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Council OKs property tax reform bills

New tiers, different classifications are in the works

Council Member Keani Rawlins-Fernandez (foreground), chairwoman of both the council Economic Development and Budget Committee and its real property tax reform temporary investigative group, listens to testimony Friday, along with Council Member Tamara Paltin, another member of the tax reform group. -- The Maui News / KEHAULANI CERIZO photo

WAILUKU — Pointing to an imbalance where longtime Maui residents cannot afford one property while out-of-state buyers scoop up multiple dwellings, the Maui County Council approved a pair of property tax reform bills that will change tax classifications and set the framework for new tiered rates.

The council, saying the move will make real property taxes fairer, voted 7-1 to give final approval to the measures during its regular meeting Friday, with Council Member Riki Hokama absent and excused.

“I think this first step with the tiers, it’s really a step to help the regular people‚” said Council Member Tamara Paltin. “The folks just having a house on Maui, not someone with three properties who visits every other month.”

Some residents, however, urged the council to delay passage on second and final reading, saying that the bills were difficult to understand and that the council was moving too fast.

Council members attempted to allay those fears Friday.

“I do think the education piece is ongoing, even if people sort of understood where we we’re at, we still need to be continuing to do these meetings and letting them know . . . where we’re at,” said Council Chairwoman Kelly King. “It is frustrating that somehow it’s gotten to be this big, scary thing. We set a framework that would allow us to do the exact same thing if we get to budget session and we find out that’s what everybody wants, they just want one classification.”

The vote allows the framework for the tiered system but does not set new rates, council members have said. Rates would be set with public input through the spring budget session. However, if the public decides no tiers should be implemented, each tier can be set at the same rate.

The effects of the property tax changes would be felt in the next fiscal year, which begins July 1.

Maui County Mayor Michael Victorino said Friday afternoon after the vote that he supports a tiered system but wants to make sure the community understands the changes.

“I plan to thoroughly examine the implications of the changes to our real property tax code adopted by the council today,” he said. “While I do support a tiered tax rate system, I want to make sure the public understands the impact that both of these changes will have on their property tax bills.”

Council Member Yuki Lei Sugimura, the sole “no” vote on Nov. 8’s first reading and at Friday’s final reading, has been asking the council to slow down so the community can grasp the changes.

Echoing that sentiment was a range of testifiers Friday. More than a dozen people spoke, all of whom asked the council to defer the measures pending more community vetting.

“It’s good to have the tools, but you put the wrong tool into the wrong person’s hand and the economy’s different, then all of a sudden you have total chaos,” said testifier Ben Walin of Commercial Properties of Maui. “So we don’t want that tool that’s a nice knife to be able to make a beautiful dinner turn into something that stabs everybody in the back.”

Community members Friday voiced worries over protections for long-term and multi-generational property owners, the impact on commercial and industrial properties, long-term rental units and implications for agricultural land.

“I humbly ask the council members to please defer this bill,” said Hana resident Claire Kamalu Carroll, who attended a Pukalani meeting on the bills the night before. “I sat in a room of confused residents who are taxpayers. I also represent generational Hawaiians; we have multiple properties handed down from generation to generation.”

Huelo resident Lucienne de Naie, Sierra Club conservation chairwoman, said in the past she’s seen a possibly good proposal, without clear community vetting and explanations, turn into a nightmare scenario.

“It just seems that people are still confused,” she said. “I read the bill myself. It is not very easy to understand language. I don’t know, we need the Cliffs Notes or cartoon versions so people have their questions answered.”

William Jacintho, Maui Cattlemen’s Association president, said the organization opposes the bills because there hasn’t been enough discussion, and they could hurt agriculture producers.

“At the last council meeting regarding this bill, several council members said it was premature to have public presentations,” he said. “If it is premature for public presentations, then how can this council actually vote on a bill that is premature and incomplete?”

Council Member Alice Lee told him that the council is only in the early stages of tax reform.

“We have so much work to do going forward,” she said. “Of course as we work through all the different steps, we will be working with the public. I want you to be assured of that, so you don’t think second and final reading means the end of the work on taxes. It’s only the beginning.”

At a recent community meeting, county officials said that the real property tax provisions that would not change include the home exemption program, the circuit breaker program, agricultural use valuation assessments and classification of all properties receiving the home exemption.

Things that would change:

* Homeowner class would be renamed “owner-occupied.”

* Parcels with dwellings that do not have a home exemption will be in the “non-owner-occupied” class, including agricultural and rural-zoned improved land with dwelling (affecting more than 4,000 properties); conservation-zoned improved with dwelling (more than 90); condominiums that are second homes or are rented long-term (more than 7,700); and vacant land condominiums not zoned commercial, industrial or hotel (more than 950).

* Tiered real property tax rates would be established for the proposed classifications: owner-occupied, non-owner-occupied, short-term rental, commercial and industrial.

Tax tiers are similar to tax brackets but instead of making categories for a range of income levels, it creates a range of property values, according to Council Member Keani Rawlins-Fernandez, chairwoman of both the council Economic Development and Budget Committee and its real property tax reform temporary investigative group.

“The assessed value of your property wouldn’t stick you in only one tier,” Rawlins-Fernandez has said. “Everyone is in Tier 1 up to the threshold and would be assessed that rate at Tier 1. And if they go above that threshold, the amount that goes above Tier 1 threshold would then, that amount, would be assessed at Tier 2. You wouldn’t only be in Tier 1 or Tier 2, or Tier 3, everyone would first be assessed at Tier 1 rate.”

A tiered system has been used successfully in many municipalities, she added.

Rawlins-Fernandez said tax reform has been in the works for years by both the council and the administration. The council budget committee voted in May to create the temporary investigative group, comprising Rawlins-Fernandez, along with council members Tasha Kama, Lee and Paltin, to explore tax reform ideas.

“We need to help the people that don’t even have one house and this is the best way,” Paltin said during Friday’s meeting. “If we are giving $20 million to the affordable housing fund from people’s real property taxes, and we still can’t house all our people, there is something out of balance in the way we are doing things.

“And so this is just an attempt to bring that balance back to stop the out of control speculation from foreign interests.”

* Kehaulani Cerizo can be reached at kcerizo@mauinews.com.

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