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The Honorable Chairman Stacy Higa <br />and Members of the County Council <br />Page 2 <br />March I. 2006 <br />The budget presented today reflects some of the lessons learned in both hardship and <br />prosperity: <br />• As we strive to "catch up and keep up" with maintenance, repairs, and services <br />throughout the island, we must also set funds aside for future needs and prepare for <br />economic uncertainties. <br />• We must constantly seek ways to preserve the quality of life of our residents through <br />affordable and accessible housing, transportation, recreation, public safety, and other <br />County services. <br />• We must balance our desire to fully meet the service expectations of our residents, <br />with the need to keep the growth of government and property taxation within <br />reasonable limits. <br />REAL PROPERTY TAX <br />The real property assessed valuations used in these revenue projections are preliminary <br />figures and the values certified in April may vary from those assumed here. The final <br />budget that is presented in May will be based on the final numbers. <br />Assessed Values. In spite of the 3% growth limit in the Homeowners class, real property <br />tax assessments for FY 2006-07 are expected to increase by 35.4%. The classes of <br />properties with the highest increases are Agriculture (70.4%), Improved Residential <br />(35.6%), and Apartment (35.2%). The districts with the highest increases are Puna <br />(96.4%), Kau (73.5%), and North Hilo (38.5%). The large increases are due to <br />significant increases in the values of land (44.1%), as opposed to buildings (24.7%). <br />New construction accounts for 2.9% of the overall increase in assessments. <br />Proposed Rate Reductions. Although the estimated net taxable real property grew by <br />35.4%, this budget reflects a 19.5% increase in estimated current real property revenues, <br />and an 18.8% overall increase in property tax revenues (includes penalties and interest). <br />Specific property tax rate reductions will be proposed when the amended budget is <br />submitted in May. These reductions will provide needed relief for classes and types of <br />properties that experienced the largest increases in valuations. <br />To illustrate the extent of possible reductions, if tax rates for each of the 8 classes of <br />properties, not including the Homeowners class, were reduced by as much as 13%, <br />revenue projections would be met. <br />Future Plans. For the following year, the possibility of placing growth limits on other <br />classes of property, similar to what was recently done for the Homeowners class, <br />will be explored. Any suggestions the County Council may have in addressing the need <br />for property tax relief, particularly for properties obtained for non -speculative purposes is <br />welcomed. <br />