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HomeMy WebLinkAbout032912_MINUTES_Approved COUNTY OF KAUAI Minutes of Meeting WORK SHOP MEETING Board/Committee: COST CONTROL COMMISSION Meeting Date March 29, 2012 Location Mo'ikeha Building—Liquor Conference Room 3 Start of Meeting: 1:37 p.m. End of Meeting: 3:05 p.m. Present Chair Dirk Apao; Members: Arryl Kaneshiro; Sandi Sterker; Laurie Yoshida; and Glen Takenouchi Also First Deputy County Attorney Amy Esaki; Board& Commissions Office Staff. Support Clerk Mercedes Youn; Administrator Paula Morikami; Administrative Aide Teresa Tamura Excused Vice-Chair Lawrence Chaffin Jr. Absent SUBJECT DISCUSSION ACTION Call To Order Chair Apao called the workshop to order at 1:37 p.m. Chair Apao called the workshop to order at 1:37 p.m. Review of and The intent of the workshop is for the Commission to undertake an objective review of the County's real discussion on the property tax exemptions and rate setting and bring efficiency and equity to the real property tax system. County's real The Commission reviewed various materials relating to the number and amount of exemption by type property tax and County for fiscal year 2010-11. exemptions and rate settings Glen Takenouchi had concerns that the Commission's recommendations may not reflect what is being procedures. proposed in the Bill that is currently before the County Council. First Deputy County Attorney Esaki explained that as required by the Charter, the Mayor would have to put forth the recommendations of the Cost Control Commission to the County Council. Sandi Sterker voiced her concerns about the conversations that she had heard about the tax exemptions and that they were going to cost the County in taxes. She felt that the Commission should not put forth a recommendation that would cost the County in taxes. Additionally, Ms. Sterker noted that the initial discussion was about eliminating the real property Home Tax exemption and raising the tax limit which would eventually even out and in turn, eliminate all of the paper work generated by the process. Cost Control Commission Workshop Meeting March 29, 2012 Page 2 SUBJECT DISCUSSION ACTION Glen Takenouchi noted that the idea came from the Commission's discussion with representatives from the Finance Department. First Deputy County Attorney Esaki informed the Commission that Bill 2425 (known as the Tim Bynum's Bill) is currently before the County Council that finds homeowners residing in their homes is entitled to relief from the real property taxes that they currently pay. Chair Apao indicated that Bill 2425 was first introduced on January 25th, which originally proposed a $225,000 exemption, with increments of$25,000 for seniors over 60 and 70 years old. The bill was deferred several times, until an amendment was made by Council Vice-Chair Yukimura to reduce the exemption to $175,000 with no age brackets. Sandi Sterker reiterated her concerns that the proposed tax exemptions were going to hurt the County in taxes. Laurie Yoshida questioned whether proposed Bill 2425 would take some of the other exemptions out or it is only dealing only with the owner occupant exemption. Glen Takenouchi stated that the proposed Bill 2425 only reflects the home owner occupant tax exemption. Laurie Yoshida asked whether the bill addresses the circuit breaker exemption. Attorney Amy Esaki indicated that Bill 2425 does address that issue, but only for those who truly qualify. Ms. Sterker agreed that it should be based on the person's ability to pay and not because of a person's age. Laurie Yoshida indicated that the same theory also applies to the charitable organizations ability to pay. She noted that it is the younger generation who may have a difficult time in purchasing a home, let alone their ability to pay taxes. Ms. Sterker agreed and questioned whether it would be appropriate for the Cost Control Commission Workshop Meeting March 29, 2012 Page 3 SUBJECT DISCUSSION ACTION County to penalize that age group especially, if they are trying to purchase a home. They shouldn't be compared to someone who can afford to build a multi-million dollar home. Laurie Yoshida referred to the Real Property Tax Advisory Commission who is recommending eliminating all type of exemptions except for the nonprofit charitable organizations under the federal Code Section 501 (c) (3). Sandi Sterker quoted a recommendation from the Tax Advisory Commission which states that in place of the exemptions, the Commission recommends that the real property tax credit be utilized to provide tax relief to those who do not have the ability to pay their fair share of the real property tax burden. Laurie Yoshida indicated that there is a need for clarity when it comes to the controversial exemption of nonprofit organizations and that the definition should include the type of standards that must be met when applying for this tax preference. Having clarity would bring consistency and uniformity in the application of this tax preference. She added that when considering a recommendation, the Commission should include all of the exemptions by type and forward it to the County Council for them to decide on which exemption they would like to keep. Chair Apao suggested that the Commission select the type of exemptions that are less controversial. Sandi Sterker suggested that the Commission eliminate the Crop Shelter and Foreign Consulates exemptions including the 16 other exemptions that are listed with zero amounts. Laurie Yoshida felt that the Commission should have a common philosophy when determining what type of tax exemptions to eliminate and whether the Commission wants to grant exemptions based on a person's income level, whereas, a person with low income level would qualify for the circuit breaker credit and the wealthy would not. First Deputy County Attorney Esaki noted that Section 5A-11.23, Other Exemptions of the County Code, provides information pertaining to the Hawaiian Home Lands tax exemptions. Cost Control Commission Workshop Meeting March 29, 2012 Page 4 SUBJECT DISCUSSION ACTION Laurie Yoshida stated that the Hawaiian Home Lands are different and questioned whether the Commission should keep the exemptions relating to all government land because all of the State lands are not taxed. First Deputy County Attorney Esaki that all State, County, and Federal government properties are non-taxed, including the roads. Laurie Yoshida noted that the Hawaiian Homes tax exemption would fall under the State government. First Deputy County Attorney Esaki indicated that the Hawaiian Home lands are taxed one time. Arryl Kaneshiro stated that the land is owned by the State and the house is owned by the tenant. Laurie Yoshida stated that the land is on a lease from the Office of Hawaiian Homes. First Deputy County Attorney Esaki noted that generally the property tax pays for the general services afforded by the County such as police, fire, and trash pick-up, and that those who enjoy these services should pay their share of the tax including Hawaiian Home. Sandi Sterker agreed and stated that was one of Mr.Kalapa's concerns because he felt that anyone who receives County services should pay their fair share. Laurie Yoshida stated that they should be exempt from the land because the land is covered under the State; however, the house would have some value and should be taxed because it is not owned by the State. First Deputy County Attorney Esaki stated that the appraiser's would look at how the property is owned to determine whether the property is a lease hold versus fee simple, etc. Laurie Yoshida referred to the recommendation made by the State Tax Advisory Commission that those entities which are currently exempt because they tend to be nonprofit in nature,be subject to a levy of the real property tax albeit at a percentage less than full market value in recognition of the community benefit they provide. . She noted that although the recommendation does not specify the percentage, the report does indicate that it should be left up to the Council to decide. Cost Control Commission Workshop Meeting March 29, 2012 Page 5 SUBJECT DISCUSSION ACTION It was also noted that in the report, the Tax Advisory Commission recommends that the Council consider repealing the exemption for Kuleana lands and in its place direct these property owners to the tax credit mechanism to provide relief to those Kuleana property owners who truly cannot afford to pay their fair share of the cost of County services. Sandi Sterker mentioned that Kauai does not have a lot of Historic residential homes and that majority of those homes are located on the island's north shore. Laurie Yoshida noted that the Tax Advisory Commission believes that the historic residential real property should be afforded relief by applying an assessment ratio that results in a valuation that is less than fair market value. Sandi Sterker agreed with the recommendation and noted that if it's in a residential area most of the owners are living in their homes and enjoying the services provided by the County. Arryl Kaneshiro wondered whether Mr. Kalapa's statement was true, and that the purpose for giving the historical homes incentive was because the home owners would be putting more money back into their homes. Sandi Sterker stated that it is evident that the home owner would be doing that anyway otherwise, they would not be purchasing a historical house. Sandi Sterker noted that a lot of the 501 c's receives County services. Laurie Yoshida mentioned that the way Oahu worded its recommendations was to basically repeal every exemption and only give income based, non-profits, and historic based on its percentage, although it does not state the percentage. First Deputy Attorney Amy Esaki informed the Commission that the recommendations made by the Real Property Tax Advisory Commission in its preliminary report did not pass Council. It was mentioned that one of the objective of this Commission is to eliminate the mass amount of paper work involved for each type of tax exemption. First Deputy Attorney noted that the circuit breaker exemption needs to be done annually. Laurie Yoshida noted that it would still be applicable because the Cost Control Commission Workshop Meeting March 29, 2012 Page 6 SUBJECT DISCUSSION ACTION Commission still wants to be considerate to those people with low income. It's the ones that are in a category in which they do not have to pay because they are not being assessed. The question is whether there would be a category where annual assessment is actually being done. Laurie Yoshida questioned whether they assess the properties that they know are exempt. First Deputy Attorney noted that by law the real property tax division is required to assess all properties. Laurie Yoshida asked whether all of the properties that are subject to a minimum tax exemption are being done and if not, then they would have a lot more assessments to do which is really where their work should be focused on. Thus, creating less paperwork for all of these exemptions because the only exemptions that qualify would be the income based, non-profits, etc. She noted that it would not relieve them from work; it's just a different kind of work. Laurie Yoshida stated that it could cost the County more money if they are not assessing properties that they should be assessing. Arryl Kaneshiro stated that the tax for the low hanging fruits carries a minimum tax of$25.00 a year. He then suggested that the Commission increase the minimum tax which would not increase the workload, but increase more revenue for the County. Laurie Yoshida stated that would have to be done anyway because the County still allows for ratios for the non-profits. Referring to the number six tab of the Reference Documents materials, Laurie Yoshida indicated that approximately one-third of Maui's owner occupants pay the minimum property tax of$150 and Oahu minimum tax is $300, Big Island is $50.00 to $100. Kauai's minimum property tax is a low $25.00. First Deputy County Attorney Amy Esaki noted that Maui County is proposing to lower the minimum property tax. Arryl Kaneshiro noted that Ag Land which is dedicated totally for pasture use pays a minimum property tax of$25.00. Sandi Sterker noted that the problem with increasing the minimum property tax is if the land is being leased. However, she felt that if the property is receiving County services, increasing the tax would be okay. Cost Control Commission Workshop Meeting March 29, 2012 Page 7 SUBJECT DISCUSSION ACTION First Deputy Attorney Amy Esaki informed the Commission that the Hawaiian Home lands are being assessed for land and building and even though they get the exemption they are being appraised. Laurie Yoshida noted, that the Commission would not be creating more work because they are already assessing it, which means the only category that are fully exempt is the government. Glen Takenouchi questioned whether the federal government such as PMRF (Pacific Military Range Facility) uses County services. First Deputy Attorney Amy Esaki stated that PMRF has its own Fire Department. Sandi Sterker found it interesting that all of the exemptions type that is under the Hawaiian Home lands would actually come under the assessed value. Laurie Yoshida noted that would be an easy one for the Commission to propose a minimum tax increase from$25.00 to $100.00 Arryl Kaneshiro questioned whether it would be appropriate to request information on how many people actually pay the minimum tax. The information would help the Commission make a recommendation for a tax increase that would increase the revenue for the County. Laurie Yoshida stated that there could actually be more than the number of parcels because if someone is paying more than the minimum tax the Commission could recommend an increase in the minimum tax. Sandi Sterker stated that one would not want to increase the minimum tax to $100.00 when you have someone who is paying $65.00 minimum tax. First Deputy Attorney Amy Esaki stated that if the Bynum Bill were to pass, the total assessment value would increase from$48,000 to $175,000. To qualify for the exemption the total amount for the land value and building value cannot exceed $175,000. Anything less would qualify for the exemption and anything greater would have to pay. Administrative Aide Teresa Tamura informed the Commission that the preliminary Real Property Tax Advisory Commission report for December 2011 is sitting with the Honolulu County Council, and that Cost Control Commission Workshop Meeting March 29, 2012 Page 8 SUBJECT DISCUSSION ACTION no decision had been made regarding the Commission's recommendations. Laurie Yoshida stated that the Cost Control Commission's recommendations are different from the City and County of Honolulu. She explained that when the Commission makes a recommendation it has to go to the Mayor who puts it in an ordinance form for the Council to receive and decide whether they agree with the recommendations or reject it. Chair Dirk Apao stated the Commission cannot make any decisions today, but are able to at its next meeting in April. Laurie Yoshida stated that the Commission can address the matter of increasing the minimum tax as well as what would be the proper way to address all of the tax type exemptions. First Deputy County Attorney Amy Esaki stated that according to Steve Hunt, the minimum property tax for Maui County is $150.00, Oahu is $300.00, Big Island ranges from $50.00 to $100.00 standard, and Kauai is the lowest at $25.00. In reference to the Hawaiian Home lease lands she referred to the July 2011 meeting minutes which states that the lands are either owned by OHA(Office of Hawaiian Association), Hawaiian Home land groups or leased to a family. There are also vacant lands, semi- improved lands and the building's are exempt from taxation and after the minimum tax of seven years and the land is exempt forever. After the seven years, building stays at a minimum tax of$25.00. She noted that the Hawaiian Home leasee's pays a fee for the County services. Laurie Yoshida noted that since the building value vary significantly the Commission should raise the minimum tax that is comparable to the other counties that way there shouldn't be any concerns about increasing the minimum tax for the Hawaiian Home Lands or qualified government type exemptions. Glen Takenouchi asked how much are tipping fees for use of the land fill. Arryl Kaneshiro stated that the total amount one pays for the tipping fees is $12.00 whether you have the service or not. Sandi Sterker asked how everyone feels about the age exemption and whether everyone is on the same page. Cost Control Commission Workshop Meeting March 29, 2012 Page 9 SUBJECT DISCUSSION ACTION Laurie Yoshida requested to get a list of all the 501 C's non-profit organizations. Laurie Yoshida asked what 2% of the previous year's bill mean. First Deputy County Attorney Amy Esaki stated that the permanent home use is a home exemption property dedicated to permanent home use and that the dedicated property shall be taxed based on its assessed value, provided that the beginning tax year 2005 and any increase in taxes from the prior tax year shall not exceed two (2)per cent a year. First Deputy County Attorney Amy Esaki indicated that the bill proposed by Bynum was to take away the 2005 tax year and refer it to the 2012 tax year to equalize the home exemptions. She also encouraged the members to watch the County Council meetings that refer to the property tax exemption. After the members shared their views and input, the Commission requested for the following information: • Information on the number of people that actually pay the minimum tax of$25.00 and those who pay below $150.00, and a listing of all 501 (c) non-profit organizations. • Update on Tim Bynum Bill 2425. Staff acknowledged the request and would notify the Finance Department via a memo. Adjournment There being no further discussion, at 3:05 p.m. Chair Apao called for the workshop to adjourn. Submitted by: Reviewed and Approved by: Mercedes Youn, Staff Support Clerk Dirk Apao, Chair ( ) Approved as circulated (add date of meeting approval). Cost Control Commission Workshop Meeting March 29, 2012 Page 10 (X) Approved as amended. See minutes of May 14, 2012 meeting.