HomeMy WebLinkAboutREP FC 104 11/25/1985 1984-1988 !II REPORT OF THE •
COMMITTEE ON FINANCE
Date: November 25 , 1985
Place: Councilroom
Time: 9:00 a . m .
Chairman and Members
Hawaii County Council
Hilo, Hawaii 96720
Your Committee on Finance, to which was referred Bill 85 , relating to
deferred real property taxes , reports as follows:
Bill 85 amends Chapter 19 , Hawaii County Code, by adding a new
article entitled, Tax Deferment for Homeowners .
The purpose of Bill 85 is to enable those homeowners who qualify for
home exemptions under Section 19-71 and 19-72 to defer a portion of
their real property payments . The tax deferment amount shall be the
amount of taxes due in excess of the amount paid in the tax base
year . The base year shall be the first year for which deferment of
taxes has been approved. Deferred taxes shall bear interest at a
rate of 8 percent, compounded annually. Tax deferment shall he
cancelled and deferred taxes and interest shall become due if the
property is sold, transferred, subdivided, or the homeowner fails to
qualify for home exemption. A 25 percent penalty shall be imposed on
deferred taxes and interest if the deferment is cancelled. Tax
deferment shall not be cancelled if property is transferred to a
surviving spouse or heirs and they qualify for home exemption.
Your Committee has amended Bill 85 to provide that in the case of
property leased from the Department of Hawaiian Home Lands , such
property shall not be eligible for tax deferral until the end of
their 7-year tax exempt period.
Bill 85 was further amended to provide that if the real property tax
liability drops below the base tax payment , the homeowner shall pay
the lesser of the two amounts . The base amount shall remain the
same . In the event a homeowner qualifies for additional exemptions
during the deferral period, a new base tax payment shall be
determined by reducing the initial base tax payment by the
proportionate dollar amount of the exemption .
In addition, Bill 85 was amended to provide that tax deferment be
renewed annually and be filed with the Bureau of Conveyances and that
interest to be charged on deferred taxes at a rate of 12 percent .
FC REPORT No . 104
ADOPTED : DEC 4 1985
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FC- 104 Page 2 November 25 , 1985
In Committee discussion, several committee members cited concern for
the financial impact to the County should the bill be enacted. In a
Legislative Auditor 's report dated November 4, 1985 , the total
estimated amount of deferred taxes after ten years would be
$18 .7 million, and the total accumulated deferred taxes and interest
would be approximately $28 .5 million. These figures were based on
the following assumptions:
1 ) Residential real property tax rates to remain at $8 .50 per
$1 ,000 for building and land .
2) Number of home exemptions currently granted remain the
same .
3 ) Dollar value of home exemptions remain unchanged.
4) Participation rate assuming 50 percent of all eligible
homeowners .
5 ) Property values increase 9 percent annually.
A supplemental report dated November 5 , 1985 with assumptions of a
5 percent annual budget growth rate and inflation of 9 percent on
property assessments showed that real property tax revenues will not
be generating its proportionate share of the budget requirement by
the sixth year of the tax deferral program. The Finance Director ,
reaffirming his opposition to the measure, remarked that some shift
would inevitably occur in the real property tax liability of other
classes of property to recover lost revenues . He suggested limiting
the scope of eligibility for the deferral plan by setting an income
requirement. The Committee encouraged the Director to submit the
language necessary for such provisions to be incorporated into the
bill .
Generally, the Committee members feel some type of tax reform is
needed ; therefore , in the interest of addressing this concern, your
Committee on Finance recommends approval of Bill 85 , Draft 2, on
first reading, that it be forwarded to the HSAC Real Property Tax
Committee for their input, and referral back to Finance Committee for
further review prior to its final passage by the Council .
(ABSENT & EXCUSED)
FRANK DE LUZ I I, CHAIRM
(PL . E R. AKU, V CE CHR. JAM L. K. DAH ;ER , MEMBER lit
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TAKASHI �'1MINGQ, 0 B '' "b+•S` LL S. KOK BUN, MEMBER
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MERL K. LAI, MEREirn SPEN R K. SCHUTTE, MEMBER
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