HomeMy WebLinkAboutCOM 0717.027 2004-2006 Page 1 of 2
Murashige, Laura
From: David Drury [daviddrury@hawaii.rr.com]
Sent: Wednesday, March 22, 2006 5:28 PM
To: Higa, Stacy
Subject: A Modest Proposal RE property tax assessments
Dear Stacy,
I got my property tax assessment yesterday. The increase in the assessment on our house was capped at 3%;
nothing to ocmplain about there. But we also own a little condo in Hilo, and the assessment on it went up by
47% in one year. This is the second year in a row that that has happened. So from July 2006 I'm looking
at nearly double the property taxes I paid just two years ago.
The place is rented out, so I'm paying the full commercial rate. County property tax alone will now absorb
two full months gross rent 3 months' worth if you set aside the portion that goes for mandatory utilities and
condo fees. Plus 4% excise tax regardless of expenses, plus state and federal income tax.
I'm not against taxes; you don't get decent public services for free. But you know as well as I what the effect
of West Coast and other mainland money has been on the county property market. Two or three wealthy fools
shell out $400,000 for 1000 square feet so they can hear the ocean roar while they cook dinner. The effect?
Everyone in the building --and perhaps other buildings gets hit with a 50% increase in their assessment,
and those who are not shielded by the homeowners cap or exemptions bear the full brunt of it. Suddenly I am
paying twice as much for the same mediocre services: my car was broken into; my tenant's apartment was
broken into (neither crime solved); the building pays for a private garbage service so we don't have to individually
cart our trash 5 miles to the dump. And so on.
In a highly skewed market like ours, the relationship between property prices and tax makes sense only from
a bureaucratic standpoint. Yes, this is our traditional procedure. But it is entirely fair for a citizen to ask, "What
exactly is the logic that makes me pay twice as much for the same services as a result of those three fools
from Santa Monica?"
My income has certainly not doubled in the past two years, nor has the income of our elderly tenant, along-term
island guy. We are not Day-Lum, and we are not speculators. We are among the thousands of ma & pa landlords
with one or two units (one in our case). We are not economically rational machines. But by being irrational, we
help to provide relatively affordable housing. We have not raised the rent, and are not making a lot of money on
the place. What are our choices, if each year's increase in property taxes continues to eat up the better part of a
month's gross rent? Kick the old guy out?
Let's be clear: homeowners are sheltered, but if landlords are rational, renters will pay a disporportionate share of
these increases.The rental market is tight, and landlords will be able to pass on the extra costs. As a group
renters
on this island are poorer than owners, but may well be paying higher (indirect) property taxes as a percentage of
their incomes. Every dollar in extra rent is one less dollar saved for a down payment on that first house or for
other
family needs.
I'm glad that the county's financial situation has improved; the latest revenue predictions are an embarrassment of
riches.
Given that the projected increases are so large, is there something the Council can do to ease the sudden tax
burden
on non-primary residences? Two obvious approaches are to reduce the tax rate for these places or to establish
some kind of exemption system. Either is possible, but they might set a bad financial precedant or be politically
unpalatable.
It seems to me that the most equitable solution --and one that directly addresses the current prob~f7rad1cal
Gomm, Na ~1
Ref. Tor FL
3/23/2006 '-f. ''ors ~6
Page 2 of 2
price
inflation is to establish ayear-to-year percentage limit on the increase in assessment for commercial rental
property
and second residences, parallel to the homeowner cap. The cap doesn't have to be 3%; it can be 5%, or even
10%.
In a normal market it might not come into play at all, and that's fine. The ultimate intent would be to shelter renters
from
the worst effects ofoff-island money, while still allowing quite reasonable increases in county revenues.
Just a thought. If you would like to talk further, I can be reached at daviddruryQhawaii.rr.com, or 959-2338.
David Drury
126 Kanoelani St.
Hilo
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