COM 0717.043 2004-2006 - Laserfiche WebLink

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Honorable Stacy K. Higa Page 6 May 5, 2006 • Tax increases on rental and commercial properties will generally be passed on to tenants and consumers. Every effort should be made to minimize the possibility of landlords increasing their rents due to large increases in property taxes. In determining tax rates, it was necessary to first identify the primary taxpayers (direct or indirect) in each class of property, then determine the extent to which respective reductions should be made. The following table provides a description of the primary taxpayer in each class of property: Class Improved Residential Apartment Commercial Industrial Agriculture Conservation Hotel & Resort Unimproved Residential Homeowners These are our conclusions: Primary Taxpayers Residence Tenants, owners of vacant land Hawaii County Tenants Hawaii County Customers Universal Customers Universal Tenants, customers, owners of vacant Universal land Large landowners Hawaii State Customers Off -island Tenants, owners of vacant land Hawaii County Owner -occupants Hawaii County The Homeowners class should have the lowest rates. Since properties in this class already qualify for various tax benefits, we believe the rate for the Homeowners class is appropriate and should be retained. Benefits added last year were: -an additional exemption of 20% of the value of the property up to $80,000; -an assessment limit of 3% of the previous year's assessment; and -a reduction of the required dedication period (from 10 years to 5 years) for participants in the non -speculative residential dedication program. Properties used as rentals for residents should have the second lowest rates and the largest rate reductions. Rental properties are primarily in the Apartment, Improved Residential, and Unimproved Residential classes. As stated in our budget message submitted on March 1, a bill to provide additional property tax relief for properties providing "affordable" rentals is forthcoming. The bill will offer tax incentives for properties rented at affordable rates. It will also enable properties in the Homeowners class to remain in the class even if a room in the home is being rented. Additionally, we plan to submit a bill to combine the Improved Residential and Unimproved Residential classes. Residential properties no longer need to be separated. This will provide the flexibility necessary to eventually create a more meaningful class, such as Rural or Affordable Rentals.