(BIVN) – The Hawaiʻi County Council discussed the latest report from the Real Property Tax Review Working Group during a Finance Committee meeting Monday in Hilo. 

The report makes three recommendations for local elected officials: repeal the Solar Water Heater Tax Credit, repeal the Non-Speculative Residential Program, and make procedural changes to Real Property Tax classifications.

One recommended change that has gotten a lot of attention: “all properties less than one acre in size which are not part of an agricultural use or dedicated agricultural programs should be taxed at the residential class tax rate to be consistent with the county code island wide.”

The report is reproduced below:

REPORT TO HAWAII COUNTY COUNCIL FROM THE REAL PROPERTY TAX REVIEW WORKING GROUP, AND AGRICULTURAL COMMITTEE

October 19, 2018

This is the third report to the Hawaiʻi County Council from the Real Property Tax Review Working Group (Review Group) which includes the Agricultural Committee (Ag Committee). The Review Group held twelve meetings and the Ag Committee held eleven meetings. The June meeting was cancelled due to Real Property Tax and Finance Administration staff being tied up with the lava event and the meeting in August was cancelled due to Hurricane Lane.

The focus of the Review Group and Ag Committee is to review and give policy driven recommendations as needed on the following: Hawaiʻi County Code Chapter 19, Finance Director Rules and Regulations as it pertains to Real Property Tax, Agricultural Rates/Values, 2011 IAAO Audit and review proposed changes or legislation which affects the Real, Property Tax Office that is referred by the Council or County. In addition the Real Property Tax Office has been providing the Review Group and Ag Committee with complaints and concerns the office receives.

The group has been meeting since August 2017, and has agreed to meet for a minimum of two years. Reports will be filed to provide County Council with updates of the group’ s progress. The goals were collectively agreed upon:

Increase the fairness of the County’ s Real Property Tax program

Identify and incorporate best property tax administrative practices

Propose additional tax programs as appropriate

Identify public policy goals and incorporating them into the County’s Real Property tax program

The Review Group is recommending to the Hawai`i County Council and the County of Hawaiʻi Administration the following:

Repeal Solar Water Heater Tax Credit. This would require a change to the Hawaiʻi County Code. Recommendation is to completely repeal Section 19- 104 of the Hawaiʻi County Code. In 2008 when this credit was established, the County of Hawaiʻi building code did not require solar water heaters, however, since 2012 it has been a requirement for all new construction. The group researched the possibility of creating a photo/voltaic credit. As the Real Property Tax office does not assess for solar and photo voltaic for residential use, there is no recommendation to create another program in the place of ending the solar water heater tax credit.

Repeal the Non Speculative Residential program. We are again recommending Administration or County Council look into an ordinance to change the Hawaiʻi County Code. Recommended steps include informing all owners currently with parcels in this program of the repeal for tax year 2019, allow all parcels currently in this program to automatically convert these parcels to the Homeowner Exemption program (by virtue of the program they already technically are part of the Homeowner class) at the 2019 frozen value and explain the 3% CAP would then be applied to the tax year 2020 (first year they would see the increase). This has been a recommendation the Real Property Tax Board of Review has reported for several years as this program does not allow new applicants into this program therefore it is not considered to be fair and equitable. It is our understanding when the County Council approved the 3% CAP and the additional 20% homeowner exemption (up to $ 80,000) there was discussion to have this program completely repealed however it ended up being an ” optional out” for those in the program. There are currently 483 parcels in this program. The impact to the real property tax revenue in tax year 2020 based on the current frozen non spec values would be 23,000 total. In addition, the County will save approximately $4,400 per year in staff time which was allocated to the administering of this program.

Procedural change to Real Property Tax classification. This would not require a change to the Hawaiʻi County code, however, the group was approached by Real Property Tax for guidance regarding a portion of the county code that was not consistently applied on the island. There are properties under one acre of land that have been receiving the agricultural class tax rate when the highest and best use is residential. Three meetings were held regarding discussion of what would be the most fair and equitable way to tax these parcels as the underlying zoning is agricultural which included reviewing properties up to five acres in size. The recommendation to Real Property Tax Division is all properties less than one acre in size which are not part of an agricultural use or dedicated agricultural programs should be taxed at the residential class tax rate to be consistent with the county code island wide. This is consistent with State Land Use Commission statutes which provide for the construction of single-family dwellings on lots existing before June 4, 1976.

There are currently 19,604 parcels which will experience a tax class rate change. 6,665 will experience an increase in taxes with the remaining parcels not anticipated to be impacted by the recommendation. The impact to the real property tax revenue in tax year 2019 based on the current assessed values and tax rates would be an estimated $ 1.3 million increase.

In addition to the above recommendations, the Review Group would like to thank the Hawaiʻi County Council for reviewing and amending the Veterans Disability exemption. We understand there was a great amount of discussion in regards to reviewing the fairness and equity of the real property tax programs.

The Ag Committee continues to look at all the current and proposed Agricultural programs in great detail. Any changes or recommendations to the Agricultural program will not have an impact on real property tax revenues until tax year 2020. As there are many parts to this program, the Ag Committee is not making any recommendations at this time, however, we are looking at programmatic and interim recommendations / guidelines on how to improve the application of this program.

Interim recommendations made by the group to Real Property Tax Division included a presentation to the entire group and a range and pasture management class which is done by the University of Hawaiʻi, CTAHR (College of Tropical Agriculture and Human Resources) program. Five staff from Real Property Division participated in the class to gain a better understanding of the complexities of pasture guidelines which included minimum size, resource management and carrying capacity. As the group is looking at making recommendations to the Native Forest program, input from experts in this field have occurred to facilitate future discussion.

The current committee members for the Real Property Tax Review Working Group are:

Members from the general public:

Mary Begier, Mary Begier Realty (Hamakua, Hilo)
William Moore, William L Moore Planning (Islandwide)
Marissa Harman, Kamehameha Schools (Islandwide)
Nahua Guilloz, Parker Ranch (South Kohala, North Kohala, Hamakua, Kona)
Riley Smith, Lanihau Properties (South Kohala, Kona)
Shannon Matson, Hot Yoga Hilo (Hilo, Puna)
Stephanie Donoho, Kohala Coast Resort Association (South Kohala, Hamakua)
Peggy Farias, W.H. Shipman (Puna, Hilo)
Jaime Ortiz-Nava, Ortiz Hawai`i Real Estate Solutions LLC (Islandwide)

The Agricultural committee members for the Real Property Tax Review Working Group are:

Members from the general public:

Mary Begier, Mary Begier Realty (Hamakua, Hilo)

Chris English, Ponoholo Ranch (South Kohala, North Kohala, Hilo, Puna)

William Moore, William L Moore Planning (Islandwide)

Marissa Harman, Kamehameha Schools (Islandwide)

Nahua Guilloz, Parker Ranch (South Kohala, North Kohala, Hamakua, Kona)

Riley Smith, Lanihau Properties (South Kohala, Kona)

Peggy Farias, W.H. Shipman (Puna, Hilo)

Jaime Ortiz-Nava, Ortiz Hawai`i Real Estate Solutions LLC (Islandwide)

The following members from the County of Hawaiʻi support the efforts of the Real Property Tax Review Working Group and the Agricultural Committee:

Deanna Sako, Finance Director

Nancy Crawford, Deputy Finance Director

Glenn Sako, Research& Development Ag Specialist*

Lisa Miura, Real Property Tax Administrator

Keita Jo, Acting Assistant Real Property Tax Administrator

Brandon Cain, Valuation Analyst

*Agricultural Committee only