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HomeMy WebLinkAboutCOM 0024.018 2012-2014 J tYiOF M.!Y DENNIS "FRESH" ONISHI �°• �'�, PHONE. (808)961-8396 FAX. (808)961-8912 Council Member District 3 °} EMAIL donishi(uJco hawaii.hr.us �TF of N',► HAWAII COUNTY COUNCIL C-) 25 Aupuni Street, Hilo, Hawaii 96720 CO MEMORANDUM -L DATE: April 14, 2014 ym TO: J Yoshimoto, Chair And Members of the Hawaii County Council FROM: U Dennis "Fresh" Onishi, Council Member SUBJECT: Minutes of the Real Property Tax Stakeholders Task Force meeting for January 23, 2014. Attached for review and discussion are the minutes of the Real Property Tax Stakeholders Task Force meeting that was held January 23, 2014, in Hilo. Please place this on the next available Committee agenda. DO•ps Att. Comm. No.°� q` ' Ref.To: PG Haw•ai'i County is an Equal Opportunity Provider and Emplover Ref. Date AM 14 nit REAL PROPERTY TAX STAKEHOLDERS TASK FORCE MEETING MINUTES January 23, 2014 County Council Conference Room 25 Aupuni Street, Hilo, Hawaii CALL TO ORDER Co-Chairperson Margaret Wille called the meeting to order at 10 00 a m ROLL CALL Present Margaret Wille, County Council, Member Dennis "Fresh" Onishi, County Council, Member Robert Price, Member Stew Hussey, Member Al Inoue, Member Also Present Nancy Crawford, Finance Director Stanley Sitko, Real Property Tax Administrator Elizabeth 'Nina' Swain, Secretary/Recorder Erin Nacis. Secretary/Support Staff STATEMENTS FROM THE PUBLIC There were no statements from the public made APPROVAL OF MINUTES Members were provided with a copy of the November 21 , 2013 meeting minutes Corrections were noted as follows • Mrs Crawford referred to page 5, first paragraph. "Bureau of Conveyances" should be corrected to "State Tax Office" • Mrs Crawford referred to page 5, first paragraph, "1/5/14" should be corrected to "1/7/14" • No further corrections noted. Mr. Price moved to approve the minutes of November 21 as amended Second by Mr Onishi. A call for discussion was made Motion passed by a vote of 5.0 COMMUNICATIONS • Ms. Wille announced that she and Mr Onishi will serve as Co-Chairs for the Task Force Mr Onishi will Chair the meetings held in West Hawaii and Ms Wille will Chair the meetings held in East Hawaii NEW BUSINESS • New Public Member Al Inoue o Mr Inoue stated ■ been in real estate for over 30 years licensed in the early 701s, ■ developed properties in Hilo including the Hilo Lagoon Center's conversion into condominiums from hotel, ■ also doing consulting work, ■ done some work for the County in acquisitions in the past with right- of-ways, ■ currently doing some acquisitions for the Hilo section of the Saddle Road for the State Department of Transportation, • he and his wife will be relinquishing the management of the Hilo Lagoon Centre to downsize and do some traveling • will also be able to do more community work as in the task force o Ms Wille requested that Mr Price and Mr Hussey also provide some information as to their backgrounds Mr. Price stated. ■ moved to Hawaii in 2002 in hopes of retiring, ■ worked for the County at the Real Property Tax office in Kona for five years then retired, ■ worked as an elected assessor in Indiana for eight years prior to, • spent six years on the County Council after owning his own real estate business in Indiana before moving to Hawaii Mr Hussey stated ■ came to Hawaii in 1990. ■ spent many years with AT&T in San Francisco in line management and three tours back in New York doing corporate strategic planning and designing planning processes prior to; ■ since moving to Hawaii, started and is still the chief appraiser for a real estate appraisal company doing a broad range of everything from residential, vacant land, rights-of-ways, commercial and business valuations, ■ delighted to have an opportunity to give back to the community in trying to get balance and clarity and to assist the administration in their attempt to help further these goals. Ms Wille stated that Mr Onishi is the Council Member for District 3 and she is the Council Member for District 9, North and South Kohala • Bill No. 71 re: Real Property Taxes, Liens, Foreclosures & Notice Referral from Council Member Brenda Ford Ms. Wille requested a summary from Mrs Crawford or Mr Sitko as to the key changes and to any opinion that they may have o Mrs Crawford stated that although she did not have a copy of the Bill to refer to, she believed that it would shorten the foreclosure period from three years to two years • Mr Onishi stated that in the past the Task Force has been deferring any legislation that has been coming from the Council to allow the Task Force time to work out the recommendations • Discussion held as to Members not receiving a copy of the Bill so they are unable to discuss or decide on it at the present time Ms Wille requested that Finance provide copies of all Bills, correspondence, etc for each meeting to the Members. c. Mr Onishi suggested that all of the Bills that were sent to the Task Force from the Council be held off until the Members have had a chance to review all of the recommendations in the report before making a decision on the Bills Mr Onishi moved to defer Bill No 71 to the call of the Chair Second by Mr Hussey A call for discussion was made Motion passed by a vote of 50 • Discuss recommendations 26 and 32 from the International Association of Assessing Officers Report c Recommendation 26: Ms Wille requested a brief summary from Mrs Crawford or Mr Sitko as to the issues that are involved and what will need to be decided upon c. Mrs Crawford stated that she could inform the Members as to what the item was but any technical questions would be best answered by Mr Sitko as to valuing using income approach versus cost approach as the division currently uses As noted in the report, none of the other Counties are using the income approach but the division is not objecting to using it It would also require some time to build the data that would actually be needed to make it effective This would require a change to the County Code Mr Sitko reported that there are generally three main approaches to valuing in the real estate appraisal process — the cost, the market comparison and the income approach • Market comparison approach compares one property to other like properties and adjusts for differences between the sale prices • Cost approach values the land using the market approach then rebuilds the structure and then depreciates it • Income approach capitalizes it or puts a value on the income flow of a property Most appropriate when dealing with commercial properties or rental properties A single-family home would not be amenable to that approach This is the more appropriate method for valuing certain types of properties such as rental warehouse space retail space, apartment complexes It would provide the full compliment of approaches with the current system to value properties Mr Sitko stated • Accessing COSTAR to assist with valuing of commercial properties Contains a lot of income information that could be utilized in the current database • Appraisers have limitations and difficulty with appeals when other parties use the income approach to argue values leaving the appraisers to fight against that approach Ms Wille opened the matter up for discussion as to its pros and cons and for any recommendations c Mr Hussey stated • Mr Sitko provided a good summary of the three approaches and the importance of the income approach in properties • Commented that the County seems to be at a disadvantage at appeals not being able to use the income approach. • Strongly supports having the County have that tool as a critical component of its tax assessing capability together with COSTAR and other data sources Mr Inoue • Agreed with Mr Hussey and that if it is a tool to look at value that it should be a part of the system of appraising properties • Questioned if there is a conflict of values between the comparison approach versus income approach, how is it decided which approach was appropriate for a particular property? c Mr Sitko responded • Process at the end of the appraisal process called reconciliation where all three methodologies are considered -- the cost, the comparison and the income • All three are used, reconciled and weighs the income approach most heavily on commercial properties unless there are good sales. Mr Onishi commented • When the economy is good then the income is really good to use as assessment Should the economy go down. that is when the appeals come in as then they are going to look at income being much less • Questioned if there would be another way to be consistent during those times Mr Sitko responded • Problem is the requirement to appraise annually based on the market • That approach is reflecting the market for that particular property • Once they are able to use the income approach and the data set up then their database would have enough data to say this is good practice for this particular income producing property That would give them a stronger argument Mr Onishi stated. • Property owners were requesting adjustments a year or two ago to lower their values due to the economy • Right now the tourism industry is doing well. • When would the department go back to adjust these values? - -4 - o Mr Sitko responded • Depending on the data that they have right now, at this point having the income approach would assist in revaluing They are trying to the market value of a property Mr Hussey stated. • The fundamental principle is to be as fair and as current as possible • Yes, in a down market businesses suffer Their value goes down • People will not pay what they would have paid in 2006 when the balloon was up at its highest volume • To tax at that level, to leave it there or to take to the bottom of the trough in 2009 at the end of the recession would be to fix rates based on a moment in time • That is not a fair valuation as it is a hangover from the past • Everything changes with the market and the more current we can make the tax assessment process with the best tools for a particular property type the more respect the process is going to have, the more support it is going to have from the public Mr Price stated. • All commercial properties are reevaluated by their owners when they receive their assessment notices • They hear from owners when they feel they are over assessed and they file an appeal • Does not remember having that many commercial appeals within the five years that he was there • When these hotels go in and renovate sometimes it was picked up, sometimes it was not So if they had a hotel at $15 million and they had $10 million in renovation, it might still stay at $15 million for that year • If the owners are paying too much or assessed too high, they know it on a continuous basis as part of their profit-loss information that they do • Not sure how the County would get into dealing with the owners books c Ms. Wille stated • It seemed like the key thing is getting the data in • How long would that take? • If vote in favor of this then, what's the next step? • How much time does the department need? • Would a code change be needed? • How would the committee follow through on this in an appropriate manner, what time frame and what steps would need to be taken? c Mrs Crawford responded • The department would draft a legislative change to bring to the committee for the committee to decide • If supported, the committee would be making a recommendation to the County Council Mr Sitko responded • Mass appraisal for commercial properties would need a five year base of sales of commercial properties and information on them • Probably the hardest thing to acquire would be actual income and expense statements from owners • Would need to work with the local commercial appraisers and the bankers to start acquiring data • Decision needs to be made as to what units will be utilized to value particular properties • It would take about three years before they actually start getting realistic values out of it due to having only one commercial appraiser • The appraiser would have to take a look at these properties as part of the cyclical re-evaluation but would need to collect the specific data on the property as well as getting the data on what is considered a good income stream from those other sources and put them all together Ms Wille questioned if the committee wanted it done in two years, what would the department be required to do Mr Sitko stated • They have only one commercial appraiser • May need to consider contracting out or getting a step-up on that to get it moving forward Ms Wille stated • How can the County be fair as this is an area that has a disadvantage to the County because they are not able to deal with appeals and be on the same playing field as the owners • In favor of moving on this and figuring out the options in terms of time • Could it be done in steps? Mr Sitko responded • They could concentrate on the hotels first which are probably the larger income items • Probably the big box warehouses are what they would like to do after due to the composition of what is here on island Most of the industrial areas are basically warehouse type structures, Ms Wille questioned whether Mr Sitko mentioned golf courses as an item Mr Sitko responded • Golf courses could also be done but hotels are what they were looking at • That is something he would need to consider because they have to treat all of the classes the same way • Yes, they could break it down • Alternatives, yes they could have more data collectors there but the first step is to collect usable data, set up the system, set up what data needs to be collected and then send additional people out to gather that information c Mr Price stated • Wanted to go back to something that Mr Sitko provided the committee with and it's called the Finance Department Real Property Tax Division Sales Ratio Analysis In that the division is stating that this is what your commercial parcels are They separated that very nicely c Mr Sitko remarked that it was the first time that they attempted to do that Ms Wille questioned as to what page Mr Price was looking at Mr Price responded- • It was provided to the committee and the information was on page 7 of the document • It seems like the division should have enough data from residential condominiums to do condominiums because they have previous data • They can go back five years instead of waiting three years to do the work • When it comes to commercial parcels, they have not broken it out like they are now talking about 1 Mr Sitko responded that with 81 sales the coefficient of dispersion is pretty wild there too Mr Price stated • That is what he was getting at • What good is doing any report on that if the coefficient of dispersion is really out of line? • They have 81 sales but they are saying that they would like to do this and that and this • They cannot do that with this 81 and then go back a couple of years or three years and bring that data forward and say okay I know where we are at now Mr Sitko stated that he did not understand what Mr Price was asking Ms Wille stated how quickly this could be done and the division responded three years o Mr Price questioned. • Why wait three years? • They already have their commercial appraiser on board • The appraiser can take their data from the previous three years or the previous five years, bring that up to date and have a starting point for 2013 • Apply some of that data to 2014 plus their new information. • Why are they waiting, that was his question? Mr Sitko responded • Yes they would be looking back at sales for five years and that is standard • They would still need to set up the system and review the properties so that they could collect those characteristics • That is the three year period • They could probably have everything done in one cycle, looking at going back on the sales for five years and looking at the tables. • It does not mean anything unless you have those kinds of characteristics flagged on the parcels themselves • They would need to do the review too Mr Price stated • The division has a commercial appraiser, they have the data in the computer. • It would only require going into the computer and setting up the parameters for the information and then pulling it forward • It is the same information that they are going to use in the future o Mr Sitko responded • No, they would not have the classifications for the various types of buildings • They do not have, for example, how many doors are on this particular parking terminal or building • They do not have that information on the units Mr Price stated that he understood Mr Sitko stated • They do not have proper information as to the number of rooms in the hotels which they have been trying to fill in • They are in the process of filling them in right now • Unless they have the appropriate income units of comparison, they are not going to come up with a decent value c Mr Price stated • He would end it there. • However, the division did come up with a sales ratio and said here is the sales ratio but it really does not mean anything Mr Sitko responded- • It was their first attempt and actually has some validity to it • It is saying that it can get better • It was the division's first attempt at it and prior to this no one ever tried it • They are dust following the recommendations of the IAAQ to expand their sales ratio reports c. Ms Wille asked Mr Hussey to weigh in on the matter Mr Hussey responded • He is hearing a willingness on the part of the County • They have a desire to have this additional tool to assist with appeals on commercial property valuations and they do not have a way to do that at the moment • They are at a disadvantage as Ms Wille pointed out. - 8 - • To define the type of data that would be required to employ the income approach from the market's point of view they would not necessarily have to get current rent rolls as that are simply a record of the individual property owners • Contract rents are not market rents • Somebody could be a long-term tenant there and give them fifty percent (50%) rates and what are you going to do with that? Not a whole lot • So they would not have to collect things like contract rents • They could develop the average expenses for a particular property type • They could go to the market and do rent surveys and find out what the market is paying at a given valuation time then identify that type of data and define a system • That is something that has not been done before • They have got some experience in terms of what would be required but I think the starting point would be to define what it is that would be the drivers on and the units of measure, whether it is revenue per room or something else. • It could work without a whole lot of additional expense if they targeted the right kind of specific information for each property type and then began the collection process and made it work • That would balance the see-saw a whole lot and it would be a much fairer way • For income producing properties, while they consider the cost approach and sales comparison approach there is so little data • Eighty-one sales in five years, how are they going to get precise in terms of valuation? It's a throw away • They go through it because they are required to by USPAP or whatever • Thinks it is a very doable thing and as a committee member, welcomes their definition of the key elements of data that they would need to drive this system • Perhaps recommendations on what additional costs that would impose • It is a new system although it may, if they switch to reliance on the income approach where appropriate and do not do as much work on the sales collection data and the cost approach which are staple but to be aware of the improvements made by an owner • When a hotel built in 1976 or 1967 gets refurbished, that kind of information about the physical condition, marketability, etc , is important too • Thinks definition of the key piece of information they would need is an estimate of what the additional cost there might be as there will be some savings too if these property types were to shift from the method used before to a reliance on what they - 0 - should be driven by, the income approach, then the division could get it done • It would be painless and it would score a mayor point for fairness, clarity and appropriateness of valuation systems • Would be delighted if they can further that kind of objective process here Ms Wille announced • They should think about what things that they would want to go over now or what things they would want the division to report back at the next meeting so that the members will be ahead o Mr Onishi stated • His understanding is, and also with the Task Force Members, that they want to look at the income approach • As Mr Sitko and Mrs Crawford mentioned, a change to the code is needed • Will need to get a proposal to the Council to change the code • After that, as the budget will be coming up in the next few months, a possibility would be to recommend getting some funds to the Finance Department to possibly contract some of the work so it gets done faster. • Mr. Sitko's saying they are shorthanded, that there is only one person • They should start looking and moving in that direction and trying to see how much funds are needed because if all the members agree that this is what they would want to do, then they should work with the department to have them get that proposal to the committee so the members can look it over • Then it can be submitted, after the Finance Department gets the committee's approval, to the Council for the budget c Mr Inoue questioned Mr Sitko if he knew if Maui County, Kauai County or Honolulu County uses the income approach Mr Sitko responded that all four counties at this point do not use it Mr Hussey questioned if they were using it or not Mr Sitko responded • All four counties are not using it except for defense work • Understood from the history that this comes down to the way the ordinance was written and a decision by Judge Chang who is in charge of Tax Appeal Court c Mr Hussey questioned if Mr Sitko would anticipate a judicial challenge if they were to recommend what is the obvious Mr Sitko responded • No because basically each County has the right to do what it needs to do as far as real property taxes are concerned • The limitation is because it specifically mentions that they use the market and costs in the County's ordinances and they did not include the word 'income or that approach - 10 - Mr Price stated • Wanted to follow up on that because when he first went to work for the County he questioned why there was no income approach • It took him almost a year and a half to get the document • The Judge's decision was pretty much based on dust one very small portion and it seemed like all of the rest of the Counties then decided why go through the expense or why do that approach because now we're going to have to teach our staff or we're going to have to do this or that • They all just said we're not going to do the income approach • Never heard of that before • Talked a number of times to Mr Sitko before when employed there and that is the only place that didn't use the income approach and wasn't sure why • Wanted to find out what Code change Mrs Crawford is referring to Mrs Crawford responded that it is the Hawaii County Code Mr Price questioned if the department wanted to change the entire Code and for what reason? Mrs Crawford responded • Chapter 19 specifically states as to what approaches are to be used • The department would like to add the income approach to that c Mr Sitko stated • In Chapter 19, specifically 19-53, it states that value is by using market and costs • It omits income which is what the whole decision was revolved around. • It is Chapter 19 that needs to be changed because by the Constitutional amendment this rules Mr Onishi noted that every committee member has a binder that contains a copy of Hawaii County Code Chapter 19 Ms Wille questioned • If they were all in favor of tentatively showing their recommendation to include an income approach subject to further research from the Department of Finance as to what would be involved and what the impacts are • Asked if the members were in favor of proceeding with this Mr Hussey responded • If it is feasible for the County to come back with the types of definitions that have been discussed, a proposal as to a Code change and the specific elements of the income approach which need to be put in place to make it work • Also with a recommendation for any costs involved as there may or may not be additional costs because there is going to be work eliminated and there is going to be work added - 11 - c Mrs Crawford responded • The department would be able to have something drafted for the Code change • If there is no code change required, as Mr Price stated, then they will not present it but will inform the members of that • As far as the further details that would be involved once this has been recommended to the Council and then the Council takes action, is that the department would need to request a longer timeframe to come up with those specifics as mentioned by Mr Hussey • Currently the Finance Department is working on the budget and Real Property is setting the values for the year • Very intense time for the division right up until the time when Mr Sitko completes the certified values Mr Sitko stated • Found the specific point in the Code relating to values It is Chapter 19-53 which states 'Except as provided below, the director of finance shall cause the market value of all taxable real property to be determined and annually assessed by the market data and cost approaches to value using. ". • That is what Judge Chang was hanging his hat on those two approaches that were allowed • The third one is not mentioned. • That is where the change is needed Mrs Crawford added that it would be a minor change Ms Wille requested • If there was some idea as to haw much money the County was losing in appeals because they do not have adequate ammunition to defend the County s position Mr Sitko stated • The division recently acquired an excellent commercial appraiser who is also licensed outside of their office • The appraiser has been very successful in asking the appropriate questions • When they receive an appeal they then treat that property individually • It is no longer being mass appraised at that point • They are missing the models or base line or what contract rent is not market rent • They need to determine what the real markets are on this island • That is going to be one of the fobs in setting up these models Ms Wille questioned • Can we say two meetings from now that you could report back to see where you are at and if you need more time? Mrs Crawford stated. • In terms of providing the members with the information, would that be information that they would like to have before they make a decision as to whether or not they would recommend this to the Council? • Would they want the details? • What information did they want from the department? • We need to be clear on that Ms Wille stated • What would the next steps be and what the different options were? • Identified the Code change and would need to get that in place • How would they get this on board within two years or three years? • What are the department's needs in order to implement it? • How does the committee assist in carrying it out? • How do we make it happen? Mrs Crawford responded • Would ask that they be given until May to provide detailed data • Would need to work a little on what information they could provide that would help the committee and maybe it would not take that long • Not sure yet if Ms Wille is asking for some of the same kinds of data that Mr Hussey is asking for, which is actually the details of data we are going to set up and identify as this is what we want to collect • Just the decision making part and given the current allocation of staff's time they do not think they could do something like that in such a short amount of time c Ms Wille responded • Would be comfortable giving them up through May to report back on it • Part of what she's looking at are what are the options • How do we implement it? • Can we do it in steps? Mr Price stated • Thought that they were asking for the Code change • Why would they wait for May? • It would be dust changing one word Mrs Crawford stated • The Code change could be done immediately • The request for other data that the committee would like to consider before they decide whether they are endorsing that Code change is what she was referring to Mr Hussey stated • That one would need to start from the general and define the categories of information and the broad steps that need to be taken as a guide to the process • Not to say ok in May or in March we are going to use the average daily room rate or whatever specific indicator of value - t-, - • Need to indicate the types of things, the decisions that need to be made if you were to do this and to set a framework later on would be filled in with staff research • With the press for time he would like to keep it very broad • Look at first blush in support of this I think you say that you d like to see this done and if we begin to put together a plan in broad strokes as to what needs to be done to make that happen sooner or later, then not to expect the nitty-gritty at the bottom level decision would be made in this first iteration that the department is going to come back with. o Mr Price stated • Wanted to follow up on something that Mr Onishi said on commercial as far as getting the dollar amount to the division to hire somebody outside to do this • Thought that is where they were going with that • Wanted to refer back to about 10 to 12 years ago Councilman Jacobson wanted to do that on commercial and Mr Sitko came up with a $10 million figure as reported in the newspaper to do that • Would it still be the same amount that they were thinking of? Mr Sitko responded • The $10 million figure or $75 a parcel, was for the entire County for a full revaluation • That was an estimate at that time based on what they were charging Kauai for lust data collection • Felt that the commercial could be done for a lot cheaper if that was done • It was being considered at one point • A reevaluation would have one-third of the properties go up, one-third go down and one-third staying the same and he was asked the question if the County would get their $2 million back and I responded no, not right away • Figured it would be relatively neutral because they would have to find a whole resort that they forgot to assess to make up that difference and that was highly unlikely Mr Price stated from what he understands from what Mr Sitko dust said is that he was referring to revaluing the whole County although Councilman Jacobson only wanted the commercial done at that time Mr Sitko stated that Councilman Jacobson thought that they could do the whole County for $2 million. c Mr Price questioned that the commercial would not cost as much Mr Sitko responded no that it would obviously not cost as much Mr Price stated that it was an outside firm doing the work v Mr. Sitko responded • yes it would be an outside firm • Did Albuquerque for $2 million commercial only 16,000 parcels with income, cost and any sales comparison - 14 - Mrs Crawford responded • She didn't think that they were talking about the same thing at that moment • One is revaluing all the commercial property and the other is beginning to use the income approach Mr. Price stated • What he was getting at is when they do the revaluation they do it that way so you have a starting point and you have all the criteria as stated by Mr Hussey • These are the identified information that they need, whether it's the garage doors that Mr Sitko referred to or the amount of beds it is all done in the revaluation • Once they get that done they have the whole package completed • Then all they have to do is maintain it Ms Wille stated: • Would like to break it into two decisions • One, do they have an affirmative that they are all basically in favor for adding in an income approach. • Called for a vote All responded with ayes No one responded against Decision made • Second, requested that Mr Hussey read his motion Mr Hussey moved that the panel request of the County a broad implementation plan to implement the income approach for appropriate property classifications and give the panel an approximate timeline in which that could be done Mr Inoue seconded the motion Mr Onishi stated • Really did not want to discuss about that. • Wanted to see if they could dust move forward and start having Finance do the change to add in income and also for them to come back to the committee and find out how much it would cost to get evaluators or inspectors in to do the job. • That is where they should start looking first because they would need to know how much is it going to cost to get employees in or to contract out and then they need to make a decision. • Whatever the members are discussing is great and understands what you they are saying • Knows that it will come in later once they get a new employee in • The person is going to know what their responsibilities are and if contracted out, what the contractors are going to have to be looking at • Then will be able to implement all of it. • Right now their decision should be to move forward to get the Code amendment • Finance is going to get that to the Council so they can put that 'income' in there and then the committee will need to find out how much is it going to cost to implement this program • The budget is coming up by April or May c Ms Wille stated. • They need to first follow through as they have a motion on the floor so she would like to take this motion as there was a second from Mr Inoue • Requested that the motion be read once more c Mr Hussey • Moved that the panel requests of staff a broad income approach implementation plan identifying broad necessary steps for appropriate property classifications and approximate timeline to implement that • Stated that he is not expecting that this is going to be at the detailed level • Just a statement of intent and a first draft of what they need to have happen at the general level • Does not expect more than a one-page response • Not something that the department is indicating that they would have an opportunity to do in detail • Does not want to push something prematurely but simply to set the stage for conservative action in the future • That is the intent of the motion Ms Wille called for the vote Motion passed by a vote of 5:0. Ms Wille stated • Wanted to follow up with Mr Onishi as she heard him state basically two things in addition to what was just voted on • One, proceed and get the correction in the Code which would give them the option in doing this • Second, what would they need to have this in place in two years such as additional staff person • If they wanted to take three to five years, do they not do it • What financial support would be needed Mr Onishi stated • If they would want it right away then they could contract it out and get it done • If this is very important and they really need this data, then why are they going to wait two to five years? • Get it done right away • Invest now for the long term Ms Wille stated • In terms of options, perhaps they could send a letter out right now stating here is where it is at and if you do not respond this is where they will be going to go in value • What would they be comfortable with, what are the options and how can they weigh in. - 1() - • Can they proceed with a motion to work on the code change? Are the members comfortable with that? Mr Onishi moved to have Finance Department assist with the preparation of the amendment to section 19-53 to add in 'income' Mr Hussey seconded the motion A call for discussion was made c Mr Price stated • Question as to what change is being made • Are they changing one word or is it changing any place else or anything else in the Code Mrs Crawford responded • Part of the job of the Corporation Counsel is to assist them with those changes • There are many places, like Chapter 19 for example, where you do not just change one place • They are interwoven and that is why Corporation Counsel will assist and make sure that whatever the department submits to the Task Force is complete and appropriate Ms Wille called for the vote Motion passed by a vote of 5 0 c. Mr Price stated • Wanted to go back to the RFP (Request for Proposal) that Mr Onishi is asking for • Are they dust asking for Mr Sitko to get ahold of couple outside consultants and let them dust give us a one-page letter saying if we come to Hawaii and do your revaluation on commercial it's going to cost this much per parcel or is it something more elaborate that they were thinking about? Mr Onishi responded • They were leaving it up to Mr Sitko and Mrs Crawford to let them know what would be the best avenue, • Either hire someone permanently and to be within the department or the section or to dust contract it out • Relying on them to give the committee the information and then the committee can decide what they should do • They're going to have to get the support from the Task Force to the Council to have the Council amend the budget if need to or to support if there is another proposal to open a position and so forth Mr Price questioned • The department will have a dollar amount and bring that to the committee and say if we did it in-house it would cost this much per parcel and if we did it outside this is what it is going to cost per parcel Mr Onishi responded • They were only looking at positions • They want to have this done right away as the Code amendment is going to be done quickly, within the next couple of months or month and a half they could get it changed. - 17 - • It is up to the Task Force to decide how fast do they want them to implement it • As Mr Sitko stated, they only have one staff member so it might take two to three years c Mr Sitko responded • Saying three years because of the review • It would be one person reviewing all the commercial properties on the island c Mr. Onishi stated. • If the Task Force members feel that they should do it faster, or have the department do it faster, then they would need more manpower • That's where their recommendation is going to come to the Council and say that the Council will also need to provide the department more manpower and this is the amount of money that they need Ms Wille commented that it is part of Mr Hussey's request for broad information and to see what some of the options are Mr Hussey stated that it would certainly be a start on a one-pager and then they could have a dialogue in a way that is not going to bend anybody out of shape Ms Wille stated • If they are going to keep loading down the department with more assignments, how does the committee juggle all these things and what are the options • Just trying to look at what is realistic but we want to act • We want to move forward if it's positive • We want to get something done • If it is worth doing it is worth doing as quickly as possible • If there are some ways that are a step, and maybe talk to corporation counsel in terms of those categories. they could dust assume this we could get done in a year, this we could get done in two years, at least they would be moving on this Mr Onishi stated • The bottom line is how much money would we save or we would collect if we went with the income approach • If it is where they are going to get lots of money coming back, then let's move forward fast and get things going • If it is not going to get a lot of money back, then maybe they can go with that two to three year timeline • But if they are talking about millions of dollars we can collect, then let's move forward • The investment of putting in for labor compared to what they will be getting back will be at a higher percentage • That is how they can move forward Mr Hussey commented • With a thoughtful prioritization of the classifications of property like the hotels and other commercial establishments, that - Is - probably at this point are hugely, the valuation of taxation are dust not related to market because they are a different animal and we haven't been able to look at them that way • Believes that hotels are a major revenue potential for the County and then when you take the next classifications as to whatever they may be, then you take that tip of the iceberg and start going after them right away because it's the top ten percent that you want to go with and not the ninety that are behind it • This is a very exciting initiative and looks forward to the County's first response Ms Wille stated that if no one was opposed then they were going to move on with the agenda Mr Price stated • One last question on this recommendation • Thought that there was someone in Kona that wanted to address this from the public when it was brought up • Mrs Nacis, staff member, noted that his name was Robert Johnson • Thought that it was the committee s main purpose for putting this off because he had something to say about it. • When they go back to Kona the next time will they all him to speak or not Mr Onishi stated that they could let him testify Mr Price stated that he was dust inquiring as to procedure because Mr Johnson made the trip to Kona and then the committee informed him that he could not speak c Ms Wille responded • The committee was already past public statements on the agenda when Mr Johnson arrived • It wasn't that they weren't allowing him to speak • This issue will be moving on and moving forward • If we were saying forget this and we knew that he wanted to speak, they would lean towards differing it if he had a particular interest. Recommendation 32: Ms Wille requested that Mrs Crawford provide a statement summarizing the issue Mrs Crawford stated • This recommendation was that Council work with State legislators to implement some changes that would allow information from the State income tax returns and death certificates to help in determining if homeowner exemptions are duly valid and institute other procedures as well that would help in determining residency for homeowner exemptions. • Since the last Task Force meeting, Mr Sitko had an additional meeting with the Real Property Tax Administrators from all four Counties and they had a subsequent meeting, but one of those items as stated in the report has already been completed - 1() - • Time has gone by so some of the concerns expressed there have already been handled • The division is receiving the requested information after some needed legislative change but it also required cooperation from these State departments. • Legislation by itself did not necessarily get them anything • The Tax Administrators have done a very good job in working with the different State departments to come up with a nice working relationship that allows it and the death certificate information is available to them and they are working on income tax information as Mr Sitko will address Ms Wille stated • Just wanted to summarize as to how to prevent abuses of people taking exemptions that may have expired or no longer be applicable • Wanted to open it up for questions although she wanted to get one census, if they had it where everyone had to qualify on an annual basis for the program, would that eliminate having to do some of this gathering of this information? Mr Sitko responded • Maui County currently requires property owners to file a State income tax annually • That agreement, and it is the same type of memorandum of agreement that he is entering or hoping to enter with the Department of Taxation, it is basically sending in their exemption lists to the DOT, they compare the names against their records and provide information as to whether they had Hawaii filings or not • That is how Maui County handles it • There would be some major issues that they would have to address in the Code before they could get that stringent because they don't get their homeowners exemption unless they file a Hawaii return • With the bureau of vital statistics, they have already gone through and compared around 1,200 names of people who have died and nobody had bothered to ever inform the division • Until a probate is started and the title actually changes they do not really know • The four Counties actually did have to get some legislation passed requiring the State to do it and the bureau of vital statistics came to an agreement with the administrators then they backed off and again started submitting their lists of exemptions, names, etc • The State's first run on this was last cycle and that is why they had 1,200 names on there Some of them dating back 10 years that have been getting exemptions without letting the division know that someone had died o Ms Wille questioned • Should they be revising this recommendation? • Should they be waiting as Mr. Sitko had addressed some parts of it? • Does not know where the gaps are • What is left for them to deal with since the department has handled some of it and have taken care of it already? c Mrs Crawford answered • In regard to recommendation no 32 that there is not any Council action at this time The only thing that they have not actually seen yet is the tax data because they're working on the MOA Mr. Sitko responded • They are working on the Memorandum of Agreement Once again he pointed out that there is a big difference between Hawaii County ordinances and Maui s so that may be something that the committee may have to look at Ms Wille questioned that there may be some recommended code change to implement what they're working on Mr Sitko responded • They will be able to implement it • Just that it won't be 100% because whoever did file a tax return is all of a sudden going to fall into the category of deserving a home exemption • It is the negative that they are not going to have • Should someone not file. the division is not going to have any positive reason to remove them from the program Mrs Crawford stated • It's only Maui that actually requires homeowners to file their State tax returns whether they would normally need to or not • They are required to file a State tax return as their way of proving their residency to the tax office Mr Price questioned if that was for dust the one exemption or were there other exemptions that they were talking about c Mr Sitko responded that the death certificate was for all exemptions c Mr Price stated • Mr Sitko stated that people had passed away and they didn't know about it. • That was straightened out and the division is now 100% okay that it has been straightened out? Mr Sitko responded • They will be submitting their lists annually to the State • They are in the process of scrubbing those on an annual basis. Mr Price questioned if it is the homeowners that they are hung up on at this point and not any of the other exemptions c Mr. Sitko responded • No, as it would be the homeowners that are giving them the issues 't - • Owners need to have a primary home here c Mrs Crawford stated • This recommendation is about homeowner exemption and that is what they are talking about throughout these recommendations • There are items, as even at the last meeting, that they talked about that you could do • There is a lot of overlap in these recommendations from IAAO and so the fact that they are talking about homeowners right now is only because that is what this specific recommendation referred to c Mr Price stated that the only reason he spoke up was because Mr Sitko mentioned death certificates Mrs Crawford questioned if Mr Price's understanding was that it had nothing to do with the homeowners' exemption c Mr Price responded yes. c Mrs Crawford responded: • If someone has a homeowners' exemption and they have subsequently passed away, this information allows the division to remove that homeowner exemption • We might not have otherwise without the death certificate information • They would not have known to remove that exemption and that property would continue to get that advantage under the homeowner exemption Mr Price asked • If Mrs Crawford was talking about a broader spectrum of the homeowners' exemption • Mr Sitko's referring to one thing and Mrs Crawford is saying that it is very limited. • Missing something on that • It is all taken care of with the exception of homeowners' exemptions • That is the one the division is working on whether part of it is a death certificate, or they do not live here or the spouse does not live in the house Mr Sitko interjected stating • The recommendation was to work with the State legislature to get the State to cooperate with the department and there are several divisions that they are working with • He covered vital statistics which is the one department that gives the division the death certificates and that is applicable to all personal exemptions, disabilities and homeowners. • They are working with the Department of Taxation on trying to establish residency criteria that they actually live here and not somewhere else • This is their primary home and that is the particular issue they are trying to get with the Memorandum of Agreement • Yes; they are talking about two different things but they do all flow in to the division Mr Inoue stated- • Wanted to thank the department for taking the initiative because among his colleagues in the real estate industry there is a concern that owners are taking advantage of the homeowners' exemption. • They live on the mainland and they file a homeowners' exemption • It is really of concern because the income that the County is not able to receive because of the exemption they think is quite significant Mr Sitko commented • The division's difficulty is that they have to prove it • Everyone has the right to appeal once the notices are sent out • If they are denied an exemption they have the right to appeal • Then the division has to prove that they are not a resident • That is one reason they are looking to tighten up the sources of information that they have Mr Hussey questioned • If there was an accepted legal criteria to establish residency on the Big Island • What might that be and does the division have access to it Mr Sitko stated • That it is Chapter 19 • He would have to check but thinks that it is Chapter 19-73 but was not sure Mr. Hussey questioned if it is generally tax forms. Mr Sitko commented • It is whatever they define • This is a County exemption Mr Hussey stated • Mr Inoue's comment that there are a lot of people out there that think that people are misusing the homeowners exemption and it is not fair and it is perceived to be that and it needs to be fixed • How do we fix it? • The division has taken some initiatives to do some closure to the problem • What else can we do to define a way that is possible to stop this from occurring? Ms Wille stated • There are also driver's licenses and voting records also • Do we need to do more? • Should a person be required to re-file or re-request to get the personal exemption? • There are lots of cases where people have lived here, full-time for a year, then they leave and are doing just part of the year here. Mrs Crawford commented • One thing could be that they could require residents to all file tax returns. • Maui is the only County that is doing that • There are other options and they could be presented. • Ms Wille mentioned having people renew every year • There are a little less than 40,000 homeowner exemptions so that would be 40,000 submittals coming in every year for their staff to review • The committee and Council could decide what is best but there will be costs associated with that for the department as well • The department could provide a list of different options • Maui also removes people from the homeowner class if they are late with your payment even if they are one day late • Did not think that our County Council would be interested in implementing that rigid a law although Maui County did • That is information the department can provide to the Task Force for them to consider what they might recommend to Council Mr Onishi stated • Ms Wille mentioned that it may be possible for the recommendation from this Task Force to the Council is to implement that income tax requirement • Did Maui change an ordinance or did they change their Code? Mr Sitko responded • They actually changed their Code • Their version of Chapter 19 • They require the returns to be presented on an annual basis to get their homeowners Mr Onishi questioned that if the Task Force would recommend that to be implemented, would the department be alright with that? c Mrs Crawford responded • They have not had time to talk about that specific recommendation yet • There are some other places in the recommendations where they talk about potential changes to exemptions • It would take some analysis on the department's part to figure out how much work that would be for the staff • Not opposed to tightening this up and finding some approved methods in determining residency and the allowance of the exemption • Not sure if that particular method is what the department or the Task Force would think is the best Mr. Onishi stated 24 - • Maybe the Task Force could wait until Mr Sitko finishes up the MOA with the State tax department to get the information • If that does not go through then the Task Force could recommend that it be put in our Code that the annual tax returns be a requirement Mr. Price questioned • If it is something that they would want to do why wait for legislation? • Why jump through all those hoops and hurdles of the MOA and going through the State legislators to give the department the information they already have? • If it is implemented in Maui why would they not be able to do it here without going to the State legislature? c Mr Onishi stated • Mr Sitko did not say State legislature • Mr. Sitko is going through the State tax office to get the MOA • What Maui did was through their County Council Mr Price questioned if the department could do it through the County Council c Mr Onishi responded yes but that the department would want to get more data first before they make the proposal Mr Sitko stated • What Maui does is they take their list of exemptions and sends it in to the State department and gets back a response • The response shows these are the homeowners exemptions these returns were filed and these were not. • That would require the Memorandum of Agreement with the Department of Taxation o Mr Hussey stated • The success of Maui's initiative through the Council to have that comparative information from the State, has it reduced the abuse of the homeowners' exemption? • If so, by how much • Do they have any information that would be helpful to the committee in evaluating that particular alternative? • Timing is one issue to file every two, three, four, five years rather than annually they should have a way annually to hold people accountable, whether they are living here and deserve a homeowners' exemption or not • Does Maui have any feedback yet on the effectiveness of who has filed taxes, who is getting an exemption and how much money they have saved? • Has it corrected the problem? • That is one request for information that would be helpful • Second would be to see what other means might we have to take local control of this thing to close the abuses • The department has done several things —they have done a MOA, they are working with the State to get that information -- but what else can we do here to stop the unfair abuses? c Ms Wille stated • Sees it as they are addressing the issue • They can come back to the committee with sort of a gap analysis as to what are they still missing • Do they feel that they got enough information that they have addressed that the administrative costs of whatever is left over is not worthwhile • It is about balancing • Want to prevent abuses but would require weighing how much are we going to bring in versus how much will it cost. • Does not have any problem adding in an annual requirement of eligibility and whether that's through tax filings or submitting else like your drivers license or submitting your voter registration • Does not know what the time frame is as to these agreements with the State are • The committee should look at their next steps or their next decisions that they need • Or maybe just have it that they would want to vote that we do want to proceed with this item on the agenda and that we want to address the potential abuses on the homeowners' exemptions • The Task Force is looking to the department as they have already addressed some of those issues in administrative ways • Look to the department as to what recommendations, if any, that the committee needs to follow through with and whether they would involve County Council action or not Mr Hussey questioned • Would that be on the next agenda, or two agendas from now? • What would be feasible in terms of what has just been said? • Could the committee put it on the next meeting's agenda or the one following it in this heavy tax period? Ms Wille questioned if they would want to say by May? o Mrs Crawford responded • Certainly by May • They could probably do it sooner but is not sure about February as it is a very tough month for them Mr Sitko stated • He could get the information from Maui as it has already been discussed with their Administrator. • Does not want to quote things that he did not write down so he would want to go back to Maui s administrator so he could probably get a report on the savings that Maui has gotten from it or the problems that they have had with it Mr Hussey questioned if they would want to have it on the March agenda or April agenda c Mrs Crawford responded that March would be fine Mr Hussey moved to request a follow up on recommendation no 32 regarding Maui's progress in stopping these abuses and recommendations for further methods to plug the loophole Mr Onishi seconded the motion Ms Wille called for the vote Motion passed by a vote of 5 0 Mr Price stated • Thought that they were talking about recommendation 32 • It states that "the Council should consider working with State legislators" • That is what he was referring to, "to obtain residency information from income tax returns and death certificates to prevent abuse of homeowners' exemptions In addition, the division should institute procedures to verify residency using drivers' licenses and voter registration records Council to prepare a resolution and draft a bill as part of the HSAC package to generate support in legislature to obtain residency homeowner information " "RPT Progress Report all the counties have come to an agreement with the Bureau of Vital Statistics regarding a method of purging the exemption rolls of deceased individuals We have dust completed removing 1200+/- exemptions based on this data The Department of Taxation is also willing to come to an agreement to share income tax data for residency checks " • Now we are sitting here and dust trashing all of it? c. Mr Onishi stated • If Mr Price reads it, in the beginning the recommendation was that the Council work with the State legislature to get the information for the State income tax and the death certificates • Mr Sitko already has an agreement with the vital statistics people that they provide the division with the information • Now Mr Sitko is working with the State tax office to get the MOA to get the residency about the income tax • The committee does not have to propose any legislation and work with the legislators because administration is already moving forward on that Mr Price questioned if the Task Force are not going back to October of last year c Mr Onishi responded • No because the department is already doing it • The department is doing what the recommendations were Ms Wille questioned • Would they be doing a gap analysis? • What is missing that is needed to proceed c Mr Onishi stated • They are looking at what Maui did. • The department will get back to the committee to let them know if the County of Hawaii should do what Maui County is doing OLD BUSINESS • Follow-up reports from Finance Department on Consultant's Report items 18, 22, 24 & 25 (together), 27, and 30. o Recommendation 18: Ms Wille recited the recommendation — The Real Property Tax Division should consider formalizing supervisory review of some or all appraisals done by staff They should incorporate a broader role for valuation analysts. Including running quenes on a regular basis to look for sales chasing and budding permit chasing Findings should be reported as part of an annual ratio study report." Further, from the initial Ad Hoc Committee report — "Finance agrees that formalizing appraisal reviews should be done and In the short term Appraisal supervisor will be responsible " Questioned if the department had any follow up on that agenda item c Mrs Crawford responded • For that particular item there was a question as to what is the baseline or target of appraisals to be reviewed and they said about a five or seven percent • We do not have an analytical process to present to you on this particular item but that is still what the department feels is a reasonable baseline and target. • Appeals, complaints and sales are all 100% reviewed and that constitutes about one percent • The additional review done by the supervisors would be another four to six percent of the appraisals which we think are doable • There was a comment as to contracting appraisers to come in and view the division's appraisals done by the staff and they considered that and they dust do not think that it is practical at this time Ms Wille opened up the matter for questions or discussion. o Mr Onishi stated that at one of the last meetings that the department mentioned that they were short on staff Mrs Crawford provided an update • The only two vacant positions they have at this point, after filling the clerical ones, are the two valuation analyst positions • They have been recruiting for both of those positions and the interviews are scheduled within the next two weeks or less for one of them as the department just received the list ■ The recruitment for the other position is closed ■ The department has not received the list from Human Resources yet but that should follow very shortly ■ The department is optimistic that a month from now they will have two additional staff members to help with review ■ The other point that Mr Sitko made before is that there are a lot of analytical review that takes place ■ Even though the division has not had those valuation analysts, Mr Sitko had the ability to run a number of different reports in the computer system - ?8 - ■ That may not be the same as sitting down and reviewing someone's appraisal but it provides important on data on how the appraisers are doing in total on their properties Mr Sitko stated ■ Did not have much more to add to that ■ Right now the biggest back up is with him at the moment until the valuation analysts are hired ■ That will provide the much needed assistance to himself and Ms. Nahoopii ■ This is one reason why he is not able to do too much at this point because the division is trying to get everything ready and packaged to send out for the assessment notices at the end of February ■ During this period, edits are sent out to all the appraisers ■ If there are errors, or it does not look right among other things, or values are changed by more than a certain percentage, it is reviewed and sent back for explanations or revisions ■ The division needs more people running these edits ■ Mr Sitko is able to run them once and then has other obligations to tend to making it difficult to stay on top of the task Mr Onishi stated ■ Mr Sitko mentioned that the staff needed more training • Are you doing that as well? Mr Sitko responded • Yes, they have an IAAO instructor coming in on the last week of April and they are going to be doing residential modeling. • Last session the appraisers had was IAAO 300 which covers the fundamentals of mass appraisal. • The appraisers took the workshop on sales ratio analysis and studies which was also one of the recommendations from the IAAO • They are about 80% through since the division is having the appraisers take the course two at a time by webinar and not all at once Mr Price questioned ■ Mr Sitko's sales ratio analysis that was prepared by Keita Jo was done under Mr Sitko's supervision? ■ Is not Mr Sitko available to do it? ■ Ms Nahoopii is also available to do it ■ The appraisal supervisor is or is not available to do that work plus this other person ■ That's four people within the department, although I have not been there in years, that actually can do bits or pieces of this valuation analyst but the department is saying that they still need two more Mr Sitko responded that both he and Ms Nahoopii are administrators and they have other fobs to do as well Mr Price acknowledged that Mr Sitko stated that he would do the job to get it done but you do not need to. Mr Sitko responded ■ The valuation analyst will be doing this 0 _ ■ This is actually part of their jobs ■ Keita Jo is an Appraiser IV ■ Mr Jo has taken the training, he has taken the initiative to do this but he is above and beyond the call of duty at this point ■ Although Mr Sitko sits with Mr Jo and I review it, that is a little bit extra on Mr Jo's part o Ms Wille questioned as to where this is going with this item in terms of questions Mr Hussey stated. • He read the recommendation, apparently it is sprung from the fact that the auditors did not find a formal supervisory review of some or all of appraisals done by staff and that they suggested that one be established at the valuation analyst level and as he remembers four to six percent is the number from past discussion as being a good target. • The question is is there currently a formal supervisory review process on the way? • Mr Sitko mentioned a number of peripheral things but is there a system as to having a review process and setting criteria. • Then the appraiser would be required to say what they are doing, to what stand, and how it measured up to the standard • Is there some kind of review system currently in place at the tax department? Mr Sitko stated. ■ They are working on it ■ They do have an appraisal supervisor and they have been working with him on setting up, what he would call a random schedule of parcel reviews, but that still has to get started at this point o Mr Hussey questioned • Has a model been articulated? • Presumably this group internationally doing it for counties all over the United States or somebody, has a model of a review process for tax offices that could be looked at and say this is what we do not have now, we are working on it, but we know where we want to go ■ Does someone have a system that other people have used successfully and has that been articulated and does it exist? Mr Sitko stated ■ This has been discussed with the appraisal supervisor ■ From the eight years of mass appraisal projects that Mr Sitko has been on, they took the data or the property record cards, they selected them randomly so that it was treated equally they go out and take a look at the building, they review all the characteristics on the card if they were properly collected, and they also check for the grade, the estimate of the CD or depreciation that was put down on the card and fundamentally that's all you do at that point. ■ Unless you see something wrong, then you go out and recheck the property Mr Hussey stated that this process has been going on for some years apparently as an approach to proper management of the process - 10 - o Mr Sitko responded that this has been going on in other jurisdictions and usually when they are doing a reevaluation for as long as he can remember c Mr Hussey stated • The auditing team came in and said that the process that is currently in place be formalized so that there be supervisory review • So what they are after is if there is a model out there that the department could benefit from that they would not have to reinvent the wheel • Looking at that model to say here is where we are now, here is what we have been doing and it is gone part of the way but somebody comes in and says here is some additional things that might be helpful in fairness of administration of the tax process • If that model was in place and you compared that ideal against where you are today and see what the division has to do to get to the model • What he does not hear is that there is a model that has been identified and I think that would be the first place to start ■ There has got to be several out there Mr Sitko stated that he was a little confused as he thought that he had already articulated the model that they are going to be utilizing and that is the one that they will be using Mr Hussey responded that he thought that it was the model that the division had had been using Mr Sitko responded • That is what he had presented to his appraisal supervisor as what they want done ■ They still need to get it going at this point Mr Hussey questioned that the model is not in place yet but they have a one in mind Mr Sitko stated that he had communicated the responsibilities to the individual who needed it Mrs Crawford stated • In the near future that could be formalized in the form of a policy or guideline • As she understood what Mr Hussey was saying, that the department does not have a formal model that they could show Mr Hussey stated • Somewhere out there, hopefully somebody with similar tax responsibilities could be looked at to see here we are now, here is our information and what can we do from here • The committee would support what is decided upon to move in that direction and they would be working together to fulfill the intent of the auditors Ms Wille stated ■ Appreciated what Mr Sitko stated ■ It could be put into two things — do you have a policy or plan and then getting it implemented ■ That is two different timelines - 31 - • Even if the department took the next 90 days in terms of responding to this recommendation at least they would have a plan • They could also do a little more research and check it against what other places are doing. • It seems like the department has partially succeeded in this or have already got that plan and now it needs to be implemented • Breaking it down into having a policy and what that timeframe is to put that in writing • Second, in terms of implementing and what is a realistic timeframe on that • When would the department come back to the committee with this item? • Would it be in May or April dust so it could be put on a tentative agenda? o Mrs Crawford responded it would be in May because they will need to bring additional staff on board and give them their responsibilities as well as their appraisal supervisor c Mr Sitko stated that he currently is having the appraisal supervisor enforce the edits that are being sent out so he really would like to hold it until May Ms Wille moved that the committee would like to receive a report from the department as to where they are in terms of putting in the review process in as a policy and the timeline for a realistic plan for implementation Mr Onishi seconded the motion Motion passed by a vote of 5 0. Due to other obligations for members of the Task Force, it was decided that they would continue with the discussion of recommendations until 1230 p m At that time, the members would adjourn the meeting and carry over the remaining items on the agenda to the next meeting Ms Wille requested that Mrs. Crawford select the next item for discussion on the list of recommendations Mrs Crawford stated that they could keep to the order as listed and discuss item no 22 unless someone may have an issue with doing so Recommendation 22: Mrs Crawford commented ■ The process has been going pretty well ■ It was requested that the department bring copies of CTCs (Conveyance Tax Certificate) to the meeting for the members to review ■ This is another one of the recommendations that talked about taking action by approaching the Bureau of Conveyance about amending their tax certificate Mr Sitko commented that it is the Department of Taxation and not the Bureau of Conveyances and that is where the wrong information was picked up in the last minutes Mr Crawford stated ■ Thinks that the authors of the report misunderstood and mentioned the Bureau of Conveyances but it is really the tax department • The response that was here before is, again, administrators have been meeting with the Department of Taxation and actually have been having some positive conversations with them as far as getting information. • The other thing is there was a comment that a lot of information is incorrect or missing and there was the request that the department bring some samples of CTCs for all of the committee members to see Mr Sitko stated ■ It does seem that the Bureau has been making a better effort at filling in these conveyance tax certificates. ■ The department is working on a Memorandum of Agreement. ■ These are very low priority but the administrators were working not only with the Department of Taxation but are also working with the Bureau of Conveyances to ensure that things are better handled ■ This is a wiser approach in dealing with the State departments because he does not think that they will get effective State legislation that will require the agencies to provide the Counties with all the requested information as needed ■ The State is trying very hard but has their own issues • The State is also short staffed ■ Received that information from the meeting that the administrators had with the State on January I • The State has also have had to implement a new computer system which is not functional at this point but they are working on getting these documents scanned and at one point the Counties will be able to download the documents themselves ■ That will require, on our part, having someone with the technical skills to go in to the data, pull the files, and getting them in to the system ■ Same thing is true with the Bureau of Conveyances but these are all projects in process at this point IJ Mrs Crawford stated ■ Thought that one of the questions the last time was whether or not they needed to actually have the forms changed as perhaps they were not having the correct information ■ They are adequate as they are ■ They do provide the information needed Mr Sitko stated • Right now the division does have access to the multi-lists which a lot of jurisdictions do not have which they use to fill in the missing information • This process informs that there is a transaction going on and then the appraiser can do further research later Mr Hussey requested that the department state in a sentence or two as to what were the real problems with the Bureau of Conveyance as to not giving the County information - 33 - o Mr Sitko stated that he thought that there may have been times where areas were not filled in that should have been filled in and/or incorrect amounts were being calculated Mr. Hussey stated which would affect the tax assessment process o Mr Sitko replied • That it would only if they would need to back in to what was the consideration by calculating the taxes ■ It usually states what the property sold for o Ms. Wille commented • The members were provided with copies of the exemption from conveyance tax. • What the department is saying is that on some of the forms information was not filled in • Whether someone qualifies to get an exemption is determined from the conveyance tax Mr Sitko stated • In that case those would not be considered valid sales because they are usually family members or whatsoever • They provided copies of two forms, the first which they refer to as the 64-B which is the Exemption from Conveyance Tax form which is used to note the transfer title • The division does not consider those transfers as from an open market ■ That would be an invalid sale ■ The next three forms are 64-As which are actual Conveyance Tax Certificates and these would be the forms that the division would be examining for their validity, the sale amounts and other information o Mr Hussey stated • This seems to be a point initiative of all counties to go to the Bureau of Conveyance to get them to provide better information • Are the other counties on board or is this something our County should be spending time on or is this a political dog that is going to be beaten out of existence and driven into oblivion or what o Mr Sitko responded that this is a four county initiative o Mr Hussey questioned if they are all working on it * Mr Sitko stated that the responsible parties from both the Department of Taxation and the Bureau of Conveyances come in and they share the data Mr. Hussey questioned if the panel could do anything to help them out on this or is this something that they should not consider Mr Sitko replied ■ At this point the department is doing as well as they can ■ The mayor issues right now are the State's own staff shortages and the fact that they are not able to scan their OTCs because their computer system is not quite functional ■ As soon as they fix those issues up they should be moving forward fairly rapidly Mr Inoue stated that in terms of data sharing, does the department have a link to the State's database - 14 - o Mr Sitko stated ■ Everyone is having problems maintaining their databases ■ What they are looking for are methods to share the information that does not violate their variance ■ For example, when the division requests a scrub of taxpayers who filed their taxes, the division does not need to see the tax forms ■ All that is needed is a list of taxpayers and the State compares it with their information and provides a list of whether it was a yes or a no ■ They are working on the methods of sharing the appropriate information. ■ The CTCs would be put into some sort of a holding area for the division to pick up ■ In reverse, the division does not give them access to their database. Mr. Price pointed out. • The conveyance tax certificate that was distributed to the members, one in particular for $9,000, he noticed that the front of the paperwork is completed but the back part is not • That was one of his complaints when working for the division that they did not have the data there that they really needed • Was there anything included with this form? Mr Sitko pointed out that it was a copying error with the forms c Mr Price stated • He understood but when he worked for the department and received them, that was one of his complaints • On the ones that the back page was needed, whether there was something there or not, they needed it to be specific ■ It was not needed for vacant land Mr Sitko stated ■ This is actually an issue that, once they are able to access the direct scanned copies, is going to be different because right now they are receiving the forms from Title Guaranty as part of the discs that are being provided ■ So if Title Guaranty does not scan it, we do not get it ■ Once the division is able to get it established and able to pick it up directly then they will be able to have that information ■ Now in this case he would need to check as to what happened to the back page as it could be simply that it did not get copied over Mr Price stated ■ The turn around time is phenomenal ■ When he was working for the department he was getting the forms late so it was hard because they were setting their land values for the end of the year trying to use data that they did not get until February or March ■ Has it picked up? ■ Is it getting better? Mr Sitko responded ■ It is getting better on their side - 3� - • But if they did not get the disc by a certain date they could not give it to their staff • Once they have established a direct link to the State's scanned documents, they will probably be able to pull them off on a daily basis ■ That would only be if the division has someone that can do it ■ They are better and felt that they are heading in a good direction o Mr. Price pointed out • On one of the forms that the incomplete information on the buyer and the seller as to no contact information, that made it difficult for the appraisers to contact someone to verify the transaction • How can they be ensured that the information is filled in on the form so they could verify the pertinent information that is provided? • Looking at the second one, the data is provided to assist the assessor so that they can verify it • Looking at the last one, they have some data there but the back side is empty • These seem to be some improvements from what he had to deal with • A lot more improvements so is that what the division is trying to tell us that they are getting better? Mr. Sitko responded ■ They are getting better in filling them out. ■ In a lot of these cases they could confirm a lot of the data with MLS ■ In the case of vacant land, they see a lot of issues as a lot of that do not go through MLS and you would have to contact either the buyer or the seller • The names of both the buyer and the seller are provided ■ The information that Mr Price was asking for is the mailing address or the contact number for the seller and that is something that would need to be brought up with the Bureau Ms Wille questioned • If the buyer and seller always sign on the same form or are they sometimes submitted where the seller signs on one form and the purchaser signs another separate form • That would explain only having half of the available information on a form o Mr Price stated • When he worked for the department he was told that there is a document with both names • It is dust that they decide which one they want to give the department or send back • Does not know that answer but that is what he knew for as long as he worked there • It could be one or the other but he does not know what the State requires Mr Sitko responded that it would be something that he would need to check on at this point but assumed that the seller would definitely need to sign as someone would need to pay the tax o Ms Wille stated • Maybe the County should be requesting both copies — the one signed by the seller and the one signed by the purchaser • Or is it just sloppy and they require only one party or the other to sign it? Mr Sitko commented • It was a very good question but right now they are still depending on a third party to give them this information. • Once they go directly to the Department of Taxation then they will be able to receive copies of both sides • Right now Title Guaranty is getting these documents, copying them, and putting them on discs along with the appropriate documents from the Bureau of Conveyances • They receive those discs every two weeks Mr Price stated that his understanding was that the closing company was responsible for this paperwork. Mr Sitko responded that the documents are probably there but they are being filtered as in what they are receiving right now o Mr. Wille requested • The matter move along and that at some point the department will report back as to the status of their access to the data • Appreciates and is glad to hear that much progress has been made • Are there any gaps here that the committee could pursue as she did not see any Council action needed? • If the department would able to report and follow up on this and what administrative actions have been taken to further improve the situation with the conveyance tax revenues Mr Price • Thanked Mr Sitko and Mrs Crawford for providing the committee with the documents which gave the members a better understanding as to what is being discussed as to the data • The end result is that the staff has to try and make an assumption and it is not fair, especially when they go to an appeal and they are sitting there trying to defend their numbers and the taxpayer has the latest data • That is why he asked for copies of the CTCs just to show on those five how it is a problem Mrs Crawford stated • Her recommendation on this would be that they move along and take care of other things that way down the road, or closer in the fall • They could provide an update report on some of these items, like a blanket update on several of the recommendations Ms Wille questioned if the department could provide a report of that sort in September Mr Hussey stated that would be a good plan as the committee would be going for another year and half on these items it seems - .I o Ms Wille requested that the department provide a status report on items that have been worked on to the committee in September ADJOURNMENT Next meeting will be held on March 20. 2014, at the County Council Room at the West Hawaii Civic Center at 10 00 a m A planning meeting for the members will be held on February 6, 2014, at Ms Wille's office in Waimea at 10 00 a m Mr Hussey moved to adjourn the meeting Second by Mr Price Motion passed by a vote of 3 0 Meeting adjourned at 1230 p m Respectfully Submitted, (N&na,) Sway w Elizabeth (Nina) Swain Secretary/Recorder - 38 -