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HomeMy WebLinkAbout02/15/2012 Public Hearing Transcript re: BILL#2425Honorable Honorable Honorable Honorable Honorable Honorable Honorable PUBLIC HEARING FEBRUARY 15, 2012 A public hearing of the Council of the County of Kaua`i was called to order by Tim Bynum, Chair, Finance /Parks & Recreation /Public Works Programs Committee, on Wednesday, February 15, 2012, at 1:36 p.m. at the Council Chambers, Historic County Building, 4396 Rice Street, Suite 201, Lihu`e, Kaua`i, and the presence of the following was noted: Tim Bynum Dickie Chang KipuKai Kuali`i Nadine K. Nakamura Mel Rapozo Joann A. Yukimura Jay Furfaro, Council Chair The Clerk read the notice of the public hearing on the following: Bill No. 2425 — A BILL FOR AN ORDINANCE TO AMEND CHAPTER 5A OF THE KAUAI COUNTY CODE 1987, AS AMENDED, RELATING TO HOME EXEMPTIONS, which was passed on first reading and ordered to print by the Council of the County of Kaua`i on January 25, 2012, and published in The Garden Island newspaper on February 3, 2012. The following communications were received for the record: Bob & Lila Dolan email, dated 2/14/2012 ,2. Thomas Noyes email, dated 2/15/2012 The hearing proceeded as follows: GLENN MICKENS: For the record Glenn Mickens. Thank you, Tim. I have a testimony here, it's actually Walter Lewis' and he can't make it today, but he asked me to read it and it's my opinion also. So for the record, I'd like to read it. I have been informed that in the years following the inception of the current recession, the decline in value —I think you all have copies of this too —of Kaua`i real property and the maintenance of tax rates has resulted in taxpayers, other than those having the homestead exemption, have had lowered their tax liabilities by over $20 million, while because of the effect of the 2% cap on tax increases enacted in 2004, taxpayers with homestead exemptions have incurred increases over $3 million in their tax burden. In consequence, taxpayers in the homestead class are now paying over 12% of all property taxes which is up from the 7% to 9% historical average. For this reason the finding contained in Bill No. 2425 that homeowners residing in their homes on Kaua`i are entitled to relief from the real property taxes that they currently pay is well taken and states a just cause for enacting an appropriate reduction. PH re: Bill No. 2425 2 February 15, 2012 Ostensibly, the bill achieves the reduction in taxes for the resident homeowners by increasing sharply the exemptions now afforded to such taxpayers. However, the bill is deceitful because to accomplish the reduction in the range needed for historical parity, a significant reduction in the tax rates for such homeowners would also be required and such a reduction is never mentioned. If the Council wishes to rectify the inequity currently being incurred by homeowners and to have integrity, the bill should be amended to provide that tax rates for resident homeowners in each year should not be set at an annual amount that would cause such taxpayers to be liable for more than 9% of the total taxes payable by all taxpayers. Adoption of the bill without assurance of rate change could be a fraud on the taxpayers. Increased exemptions do not themselves affect tax liabilities. If rates were adjusted so that revenue from the homeowners class would be constant, the consequences of the increases would be to redistribute the tax burden so that a greater portion would be payable by the middle and upper value homeowners. If it is intended to reduce the tax burden of the homeowner class, this could be done solely by reducing tax rates. The Kaua`i real property tax is an ad valorem tax under which the tax is proportionate to the value of the property. The owner of a one - million dollar property pays four times the tax of the owner of a $250,000 property. Exemptions change this. With the $48 per thousand exemption, the owner of the million - dollar property would pay 4.7 times the tax of the owner of the $250,000 property. And with at $225 per thousand exemption as proposed in the bill, the owner of the million - dollar property would pay 31 times the tax of the owner of the $250,000 property. Some increase in exemptions may be judicious, but the increases proposed seem excessive. A major point for increasing the exemption would be to aid the first -time homebuyer. That may be a worthy objective, but the aid could be given by an exemption for such buyer, avoiding an across - the -board increase for all. In summary, the objective of reduced taxes for resident homeowners is justified, but it should be accomplished by a limit on the applicable tax rate, not by increased exemptions and the dubious prospect of some future rate relief. In its present form, the bill should not be enacted. So anyway, that is Walter's testimony and, Tim, you may have talked with Walter about this. Mr. Bynum: Mr. Mickens: Many times. Okay, good, I'm glad you have. Thank you, Tim. CARL IMPARATO: Aloha Councilmembers, my name is Carl Imparato. I live in Hanalei and I appreciate the opportunity to speak on Bill No. 2425. I support this bill provided that one important clarifying change is made to the current draft. It's my understanding that one of the major goals of Bill No. 2425 is to bring more of the benefits of the cap on the rate of property tax increases to those resident homeowners who did not purchase their homes prior to the run -up in prices that took place in the first years of this century. Now that goal is a very reasonable and fair goal as long as the bill would not harm homeowners who are already protected by the cap. And I just have two points to make. PH re: Bill No. 2425 3 February 15, 2012 The first is that I believe that the proposed language in Bill No. 2425 might harm residents already protected by the cap on the size of annual property tax increases. And my understanding is that the intent of the bill is that it should not result in property tax increases for any resident homeowners as the bill is supposed to leave in place the protections that resident homeowners already have under the cap. The actual language, however, my specific concern is that Section 5A- 9.3(e)(1)(B), it's the new section, could be interpreted to override the paragraph that's just before it. This new section says "notwithstanding the foregoing" and then it only explicitly exempts Section 5A- 9.3(e)(1) from the "notwithstanding" clause. It doesn't explicitly exempt Section 5A- 9.3(e)(1)(A) from the clause. And so given all of the double- negatives and everything that's going on in there, it's conceivable that this bill could be interpreted to basically override the paragraph that precedes it. And if that's the case, then it might take away the protections for people who are already covered by this. Now this, I think, is just an ambiguity in the language. It's not a fatal flaw in the bill and it can be easily corrected and I proposed in my written testimony that simply replacing the words that state "as calculated pursuant to 5A- 9.3(e)(1)" with the words "as calculated pursuant to Section 5A- 9.3(e)(1) and Section 5A- 9.3(e)(1)(A)," that that can make it all clear, and therefore, I request that as you study this draft you make that change to the language. The second point that I wanted to make is that the existing cap on the rate of annual property tax increases for resident homeowners is a very important protection. Sometimes the cap gets mischaracterized. Last December Councilmember Bynum made a presentation that had a lot of data in it, and it was a very interesting presentation. A lot of work went into it. It showed that there were many resident homeowners whose property taxes are lower than they would otherwise be without the cap. So the result of weakening or disabling or eliminating the protective cap to do the wording that I just mentioned earlier would therefore be to increase the property taxes on those people who showed up in that category who are already benefiting. Councilmember Bynum's presentation alluded to the inequity of the situation in which resident homeowner A pays X- dollars and a newer resident homeowner B pays Y- dollars, where Y is more than X on identical properties. The primary conclusion that should be drawn from that data is that the cap has been very effective in protecting homeowners, because otherwise, homeowner A would be paying the same as homeowner B. So the data that was presented last December, I think, supports the importance of retaining the cap. It pointed out inequities. It pointed out unintended consequences. But it's not the cap itself that is inequitable and it would not be a solution to disable the cap. Rather, given that the cap does protect homeowners who are under the cap from excessive tax increases, the solution to the inequities that Mr. Bynum raised is to bring newer resident homeowners similar protections under the cap. And I believe that's what Bill No. 2425 is intended to do. So in conclusion, I urge you to modify the language in Section 5A- 9.3(e)(1)(B) to ensure that the bill would not inadvertently increase any resident homeowners' taxes beyond the amounts allowed under the existing cap and under their existing baselines under that cap, protect everyone, make no one any worse off than they are today. And if that's done, I think that Bill No. 2425 would be a valuable step in bringing additional fairness and equity to Kaua`i's property tax system. I thank you for your time and consideration of my comments. PH re: Bill No. 2425 4 February 15, 2012 Mr. Bynum: Thank you for your testimony. I'm just going to say a couple of clarifying things. I'm not going to ask a question. When I received your written testimony, I forwarded it to the County Attorney and to our staff too, because you're correct — the intent is exactly like you said that the cap will remain for people who currently have it and that it also adds a large number of people who purchased their homes between 2004 and the present. So thank you for your testimony and we are in the process of addressing the concerns of the language to make sure that it's crystal clear. Mr. Imparato: Thank you. Mr. Bynum: Thank you. Council Chair Furfaro: Committee Chair, could you ask him... again of the testimony he gave at this here. Mr. Bynum: Yes. May we have a copy? Mr. Imparato: I have this here. Mr. Bynum: Thank you very much. There are no other registered speakers. Is there anyone else present who would like to testify on this home exemption bill? Seeing none, this hearing is adjourned. There being no further testimony on this matter, the public hearing adjourned at 1:47 p.m. /wa Respectfully submitted, RICKY WATANABE County Clerk