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HomeMy WebLinkAboutCOM 0315.002 1996-1998 This fax goes to County Counci~ FRO1I: Bonnie Goodell COJIIIE\'TS: For all council members and for Collette in R&D. CO:IIP.~tiI": C\ La, Inc. Seeeral faces to follo~i~ of charts and graphs on tares to D.~TE: \Ion, \Ia;• 12. 1997 backup this testimony. TI\IE: 11:08 .a\ I P?,GES (\OT I\CL COVER): 3 c ~ 3- ~-.C C r v _ ~ y ~m~. 315.2 w,r. ~ra: SRN. ndl~ ~.P~. t~ate__MAY _1, 2 11997 Mondav, Mav 12, 1997 11:08:38 AM (8081 967-8295 THE HO\IEO\~-\ERS' T.al' CL.~SS SHOL-LD BE REPS.-SLED. Bonnie Goodelh ~ iet~•point The Homeowners• Tax Class is a special propert} tar class, established in 1993. imddirionto the Homeowners• Exemption. The Homeowners' Exemption deducts 540.000 (or 580,000 for the elderly) from the assessed t clue of ott•ner-occupied homes before taxes are calculated. The Homeowners• Class then drops the tar rate on t~•hat is left from SIO or 58.50 per thousand dollars of assessed ~ alue (called mils) to 54.45 mils. less than half. The Homeowners' Class is unfair. B} ewer} measure. this is tery bad government. It is a subsid} of the well-off b} the poor. It means that the more people move here, ow•n homes and need sen~ices, the less tive collect in tares. It discourages home-based businesses. tt•hich w~e desperate]}' need. The home-Uusiness aspect is impossible to fain} enforce so it punishes honest}'. It encourages a "free lunch'• mentalit}', and shackles the poorest communities. The actual cost for parks. police and fire protection for each home, according to our standards, is ove 51,000 dollars a }ear. \~-hen homeowners are not pa}'ing that much, someone else must subsidize them. exactl} as if the}' w ere collecting welfare. }'ear after }•ear. Homeowners tar breaks are a sped interest w elfare entitlement for people teho can afford to bu}• homes, paid for b} renters, young working families and the elderl}• in 1~'est Hawaii. b} people trying to start home businesses, and b}• vacant lots-tahich get no current services. but get a huge IOU, payable b} our children. The Homeowners Rate is especiall}• unfair to renters, tvho w ere alread}'. because of the Homeowners Exemption. subsidizing people who can afford to bu}•. For example. in a Puna subdivision, the lot ma}' he worth 520,000 and the home 560,000. For a rental landlord, the tax t+ill be 5800. which means that S67 per month of the rent must go to propert}' tax. If the rent cannot absorb that along w~i the other costs, renters go out of business. until the rents are pushed up to absorb that cost. For a homeowner under the same circumstances. with the 540.000 exemption and the 4.45 mils rate, the ta: bill comes down to 5178 a }ear. or if retired. the w hole assessed value is w iped out and the minimum S25 is the bill. For vacant lots. about -10,000 of them. t~•hich receive ~~irtuall} no ser~~ices, the tax bil is around 5200 each. Thaf s more than the bill for a homeowner. In Kona. a home might be worth S1UU,000 on land worth SiUU,000, so the tax bill for a rental unit could be 52.000. or S167 per month to be absorbed b} the rent. For a homeowner, it would be 5712, or S534 if elderly.. vacant lot would pay 51,000, again more than a homeowner. ytany renters are elderl}•, and usually less well-off than homeo~eners. Can an} one tell me why the tar on a rental unit in Kona should he 100 rimes the tax on a home in Hilo? In East Hawaii, where propert} values are much less. onl} around 25CC of residents are renters, while in ~~-est Hawaii. w here land values are much higher, more than 50CO are renters. So the extra burden Submitted by Bonnie Goodell Mondav, Mav 12.1997 11:08:38 AM (8081 967-8295 Repeal the Homeowners Tax Class Bonnie Goodell, 967-7775 5/10/97 p.2 placed on ~`"est Hawaii is magnified et en more. It is almost as if someone sat down and said, "~~"ell, tee make ~Cest Hatcaii residents pa}' more than their their share, because their land values are higher. C"an wP srrPtt them PcPn mrnv? Hrnt ahnut a HOTTIP(IICOPI'S' Rxemption that gill rPmncP ahnut .i~C. of East Hawaii home value but only 2>~c of ~["est Hawaii home value? I'eah, and after that tt~e can make a special Homeowner rate to sere[+~ renters: homes are so expensive oaer there, most people cati t afford them. Great: The home owners tvori t complain because of the lots rate and the can realh make the }'oung families and retired renters subsidize us all." People tvho operate home businesses see their property taxes double or more, et en if the}' onl} sell back}'ard bonsai or bab}•sit. ~~"e do not have pearl} enough jobs or places for businesses to employ a of us. ~~"e have changed the zoning code make it easier to do home businesses. The economics of home business runs something like this. "I have kids, or a 5~ail parent who cannot be left alone. It costs me S5,000 to go out to [work. B} [working out of m}' home, I am there form}' kids or m} parent. Even if I make S>,000 less. «'e are better off and I can be there form}' family. But my proper[} taxes increase 51.000 per }'ear.° There are more and more businesses that can be done from home with virtual!}' no impact on nPl gll hC)rllnnd fhal'aftP P!i ('Pp1111at rhPi'P ai'P nl(1rP pPCIpIP at lltln'1P ill Ill(lk aftP l' kldc and the PldPrl}', better neighborhood security, and less rush hour traffic. ~~'e need them. Most people tr•ho operate from their homes lie about it to the tax assessor to avoid that unfair tax bill. The tax assesoos haae testified repeatedly to impossibilit} of fair interpretation or enforcement. ~~'hat is the messate here? acant lots are not only subsidizing homeowners, but the more people move in and otvn their otvn homes the less we collect. If s as if someone sat down and said. "Oka}', we've got these scant lots. Taxation of people tvho have no vote and get no services is bad government. but it s good politics. Can tee rig the tax codes so that the vacant lots actual!} pa}' more than the people living Wert door?" Perhaps the [worst Feature of the Homeowners Class is shakles it places on substandard areas, [which make up nvo thirds of the Big Island homesites. In other places, Tax Increment Financing has tt°orked ver}' well for these kinds of communities to "bootstrap'' themselves, because improvements that help economic det elopment can be paid for b}' the increased tares that twill be generated when tl place is economical!} health}'. But, the Homeowners Class tax tale eliminates the tax increment..~s soon as people mote in and build homes. tax revenues go down, not up. It s as if someone set out to make sme that these substandard areas [were denied the opportunity to bootstrap themselves. Like the said. "Oka}•. tre't e got these communities with no services and lots of vacant lots. subsidizing us likf slates tt•orking for no pa}'. How can we keep them from getting toting rights and equal opportunity?•~ Monday PAav 12. 1997 11:08:38 AM (8081 967-8295 Repeal the Homeowners Tax Class Bonnie Goodell, 967-7775 5/10/97 p.3 Because homeorr'ners are so high/;' subsidized b}' vacant lots, it creates a great incentive for as man}' vacant lots as possible. ~~'e ahead}' have three or fom vacant houselots to subsidize every hnmP~n~nar «'hirh makPC nc nn;~hlP m ivcict a~lriing mnrP anrT mrn~P r~arant hta Tt' C RC If 1l'P .ll'P saying. "Okay. maybe we're addicts. supporting our tax habit by ripping off people rvho can't vote tc defend themselves, but, he}'. they deserve it. They re just speculators and newcomers angway. They knew the deal. Screw em! Look. there's these real estate developers with a great fix...just fort}' thousand more lots and then tr'e' 11 get our act together. Promise." Ever}' serious stud} of sustainabilit}' has reached the same conclusion: the foundation of sustainabilit is Fiscal Equit}, being fair about the move}'. The unfair tax pattern on the Big Island is part of a c}'c that started in the 1950s. as revenge for the previous sixt} years of bigotry and abuse. The people doing the abusing nom are using exact]}' the same manipulations and rationalizations that were used against them fift}' }'ears ago-proving, once again. that power is an equal opportunity corruptor. The tables are about to tmn again. Do rr'e «'ant another cycle of revenge? \Ce can get over it nom, while there is still time. for the sake of the children. Or rce can leave a debt, complete with resentment and recriminations. Fift}' ;'ears from nor+ • when the histor} books are coming out about the mistakes rve are making now. horn' rr'ill rve be judged? `-~i ~y~/~II~LX ~7~TZ~H'~1~ Bonnie Goodell is a planner lining in ~.'olcano• specialising in sustainabilit}' and equity planning.