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HomeMy WebLinkAbout100812_CCC_Minutes_APPROVED COUNTY OF KAUAI Minutes of Meeting OPEN SESSION Board/Committee: COST CONTROL COMMISSION Meeting Date October 8, 2012 Location Mo'ikeha Building—Liquor Conference Room 3 Start of Meeting: 1:33 p.m. End of Meeting: 2:45 p.m. Present Chair Dirk Apao; Vice-Chair Lawrence Chaffin, Jr.; Members: Sandy Sterker and Arryl Kaneshiro Also First Deputy County Attorney Amy Esaki; Board& Commissions Office Staff. Support Clerk Mercedes Youn; Administrator Paula Morikami. Excused Commissioner Glen Takenouchi Absent Commissioner Laurie Yoshida SUBJECT DISCUSSION ACTION Call To Order Chair Apao called the meeting to order at 1:33 p.m. Approval of Regular Open Session Minutes of September 11, 2012 Commissioner Sterker moved to approve the Minutes minutes as circulated. Chair Apao called for a motion to approve the minutes. Vice-Chair Chaffin asked whether the Hawaiian Homes pays for fire and police services. First Deputy County Attorney Esaki explained that the only services that are paid for is trash pick-up. Commissioner Sterker indicated that the Hawaiian Homes are tax exempt from paying the $25 minimum real property tax for the first seven years. First Deputy County Attorney Esaki mentioned that the solid waste fee, or any other fee applicable to an owner's property, is not a tax, and it is not counted toward the minimum real property tax. Commissioner Sterker noted that the Commission is only approving the minutes and that any inquiries can be made during its discussion pertaining to the real property tax exemptions. Vice-Chair Chaffin seconded the motion. Motion carried 4:0 Cost Control Commission Regular Meeting Open Session October 8, 2012 Page 2 SUBJECT DISCUSSION ACTION Business CCC 2011-08 Review and discussion of the County's real propem tax exemptions and rate setting. (On-ggipg) Chair Apao questioned whether any of the Commissioners had submitted their questions to Staff for the real property tax division as discussed at the Commission's meeting in September. Staff noted that Commissioner Kaneshiro was the only member who had submitted a question that pertained to the Home Exemption cap and whether or not it would make sense to eliminate or modify the language so that the Real Property Tax Division would not have to adjust the cap every year. Staff distributed a copy of Mr. Hunt's response to the Commission. Commissioner Sterker noted that based on Mr. Hunt's response, it seems that the Home Exemption cap must be adjusted every year because the County must base the cap on the Consumer Price Index report. Commissioner Kaneshiro questioned whether the Home Exemption cap was passed by an ordinance. First Deputy County Attorney Esaki explained that the Home Exemption cap ordinance was approved and passed by Council. She further explained that the purpose for the ordinance was due to a proposed Charter amendment in which the public wanted to cap the property tax because every year when the market was good, the taxes would keep going up so they wanted to put a cap on it. As a result, the County Council came up with Permanent Home Use cap (PHU)that sets the ceiling for the maximum increase to an individual's property tax bill when that property is their primary residence. The Council felt that by having an ordinance it would make it less cumbersome to adjust the cap yearly, as opposed to having it as a Charter Cost Control Commission Regular Meeting Open Session October 8, 2012 Page 3 SUBJECT DISCUSSION ACTION amendment. Vice-Chair Chaffin questioned whether there was a way of imposing a three year cap that could be adjusted every third year. First Deputy County Attorney Esaki indicated that it would be for the Real Property Tax Division to decide. Commissioner Sterker agreed. Commissioner Sterker indicated that she does not understand the difference between the building tax rate and the land tax rate. First Deputy County Attorney Esaki explained that the tax rates are set by ordinance which is approved by the County Council. Commissioner Sterker also noted that certain exemption types have two different tax rates. Commissioner Kaneshiro explained that the tax rates for each exemption type are based on the tax class such as agricultural, residential, apartment, and commercial. First Deputy County Attorney Esaki stated that the tax rate is used by the Real Property Tax Division to assist them in computing what the ultimate taxes would be for those who do not pay the minimum tax real property tax. Commissioner Sterker voiced her concern that there were so many Low and Moderate Income Housing that are tax exempt. She indicated that with the exception of the County of Kauai all of the properties that are on the list all receive police and fire protection services. She asked why couldn't they all be assessed the minimum real property tax. First Deputy County Attorney Esaki explained that the ordinance allows it. For example, the Mutual Housing Association who is the owners of the Lihue Town House apartments on Rice Street qualifies for the minimum tax because the project is considered low income housing. She further Cost Control Commission Regular Meeting Open Session October 8, 2012 Page 4 SUBJECT DISCUSSION ACTION explained that the people who live there must also qualify to receive the minimum tax exemption based on their income. Commissioner Sterker indicated that she understands that people must qualify but why should the owners of the Mutual Housing Association qualify for the exemption if they are the owners of the apartment complex. First Deputy County Attorney Esaki explained that the ordinance allows for the minimum tax to be applied to all low income housing projects. Commissioner Sterker voiced her concern that the Low to Moderate Income tax exemption should not be applied to the property owners just because they build Low and Moderate Income housing on their property. She stated that is why there are tenement owners because they are the ones with the low incomes who should qualify for the minimum real property tax exemption. She voiced her concern that the property owners are also paying the minimum tax when they are the ones who are making more money. Commissioner Kaneshiro indicated that he is unclear whether the owners of the property are actually making more money because the purpose of the ordinance is if you are assessed at a higher tax rate and you decide to increase the rent you then need to justify the purpose in order to qualify for the Low and Moderate Income Housing tax exemption so by the owners keeping the rent low they would not have to have a purpose. Vice-Chair Chaffin stated that there should be two requirements in order for a person to qualify for the exemption. The first is the ability to pay, which is based on a person's income, and the second is the amount of services that is required because to him it seemed that the subsidized Cost Control Commission Regular Meeting Open Session October 8, 2012 Page 5 SUBJECT DISCUSSION ACTION housing developments require more police services. First Deputy County Attorney Esaki explained that the Kalepa Housing in Hanamaulu has made available a unit for a uniform police officer to reside in to help deter criminal activities within the area and that could be a reason why one could assume that the low income housing developments would require more police services. Commissioner Sterker indicated that it would not matter whether the owners of the building pass the cost of their assessment on to the people in the form of raising the rent because most of those people who are living there have to stay under a certain income level in order for them to qualify for low income housing. By raising the rent the owners would no longer qualify for the Low Income Housing Tax Exemption. Vice-Chair Chaffin voiced his concern that the time and effort expended by the Cost Control Commission in reviewing the tax exemptions may be inadequate because the Commission lacks the technical background and knowledge to determine whether the various tax exemptions should be maintained, revised, or eliminated. Commissioner Sterker expressed her support of Bill 2444 because it would help the County recoup some of its losses that have been occurring for a long time. She indicated that by increasing the minimum real property, even more tax would surely help the County because they would not have to worry about raising the minimum real property tax every three (3) years. Commissioner Kaneshiro questioned whether it is the Commission's responsibility to review each exempt type to see whether they are in compliance to be a nonprofit organization. Commissioner Sterker stated Cost Control Commission Regular Meeting Open Session October 8, 2012 Page 6 SUBJECT DISCUSSION ACTION that the Cost Control Commission needs to determine whether all of nonprofit organizations that are on the list should be tax exempt. She suggested that the Commission once again review the definitions of the 501's which could determine which of the nonprofits should be retained and which ones to eliminate. She noted all of the churches that are on the list are 501(c) (3), except for Michael Longley, Robinson Family, and Gay Robinson Family. Vice-Chair Chaffin restated his concerns that the task may be too overwhelming for the Cost Control Commission to take on. Chair Apao stated that he agrees with Vice-Chair Chaffin; he explained that all of the nonprofits that are on the list must have a valid reason. He noted that representatives from the various Credit Unions have come before the Cost Control Commission to give testimony and to ask the Cost Control Commission to look favorably upon the retention of the property tax exemption for Credit Unions. Commissioner Sterker stated that at some point one needs to ask why are the nonprofits paying the minimum real property tax when there are some who are very capable of paying more. Commissioner Sterker further indicated that she would support a recommendation to retain only the people and/or nonprofit organizations that are truly worthy of paying the minimum real property tax. Commissioner Sterker strongly stated that, in truth, the County needs the money so that it can provide the services for the entire community and by not doing anything to eliminate certain exemption types or increase the minimum property tax it would not benefit the community as a whole. Cost Control Commission Regular Meeting Open Session October 8, 2012 Page 7 SUBJECT DISCUSSION ACTION Vice-Chair Chaffin questioned whether it would be appropriate for the Cost Control Commission to bring this issue to the attention of the Council. Commissioner Sterker noted it is the responsibility of the Cost Control Commission to: review personnel costs, real property taxes, travel budget, contract procedures, review with the aim of eliminating programs and services available or more sufficiently supplied by other governments or organizations, eliminate or consolidate overlapping or duplicate programs and services, and scrutinize for reduction of any County operations. First County Deputy Attorney Esaki restated Vice-Chair Chaffin concerns that the task may be too overwhelming. She suggested to the Commission that they should revisit the matter for continued discussion and deliberation in 2013. She indicated that the Commission has already submitted two recommendations and should now take additional time to study the information in order to make adequate recommendations in the future. Commissioner Sterker asked that if the County Council were to pass the $150 minimum real property tax increase, how would it affect the status of the nonprofit organizations? First Deputy County Attorney Esaki indicated that she would need time to do the research and that she would forward the information to Staff for distribution to the Commission prior to the meeting in November. Other members expressed concern that the County Council is already having a difficult time deciding whether or not to approve Bill 2444 and that a recommendation from the Cost Control Commission, at this point, on whether the various tax exemptions should be eliminated, maintained, or revised may not result in a meaningful recommendation. Cost Control Commission Regular Meeting Open Session October 8, 2012 Page 8 SUBJECT DISCUSSION ACTION Chair Apao indicated that one reason that the Commission wanted to look at the real property tax exemptions was to come up with a recommendation that would lessen the workload for the County's Real Property Tax Division staff from going out to do property assessments. Commissioner Sterker stated that by eliminating the tax exemption for the nonprofits, it would save the Real Property Division time and effort from doing the assessments. Commissioner Sterker questioned whether it would be appropriate at the time for the Commission to defer this matter to 2013. First Deputy County Attorney Esaki said that since the Commission has already submitted its recommendations for the year she suggested that the Commission could either"defer"this item for future discussion, or make a motion to "receive" this item. She noted that item CCC 2011-08 has been on the agenda since July 2011. Vice-Chair Chaffin stated that he would rather the item not appear on the next agenda. But instead make a positive statement in the 2012 Annual Report to show that the Commission had reviewed the issue in its entirety and found that the time and effort expanded in reviewing the property tax exemptions proved to be overwhelming for the Commission. Commissioner Sterker stated that part of the Commission's responsibility is to review the real property tax exemptions, and felt that the Commission should continue with its discussion on the matter. She suggested that the Commission look at other forms of information from other counties and cities on the mainland. Cost Control Commission Regular Meeting Open Session October 8, 2012 Page 9 SUBJECT DISCUSSION ACTION First Deputy County Attorney Esaki suggested to the Commission to continue its focus on the next agenda item pertaining to the County's travel policy, budget and expenditures. Chair Apao suggested that Commission continue its discussion on simplifying the Home Owners Age Tax Exemption at its next meeting in November. Chair Apao called for the motion to continue its discussion on Home Commissioner Sterker moved to continue Owners Age Tax Exemption. discussion on Home Owners Age Tax Exemption in November. Vice-Chair Chaffin seconded. Motion carried 4:0 First Deputy County Attorney Esaki stated that since the Commission has decided to continue it discussion only on the Home Owners Age Exemption in November, she suggested that the Commission withdraw its first motion and make another motion to receive item CCC 2011-08 so that it would not appear on future agendas. Commissioner Sterker agreed and felt that the Commission should have a general discussion on the Home Owners Age Tax Exemption and how the members want to proceed on this Commissioner Sterker made a motion to issue in November. withdraw her first motion. Vice-Chair Chaffin seconded. Motion 4:0 Commissioner Sterker moved to receive item CCC 2011-08. Vice-Chair seconded. Motion carried 4:0 CCC 2012-13 Discussion on the County's travel policy, budget and expenditures. Cost Control Commission Regular Meeting Open Session October 8, 2012 Page 10 SUBJECT DISCUSSION ACTION Chair Apao indicated that since he had no background on this issue, he asked staff to request from the Director of Finance, information on the County's travel and per diem policies, and comparison of expenditures for travel (General and Training) for fiscal years 2010, 2011, and 2012. Commissioner Sterker asked whether it would be appropriate to request information on the usage of the County's Civil Defense tele-conference room. Ms. Morikami mentioned that the County's travel budget for the past fiscal years is at its minimum. Commissioner Sterker requested the presence of Economic Development Specialist Ben Sullivan to provide an update on the County's energy use at the Commission's meeting in November. Vice-Chair Chaffin questioned whether it was appropriate for the Commission to request information from the County Attorney's Office relating to new and outstanding special outside legal contracts to include cost analysis and expenditures to date. First Deputy County Attorney Esaki acknowledged the request and stated that she would provide the information prior to the meeting in November. Announcements Next meeting—Thursday,November 8, 2012 at the Mo'ikeha Building in Liquor Conference Room 3. Adjournment Chair Apao called for the motion to adjourn. Commissioner Sterker moved to adjourn the meeting at 2:45 p.m. Vice-Chair Chaffin seconded. Motion carried 4:0 Cost Control Commission Regular Meeting Open Session October 8, 2012 Page 11 Submitted by: Reviewed and Approved by: Mercedes Youn, Staff Support Clerk Dirk Apao, Chair (X) Approved as circulated on 11/08/12. ( ) Approved as amended. See minutes of meeting.