REP FC 178 2014/06/03 (2012-2014)

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REPORT OF THE COMMITTEE ON FINANCE DATE: June 3, 2014 Re: Comm. No. 893/Bill No. 256 PLACE: Council Chambers Hilo, Hawai`i TIME: 9:30 a.m. Council Chair and Members Hawai`i County Council Hilo, Hawai`i 96720 Bill No. 256, transmitted by Finance Director Nancy Crawford, via Communication No. 893 dated May 15, 2014, amends Chapter 19, Article 7 Tax Map; Valuations, of the Hawai`i County Code 1983 (2005 Edition, as amended), relating to valuations; considerations in fixing. The proposed bill modifies Section 19-53 of the Hawai`i County Code to include the "income approach" as a consideration in the valuation of taxable real property. Several Council Members expressed their concerns with the bill. Council Member Wille spoke in support of the bill. She stated that the "income approach" was brought forth by the Real Property Tax Stakeholder's Task Force as an "administrative tool"to help with real property tax assessing. Finance Director Nancy Crawford and Real Property Tax Administrator Stan Sitko appeared before Your Committee for questions. The committee was informed that the three basic approaches to assessing property or market value is cost of the land, sales data or comparables, and the "income approach." Ms. Crawford stated that adding the "income approach" will broaden the ability to fairly assess the value of real property tax, particularly in commercial properties. She included that it will provide more data to effectively assess commercial properties, helping to prevent board appeals and save the county money. Mr. Sitko informed the council that the "income approach" method is recognized by the Appraisal Institute and the International Association of Assessing Officers (IAAO). He added that it was recommended by the IAAO to include the "income approach"to the Hawai`i County Code. Mr. Sitko added that the County's existing taxation system could handle adding income data to help assess property value; however, there would be a cost to collect the data. Furthermore, in discussion, he noted that models would need to be set up for the "income approach", but the appraisers would need to use whatever value is most appropriate. Council Member Ford, who opposes the bill, feels it should have the word "commercial" included in the language for more clarification. She also stated that she was concerned about how farm properties would be handled. For informational purposes, Council Member Ford voted "kanalua" then "aye." FC Report No. 178