WAILUKU - The Maui County Council voted 7-1 Tuesday to give initial approval to a compromise bill aimed at getting condominium owners to pay the correct property tax rate on their units.
The sole dissenting vote was cast by Council Member Jo Anne Johnson, a West Maui condominium owner who said she would prefer tax rates be determined by the zoning in a condominium's location.
As amended, Bill 53 requires condominium associations to file an annual report listing how owners are using their units - personal residence or a long- or short-term rental. Originally, the bill would have required condo owners to pay taxes according to the "highest and best use" of their properties, based on zoning, as other landowners do now.
The revised bill came after condo owners complained and associations offered a compromise in which they would file annual lists of how units are being used. The lists would be filed with the county Department of Finance, and the director of the department "may, after investigation, reclassify and reassess any unit in a condominium association to be in violation of the owner's certification of actual use."
Johnson said she believed such language pitted condominium associations against condo owners. Council members voting in favor of the amended bill were Mike Molina, Joe Pontanilla, Danny Mateo, Gladys Baisa, Bill Medeiros, Wayne Nishiki and Mike Victorino. Council Member Sol Kaho'ohalahala was absent and excused from the meeting.
As originally drafted, the bill was meant to close a loophole that allows condo owners to declare how their property should be classified for tax purposes. All other landowners in the county automatically pay taxes according to the highest use allowed under their property's zoning.
But condo owners complained that units in areas zoned as hotel would be unfairly paying higher property tax rates.
The bill also consolidates the current "improved residential" and "unimproved residential" property tax categories into a single "residential rate."
Victorino said the revised bill is the best attempt at ensuring that the correct condo taxes are paid.
"Again, we try our best," he said, adding that if problems surface the council could revisit the issue and amend the ordinance.
Prior to voting on the bill, Nishiki said that Johnson had brought up an "interesting" argument against the bill, but he voted in favor of it, saying he still believed it was the "fairest" way to implement tax rates for condos.
"Our thrust was to catch the cheaters," he said, adding that he believed the bill as rewritten would be a "very honest way" of accomplishing the county's goals.
The bill is expected to be brought up for second and final reading at a council meeting next month.
According to a Budget and Finance Committee report on the bill, Finance Director Kalbert Young reported that the county would have generated approximately $8.5 million in additional real property tax revenue if all condo units were assessed at their highest and best use.
The director identified 11 condominium projects that would be most affected by the proposed bill.
Those condominiums would have had property taxes assessed at the hotel/resort property tax rate of $8.30 per $1,000 of net taxable assessed value, instead of the lower apartment rate of $5 per $1,000 of assessed value.
* Claudine San Nicolas can be reached at firstname.lastname@example.org.