Council and mayor: School tax ballot proposal flawed

Terms vague, raids county revenue source, they say

MIKE WHITE Legislature gets “blank check”

WAILUKU — Wary of a state government that’s taken the lion’s share of county taxes before, Maui County Council members and the mayor spoke out Tuesday against a state constitutional amendment to tax investment properties to fund public education statewide.

“I think it was specifically drafted in a way that it gives the Legislature a blank check to come after county funds and use them not only for education, but for whatever else they choose to use it for,” Council Chairman Mike White said during Tuesday’s council Budget and Finance Committee meeting.

The proposal, which is headed for the Nov. 6 general election ballot, has drawn criticism from all four counties, which have joined in a lawsuit to block the amendment from the ballot.

County officials say the proposal is misleading and vague, and given how the state has used special funds in the past, there are no guarantees that the money would go solely toward public education.

In April, lawmakers passed Senate Bill 2922, which proposed an amendment to the state Constitution that is supposed to appear on the ballot as follows: “Shall the Legislature be authorized to establish, as provided by law, a surcharge on investment real property to be used to support public education?”

KELLY KING Unintended consequences

“We don’t know what ‘surcharge’ means,” Deputy Corporation Counsel Brian Bilberry said. “It sounds like an additional real property tax. And we don’t know what ‘investment property’ means. Quite frankly, that could mean just about any property, including properties subject to homeowners exemptions.”

The Hawaii State Teachers Association, which has lobbied for the ballot measure, has called the lawsuit “frivolous” and said the surcharge is meant to target second homes worth more than $1 million. But testifier Lawrence Carnicelli of the Realtors Association of Maui pointed out that the Legislature removed the $1 million provision from the original bill. Carnicelli said that if the Legislature intended to tax those homes, “they would have left that language in.”

Council Member Kelly King, a former member of the state Board of Education, said she supported public education but was concerned that the tax would have unintended consequences on everyday homeowners. When she moved into her home 30 years ago, she spent $85,000 for the land and the original structure; now it’s worth about $800,000.

“A lot of people are going to have homes in that million-dollar range who obviously didn’t buy their homes for a million dollars,” King said. “With the increase in value, that is a danger to many more people than originally thought.”

The Education Department is looking to generate $500 million from the surcharge, said Scott Teruya, county real property tax administrator.

But Council Member Alika Atay thought the top Education Department brass should be audited instead to see how they’ve been using current funds. He called the proposed surcharge “a raid” and echoed White’s concerns about the transient accommodations tax, which was originally offered up as a temporary tax to pay for the Hawaii Convention Center but later became a permanent tax that the counties say is unfairly divided between them and the state.

“Using that hindsight of what the state has done with the TAT, this is telling us more so not to trust this move, especially when they don’t even define what they going to collect,” Atay said.

Committee Chairman Riki Hokama added that while other counties across the country may use a similar tax, Hawaii’s education system works differently as the only statewide public school district in the U.S. He also pointed out that the county already supports education “in a lot of ways through the current property taxation we ask our people to pay.”

For example, the Department of Education uses many county facilities at no charge, including athletic fields and gymnasiums.

Corporation Counsel Pat Wong said that county attorneys plan to fly to Oahu on Friday to make their case. He said the City and County of Honolulu filed the initial complaint and then reached out to Maui County, which decided to join in the lawsuit rather than filing one of its own to avoid conflicting decisions.

Mayor Alan Arakawa said that “all four mayors completely disagree with this entire bill.” He said the surcharge could impact the county’s bond rating and allow the state to take “what has been the only major real resource that the county has had, which is property tax.”

“This is a red herring, pure and simple,” Arakawa said. “It sounds really good because it’s going to be able to help our children, but in reality it does none of that.”

However, King asked what would happen if the courts ruled against the proposal after the ballots had already been printed.

“Just because it’s on the ballot doesn’t mean it’s something that has to be voted on if, hypothetically, the counties were able to convince the judge that the language is too vague,” Bilberry said, comparing it to candidates who withdraw from a race but are still on the ballot.

Deputy County Clerk Josiah Nishita said absentee ballots for uniformed and oversees citizens will be printed next week, with other ballots to follow in the coming weeks. He explained that casting a blank vote “gets counted the same as if you were voting against the measure.”

In order to pass, a constitutional amendment would have to meet two tests, Deputy Corporation Counsel Jeffrey Ueoka said. First, the “yes” votes must make up more than 50 percent of the votes cast — excluding blank and over votes. Second, the “yes” votes must make up more than 50 percent of the votes cast — including blank and over votes.

Nishita said the process is different for charter amendments, in which more “yes” votes have to be received than “no” votes, and blank and over votes are not included in the count.

For more information on how state constitutional amendment votes are tallied, visit elections.hawaii.gov/resources/revision-and-amendment-of-the-hawaii-state-constitution/.

* Colleen Uechi can be reached at cuechi@mauinews.com.

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