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HomeMy WebLinkAboutREP FC 170 2024/06/18 (2022-2024)REPORT OF THE COMMITTEE ON FINANCE DATE: June 18, 2024 PLACE: Council Chambers Kailua-Kona, Hawaii TIME: 3:46 p.m. Council Chair and Members Hawaii County Council Hilo, Hawaii 96720 Re: Comm. No. 600/13ill No. 104 Your Committee on Finance, to which was referred Bill No. 104, reports as follows: Bill No. 1.04, transmitted by Committee Member Jenn Kagiwada and Committee Member Michelle Galimba, via Communication No. 600, dated November 8, 2023, amends Chapter 19, Article 1, Section 19-2; Chapter 19, Article 7, Section 19-53; and Chapter 19, Article 11, Section 19-90, of the Hawaii County Code 1983 (2016 Edition, as Amended), Relating to the Creation of a Long -Term Rental Class for Real Property Taxes. This bill establishes a Long -Term Rental tax assignment classification for properties that are occupied under a lease for at least 12 consecutive months and under a signed lease for six consecutive months or more to the same tenant. Finance Committee Meeting of December 5, 2023 Real Property Tax Administrator Lisa Miura, Assistant Administrator Keita Jo, and Finance Director Deanna Sako were in attendance and available for questions. Committee Member Jenn Kagiwada provided some background and the inspiration for this bill and the hope to help remedy the existing housing crisis. Ms. Kagiwada stated the Apartment Tax Class affects long-term rentals for residents and commented on the amount of vacant homes and lots in Hilo neighborhoods. Ms. Kagiwada highlighted a situation with a friend helping an elderly woman in need of housing and further explained that he is now being taxed at a higher rate. Ms. Kagiwada further stated she collaborated with Committee Member Michelle Galimba and the Real Property Tax Administrators to devise a solution to address these issues. Ms. Galimba shared thoughts and presented a PowerPoint (see Comm. 600.2) on this bill and its benefits. Ms. Galimba asked Mr. Jo to discuss some of the thoughts, potential participation, fiscal impact, and timing. Committee Member Cindy Evans commented on the use of traveling nurses and physicians mentioned in the presentation. She shared that her community has many traveling physicians and nurses who currently pay a much higher rent than residents, and asked if the bill's intent is to get people into long-term rentals. Ms. Evans also wondered if there may be unintended consequences by giving these homeowners who receive the tax break and the ability to charge above the current market value for rental housing. FC Report No. 170 FC-170 Page 2 June 18, 2024 Committee Member Heather Kimball asked Mr. Jo to confirm they would know how many would enter this program before setting the tax rates in 2025. Mr. Jo confirmed. Ms. Kimball shared some of her thoughts on the matter. Ms. Kimball asked Ms. Sako to speak about the potential revenue impacts. Ms. Sako said that, as Mr. Jo stated before, it is hard to know the exact numbers because they don't know who will sign up. Committee Member Susan L. K. Lee Loy shared some history on when the Apartment Tax Class was increased and how they justified that need. Ms. Lee Loy spoke to her concerns on this matter and sees no correlation to assisting in lower rent. Ms. Lee Loy commented about the number of vacant homes and properties and asked Ms. Miura how to get those numbers. Ms. Miura shared the various efforts to obtain those numbers, which included the review of utility bills and how these efforts did not provide accurate numbers. Ms. Miura further stated that figuring out which homes are vacant most of the year is tough. Committee Member Ashley L. Kierkiewicz shared her concerns and recommended that this measure stay in Committees for further discussion. Committee Member Holeka Goro Inaba shared concerns and stated he was not is support. Committee Member Rebecca Villegas commended the makers of this bill on their creativity and courage to put this together. Bill 104 was amended with the contents of Communication No. 600.1, which was introduced by Ms. Kagiwada and was approved with nine "ayes." Committee Chair Matt Kaneali`i-Kleinfelder asked Mr. Jo what he sees this bill incentivizes. Mr. Jo stated that he believes this provides a way to incentivize people to enter the rental market and create housing, and added that in discussing the market value, that tax incentive will hit a $2 million home just as it would a $500,000 home or a $200,000 home in Puna. Mr. Kaneali`i-Kleinfelder encouraged the makers to look at the language and get specific with whom this bill is intended to help. Mr. Kaneali`i- Kleinfelder asked the County Clerk, Jon Henricks, for information on forming a special meeting for this measure. Mr. Henricks considered all options and recommended postponing to the Call of the Chair as the best option. Multiple Committee Members spoke in support of postponing Bill 104, as amended to Draft 2, to the Call of the Chair. Finance Committee Meeting of December 19, 2023 Ms. Kagiwada provided an update on this measure. Ms. Galimba shared concerns and comments heard from community about how they would like to see different tax rates for properties of other uses and further stated they will work on ways to address it. Ms. Miura was present in the Kona Council Chambers, while Mr. Jo attended from the Hilo Council Chambers. Ms. Miura mentioned that Deputy Corporation Counsel Keyra Wong, who could not attend this Committee, wanted to acknowledge some language issues. Ms. Miura said while editing this bill to remove the physicians and nurses, the word "cumulative" was Left in, and she just wanted to clarify with the bill makers that they wanted to change that word to say, "consecutive." Mr. Jo presented a PowerPoint. The slides were created to address some of the concerns from the previous meeting. FC Report No. 170 FC- 170 Page 3 June 18, 2024 Mr. Inaba shared concern and asked if any other tax classes are set based on another besides the Affordable Rental and Homeowner. Ms. Miura replied that she could not think of another one. Mr. Inaba noted that he had reservations. Mr. Kdneali'i-Kleinfelder commented on Ms. Miura's messages from Ms. Wong regarding the use of the word "cumulative" or "consecutive." Mr. Kdneah'i-Kleinfelder asked the makers for their thoughts. Mr. Henricks clarified the matter as there was some confusion among Ms. Galimba and Ms. Kagiwada. Ms. Villegas commented on the spreadsheet provided and reviewed where the money could come from and the other tax classes that would have to pay for it, making it a hard sell. Ms. Kagiwada spoke about the process of elimination for this tax rate and explained how things would balance out. Ms. Villegas appreciated this explanation and thanked her for the clarity. Bill 104, Draft 2, was amended with the contents of Communication 600.11, which was introduced by Ms. Kagiwada, and approved with nine "ayes. After multiple members expressed concern about this bill and their inability to support it, a motion was made to postpone the bill. Bill 104, as amended to Draft 3, was postponed to January 23, 2024. Finance Committee Meeting of January 23, 2024 Real Property Tax Assistant Administrator Keito Jo and Deputy Corporation Counsel J Yoshimoto were in attendance and available for questions. Ms. Kagiwada provided an update on the bill and spoke about an amendment with the hope to clarify the bills intent, adding a short purpose and some program limitations. Ms. Kagiwada spoke to who will ultimately benefit from this and further explained the reason that they started this is for the people, renters, and people who need housing. Ms. Galimba shared that this would be an essential tool for real property tax incentives to create more housing for our local community. Ms. Galimba further clarified that this bill is not intended to get people out of Affordable Housing but to get homeowners of vacant properties to assist in the housing stock by making a home available for people in need of a home. Bill 104, Draft 3, was amended with the contents of Communication 600.25, which was introduced by Ms. Kagiwada, was approved with seven "ayes," with Ms. Galimba and Mr. Kdneali'i-Kleinfelder absent. Multiple Committee Members spoke in support of the amendment. Ms. Kierkiewicz stated that upon further review of the bill with its amendments, there could be a potential budget shortfall of $7 to $15 million if this ordinance were to pass. Mr. Jo confirmed that statement. Acting Chair Cindy Evans was concerned with some of the language on Page 2, Section 3 (k)(1), which states, "Real property occupied for twelve consecutive months and under a signed lease for six consecutive months or more to the same tenant(s) shall be eligible", specifically the use of the word "and", and was concerned that the language was not clear. Mr. Yoshimoto was not clear on what her FC Report No. 170 FC-170 Page 4 June 18, 2024 concern was and asked if her concern was that it could be construed differently other than its plain meaning. Ms. Evans explained that it is unclear if the terms can be two six-month leases and month -to -month and asked if tenants who don't meet the twelve months would be disqualified if it goes month -to -month. Mr. Yoshimoto confirmed. Ms. Lee Loy suggested having a member from the Office of Housing available for questions and recommended that the bill be held in Committee for more discussion. Ms. Kimball agreed with Ms. Lee Loy that the bill should remain in the Committee and felt it still needed tweaking that was essential to get this right. Bill 104, as amended to Draft 4, was postponed to February 6, 2024. Finance Committee Meeting of February 6, 2024 Ms. Kagiwada thanked all the testifiers and stated that due to Ms. Galimba's absence, Bill 104, Draft 4, will be postponed to February 20, 2024. Finance Committee Meeting of February 20, 2024 Ms. Kagiwada and Ms. Galimba provided an update on the bill and gave a brief summary of the proposed amendment. Bill 104, Draft 4, was amended with the contents of Communication 600.31, which was introduced by Ms. Kagiwada, with seven "ayes," with Ms. Villegas and Mr. Kdneali`i-Kleinfelder absent. Bill 104, Draft 4, as amended, was postponed to June 18, 2024. Finance Committee Meeting of June 18, 2024 Real Property Tax Assistant Administrator Keita Jo and Finance Director Diane Nakagawa were present in the Hilo Chambers for questions. Ms. Kagiwada provided an update and proposed an amendment stating the point of this bill is to create a separate tax class for long-term rentals. The amendment would take out what the long-term rental rate shall be and leave that up to this body to decide next May. Ms. Kierkiewicz asked if a placeholder was created with no rate, what the annual revenue would look like for a class without an established rate. Mr. Jo stated that part of the process would be an initial discussion with the administration to establish the rate. Ms. Kierkiewicz further commented that they would be establishing a program for people to sign up without knowing the rates and then hope they stay in it after the rate is established. Ms. Kagiwada responded to her comments by stating that the program would start in January 2026, so the rates would be set prior. Ms. Kierkiewicz noted the information to be helpful and would support the amendment but is unsure about supporting the bill. Ms. Kimball commented on a timing issue if the tax class started in January 2026, and further stated that a rate could not be set in May 2025. Ms. Kimball provided some ideas for this potential timing issue and suggested a proposed initial starting rate and not a locked -in rate. Ms. Lee Loy commented in support of the amendment and urged her colleagues to think about what could be solved by pushing the date back. FC Report No. 170 FC- 170 Page 5 June 18, 2024 Ms. Evans commented that she felt it was essential to let the public know that we are establishing this tax class but won't know the rate until May. Ms. Evans requested for clarity on the process of this program and expressed concerns about the appeal to apply for this program instead of the Affordable Housing Program. Ms. Galimba responded stating the many requirements to apply for the Affordable Housing Program. Mr. Kdneali'i-Kleinfelder asked if the bill was disassociating the long-term rental and affordable rental tax class. Mr. Jo replied that this is just providing another avenue that fulfills a different rental market segment, and to have affordable rentals and then the long-term rental category. Mr. Kdneali'i- Kleinfelder questioned if a home is worth $2 million dollars or less and in the residential category, would the homeowner qualify for this long-term rental tax class? Mr. Jo confirmed eligibilty. Bill 104, Draft 5, was amended with the contents of Communication 600.40, which was introduced by Ms. Kagiwada, was approved with eight "ayes," with Mr. Inaba absent. Your Committee on Finance is in accord with the purpose and intent of Bill No. 104, as amended to Draft 6, and recommends its passage on first reading. 1kh AYES NOES ABS EX EVANS X GALIMBA X INABA X KAGIWADA X KAN EALPI-KLEIN FELDER X KIERKIEWICZ X KIMBALL X LEE LOV VILLEGAS -Xi Respectfully submitted, COMMITTEE N FINANCE MATT KXNEj'I-KLEINFELDER, CHAIR FC REPORT 110.: 170 ADOPTED:. SEP 1 1 2024