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HomeMy WebLinkAboutORD 1991-122 1988-1992COUNTY OF HAWAII; STATE OF HAWAII BILL NO. 504 (Draft 4) ORDINANCE NO. 91 122 A BILL FOR AN ORDINANCE TO AMEND CHAPTER 19 OF THE HAWAII COUNTY CODE RELATING TO REAL PROPERTY TAXATION. BE IT ORDAINED BY THE COUNCIL OF THE COUNTY OF HAWAII: SECTION 1. Purpose. The purpose of this ordinance is to enable those owners of real property, who qualify for home exemption, to dedicate their property to a Non -Speculative Residential Use dedication and have their property values for assessment purposes frozen for a period of ten successive years. The intent of this ordinance is to protect the dedicated property from the effects of escalating values due to the market activities of the surrounding properties. SECTION 2. Article 7, Chapter 19, Section 19-58.1 is amended to read as follows: "Section 19-58.1. Certain Lands Dedicated to Non -Speculative Residential Use. (a) The term "owner" as used in this section shall mean the fee owner or the lessee of real property with an unexpired lease term of not less than ten years from the date of the petition. (b) Any owner of property who qualifies under section 19-71 and 19-72 for home exemption and uses the property exclusively for residential use may dedicate said property in its entirety to Non -Speculative Residential Use and have that parcel assessed in the manner provided by section 19-58.2, except that husband and wife, although living separate and apart, shall be entitled to dedicate only one parcel to the Non -Speculative Residential Use. Exclusive residential use as used in this section shall not permit the owner to conduct any commercial activities on the property. Those owners who have dedicated their property to agricultural use or received the benefit of the agricultural use assessment shall not be eligible for this non -speculative residential use dedication. (c) Any owner who desires to dedicate property to Non -Speculative Residential Use and to have the property assessed in the manner established by section 19-58.2, shall so petition the director. Upon receipt of any such petition, the director shall make a finding of fact as to whether or not the property described in the petition is qualified for a home exemption pursuant to the terms and conditions of sections 19-71 and 19-72. If the finding is favorable to the owner, the director shall approve the petition and declare the property to be dedicated to Non -Speculative Residential Use. In order to place prospective buyers on notice of the dedicated status and the retroactive tax liability, the petitioner shall within 60 days of the notice of approval of the petition record the notice of dedication in accordance with the procedures established by the bureau of conveyances. The petitioner shall furnish the director with a copy of the recorded notice. Nonrecordation of the notice, within the prescribed period, shall be grounds for disallowance of the dedication. -2- (d) Each petition for dedication shall be for ten-year periods. The owner shall reapply for renewal of the dedication by filing an application with the director on or before September 1 of the tenth year. The renewal petition shall, in all respects, be processed similar to an original petition. Upon approval by the director of succeeding dedications, the assessed valuation shall continue to be assessed in accordance with the provisions of the Non -Speculative Residential Use dedication. [(e) The dedication may be cancelled by the owner at the end of any ten-year period without penalty and retroactive taxes. The owner shall provide the director with written notice of the cancellation on or before September 1 of the tenth tax year of the dedication period.] (e) In the case of a renewal which immediately follows an expiring term, the assessment base for the new dedication term shall be the dedicated value on the expiration date plus fifty percent (50%) of the amount of increase between the dedicated value and the fair market valuation as of January 1, following the termination of the dedication term. [(f) The director's approval of the petition to dedicate shall constitute a forfeiture on the part of the owner of any right to use the property in any manner that would cause it to become ineligible for the home exemption as defined and determined by sections 19-71 and 19-72 for a period of ten continuous years.] -3- [(g)] (f) If, during any period of dedication, any breach of the dedication requirements should occur, the special Non -Speculative Residential Use assessment privilege shall be cancelled and retroactive taxes [and penalties] shall be imposed. Breach of the dedication shall include the [sale, transfer, change in land use classification of the property upon a petition by the owner, subdivision of the property into condominium units or separate parcels, or failure to maintain the home exemption status of the property] failure to maintain the home exemption status of the property, violating the exclusive residential use provision, dedicating the property to agricultural use or receiving the benefit of the agricultural use assessment, subdivision of the property into condominium units or separate parcels, or the sale of the dedicated property or any portion thereof sold by way of a conveyance which is subject to conveyance tax under the terms of Chapter 247, Hawaii Revised Statutes. Retroactive taxes [and penalties] due and owing as a result of the [cancellation] breach shall be a paramount lien on the property. (1) Provided, that the Non -Speculative Residential Use dedication shall not be [cancelled] breached if the dedicated property [is:] meets the criteria as listed below. The following also includes provisions that are not subject to the conveyance tax under the terms of Chapter 247, Hawaii Revised Statutes, and are included for further clarification. intestacy, (A) Transferred to the owner's heirs by testacy or -4- (B) Jointly owned by spouses and upon the death of one spouse ownership is transferred to the surviving spouse, (C) Transferred to a spouse or former spouse in connection with a property settlement agreement or decree of dissolution of a marriage or legal separation, (D) Transferred to a trustee for the beneficial use of a spouse, or the surviving spouse of a deceased transferor, or by a trustee of such a trust to the spouse of the trustor, (E) Subject to a title change between spouses and said change does not result in a loss of the home exemption status, [(E)] (F) And the heirs, surviving spouse, divorced spouse, or trustee, within 60 days after receiving title to the property, petitions the director, in writing, to continue the dedication and the property continues to qualify for the home exemption as defined in sections 19-71 and 19-72. (G) The dedication shall not be cancelled if the lessee purchases the leased fee interest from the lessor. (2) Provided further that, except as provided herein, [penalties and] retroactive taxes shall not be assessed when: (A) A person receives title to property dedicated to Non -Speculative Residential Use by way of testacy or intestacy and does not petition the director to continue the dedication as provided in section 19-58.1(g)(1)(A). ME (B) The dedicated property is jointly owned by spouses and upon the death of one spouse, ownership is transferred to the surviving spouse, and the surviving spouse does not petition the director to continue the dedication as provided in section 19-58.1(g)(1)(B). (C) The property is wholly or partially destroyed or damaged as a result of fire, seismic or tidal wave, volcanic eruption, earthquake, flood waters and wind or rain storm. (The owner shall, if he desires to cancel the dedication for the reasons enumerated above, notify the director of such cancellation by written notice to the director within 60 days of the change. All cancellations shall become effective July 1 of the following tax year, but the property will be assessed in accordance with its appropriate classification as of the assessment date January 1.1 The owner may cancel the dedication for the reasons enumerated in paragraph (2)(C) by submitting written notice of the cancellation within 60 days of the damage or destruction. Cancellation shall become effective July 1 of the next tax year and the property shall be assessed in accordance with section 19-53(a). ((h)] (g) The director shall prescribe the form of the petition. The petition shall be filed with the director by November 1, 1991 and be approved or disapproved by December 31, 1991, in order to qualify for the following tax year. In any year after 1991, the petition shall be filed with the director by September 1 of any calendar year and shall be approved or disapproved by December 31 of that year. IM. [(i)] (h) Upon approval, the dedication shall become effective July 1 of the following tax year.[, but the assessed value will be determined on the assessment date January 1.] In determining the assessed value, the fair market value, the market data approach shall be utilized. In the event that the Real Property Tax Office is unable to determine the fair market value for the dedication based on the market data approach, the prior assessed value shall be utilized until the calculation is completed. Upon completion of the market data approach calculation, then that fair market value shall be the dedicated value for the remaining term of the dedication. The owner may appeal any disapproved petition or cancellation of dedication as in the case of an appeal from an assessment." SECTION 3. Article 7, Chapter 19, Section 19-58.2 is amended to read as follows: "Section 19-58.2. Non -Speculative Residential Use Assessment. Properties approved by the director for dedication to Non -Speculative Residential Use shall be assessed for real property tax purposes in the following manner: (a) Property, approved for Non -Speculative Residential Use dedication, shall be assessed [at the] for real property tax valuation purposes on market data information available on the calendar year of the application. The assessment date shall be January 1 of the calendar year followinq the petition approval. [which existed at the time the petition was approved.] -7- This assessment shall be [adjusted in subsequent years of the dedication period in accordance with the methodology established in Article 7 of this chapter, however, in no case shall any increase ina particular year exceed the growth rate of the consumer price index] frozen for the dedication period, except for adjustments as provided for in this section. (b) Upon approval by the director of succeeding dedications by the owner of the same property, the assessed valuation shall continue to be assessed in accordance with the provisions of section 19-58.2(a). (c) If any improvements are undertaken on the dedicated property, and such improvements increase the fair market value of the dedicated property, the assessment shall be increased based on the fair market value of the improvements undertaken, however, the assessed valuation for ensuing tax years shall be determined in accordance with the provisions of section 19-58.2(a). (d) If any improvements are undertaken on the dedicated property [a copy of the building permit shall be provided to the director by the owner prior to construction], the owner shall obtain the required building permit for the construction of new or additional improvements or renovations of the dedicated property. Violation of this reporting requirement will result in cancellation of the dedication and activate payment of retroactive taxes [and penalties]. [(e) Retroactive assessments shall be imposed upon violation of the dedication. The retroactive assessment shall be calculated as the difference between the dedicated value and the highest and best ME use value or the actual selling price of the property, whichever is higher, retroactive to the date of the current ten year dedication period. The highest and best use value or the actual selling price of the property, at the time of the violation, shall serve as the basis for calculating the retroactive assessment for each of the previous years in the dedication period. In cases where the actual selling price of the property is used as the basis for determining the retroactive assessment, the apportionment of value between land and building shall be determined by the director based upon the respective percentage of each component when compared to the total assessed value in the tax year when the violation occurred.] (e) In the case where additional dwelling units are constructed or a single family dwelling unit is renovated or converted into a two or more family dwelling unit all in accordance with Article 25 Chapter 25 Hawaii County Code of 1983, the dedication shall not be cancelled provided the owners within 60 days of the change submit a written application to continue the dedication and files the claim for home exemption and the owners would continue to be eligible for the home exemption. If the owner fails to submit the written application in a timely manner or uses the additional dwelling units or renovated areas for rental or income producing purposes the dedication shall be cancelled and the retroactive taxes imposed. [(f) In addition to the retroactive taxes due, a 25 percent penalty shall be imposed on the total amount of retroactive taxes owed. Nothing in this subsection shall preclude the county from pursuing any other remedy to enforce this section.] Cm (f) If the dedicated property loses the home exemption under which it was dedicated, or if the dedicated property or any portion thereof is sold by way of a conveyance which is subject to conveyance tax under the terms of Chapter 247, Hawaii Revised Statutes, the dedication shall be deemed breached. (g) Retroactive assessments shall be imposed upon the breach of the dedication. The retroactive assessment shall be calculated as the cumulative difference between the amount that should have been owed without the dedication less the amount actually paid for each of the years deemed to be in breach plus interest at a rate of ten percent (10%) per year. If the dedicated property is sold, the retroactive assessment for that year shall be calculated as the difference between the dedicated value and the higher of either the actual selling price or the value of the property at its actual use. In the case of properties dedicated to Non -Speculative Use, notice of assessment as prepared under section 19-27 shall delineate the dedicated value and fair market value, beginning tax year 1993-94." SECTION 4. Material to be repealed is bracketed. New material is underscored. In printing this ordinance, the brackets, bracketed material, and underscoring need not be included. SECTION 5. In the event that any portion of this ordinance is declared invalid, such invalidity shall not affect the other parts of this ordinance. -10- SECTION 6 Hilo, Hawaii This ordinance shall take effect upon its approval. Date of Introduction: Date of 1st Reading: Date of 2nd Reading: Effective Date: INTRODUCED BY: November 6, 1991 November 6, 1991 November 20, 1991 December 2, 1991 -11-