property owner’s opinion of the total assessment value is more than 20 percent below the county’s assessment.
Maui taxpayers want fairness and equity with respect to property taxes and rates. Knowing that all rates will rise or fall the same percentage not only implies fairness, but also provides a totally transparent process.
* Bruce Erfer is the chairman of the Real Property Tax Board of Review. This Viewpoint represents his opinion and does not reflect that of the board. He lives in Lahaina.