Akina shares insights about property taxes on PBS Hawaii
by Grassroot Institute of Hawaii, April 6, 2023
Is there relief for rising property taxes on Oahu?
That was the question posed to guests on the March 23 edition of PBS Hawaii’s “Insights” program, which included Keli‘i Akina, president and CEO of the Grassroot Institute of Hawaii.
Other panelists were Honolulu City Councilmember “Uncle” Calvin Say; Andy Kawano, director of the Honolulu Department of Budget and Fiscal Services; and Racquel Achiu, vice chair of the North Shore Neighborhood Board.
During the hour-long discussion moderated by Daryl Huff, there was little discussion about what could actually be done to provide relief to Oahu property owners.
However, Akina did make it clear why property taxes have been going up, not just on Oahu but throughout Hawaii’s four counties.
The amounts owed are increasing, he said, because property taxes are based on property assessments. So if property assessments go up, then property taxes go up too — unless the rates are changed or other policies are adopted to avoid or mitigate the increases.
Akina acknowledged that Hawaii property tax rates are among the lowest in the country, but because Hawaii property values are among the highest in the nation, he said, the amount of property taxes that Hawaii property owners actually pay is closer to the national average.
Akina said Hawaii home prices are sky-high because of the scarcity of housing caused by “all the regulation … that developers and individual home builders have to go through in order to renovate or in order to build.”
The panelists discussed the popular perception that out-of-state buyers are responsible for Hawaii’s housing crisis, whether taxing empty homes might be a way to help residents find housing, whether kupuna should be given special treatment under Honolulu’s property tax code, and to what extent the needs of businesses, renters and leaseholders should be considered.
Keli‘i Akina on PBS Hawaii’s “Insights” program, along with guests Calvin Say, Andrew Kawano and Racquel Achiu, hosted by Daryl Huff
Narrator: A huge spike in property taxes on Oahu is drawing outrage from homeowners. Property values are shooting up. And while that’s good news if you’re looking to sell, it’s making holding onto a home much more expensive.
So what can be done to help residents struggling to deal with the sticker shock? And should there be an overhaul in Oahu’s property tax system?
Tonight’s live broadcast and live stream of Insights on PBS Hawaiʻi start now.
Daryl Huff: Aloha, and welcome to “Insights” on PBS Hawaiʻi. I’m Daryl Huff. Many of Oahu homeowners were shocked as their property assessments came back thousands and thousands of dollars higher than the year before.
Now some are calling for a change in tax rates to prevent Hawaii’s rising property values and taxes from pricing out longtime homeowners — and renters, when the taxes are passed on. We look forward to your participating in tonight’s show. You can email or call in your questions, and you’ll find a live stream of this program at PBSHawaii.org and the PBSHawaii Facebook page.
Now to our guests.
Honolulu Councilman Calvin Say represents Palolo Valley, St. Louis Heights, Manoa, Moiliʻili, McCully, Ala Moana, Makiki and portions of Kakaʻako. I didn’t realize it was that big a district. Before his election to the City Council, he was a longtime member of the State House.
Andy Kawano has been the director of budget and fiscal services for the City and County of Honolulu since 2021. Before joining the city, he spent 25 years at Foodland supermarket and its affiliates in a number of financial and operating roles, including chief financial officer.
Racquel Achiu is a lifelong Oahu North Shore resident and currently serves as vice chair of the North Shore Neighborhood Board. She’s been an active volunteer and advocate for her community for more than 25 years.
And Keliʻi Akina is the president and CEO of the Grassroot Institute of Hawaii. It’s a nonprofit policy research organization that advocates for individual liberty, economic freedom and accountable government.
We’ll start with you, Racquel, if you could talk about how did these assessments come down for you and for your neighbors when you started talking about what it means for the cost of living in Hawaii?
Racquel Achiu: Well, not just the past year, even the recent increases — it’s always a conversation throughout the North Shore.
I believe North Shore is the highest increase in the entire island with a 20% increase. And we extend on to I believe what is considered zone six, which is Kahuku to Kaaawa, they got also a high — not as high as North Shore is considered.
And then we expand on to what is considered our district in Koolau Poko area, although they did get an increase not as high as ours, it’s still high for them.
It is a shockwave for most people, but mostly I would say for our kupuna and for our retirees who have, you know, planned their lives accordingly to be able to enjoy their retirement. And now to have to worry about a burden of a significant increase, it’s challenging to be able to help navigate.
Many of them don’t really understand how it works, how valuations are made or how they can try to advocate for themselves on it. You know, they’re not real familiar with how to apply for appeals or the low-tax income credit. You know, it’s — a lot of education is missing in that area.
Huff: You know, Andy Kawano, what explains this huge increase? It did seem like a lot to happen in one year. Were you folks kind of surprised by how high the appraisals came in?
Andrew Kawano: Actually, it’s been a couple years. So coming out of COVID, I think there was just a lot of pent-up demand to acquire homes.
And if I recall right, in calendar 2021, total home sales amounted to over $12 billion — closer to $12.5 billion dollars — and our real property assessment team said that in prior years, the highest it would go to would be maybe $10 billion.
So, just a lot of demand. People essentially were putting cash down to buy homes, and that drove prices up as we got out of the pandemic. So we’ve had actually two years of larger assessment increases.
I think for fiscal 2022, the assessments were up about 9.5%, and this past year overall about 13%.
Huff: Let me ask Keliʻi Akina: You know, these valuations — is it fair that me, who owns a house in a lot, that my property taxes have to go up because somebody else sold their house?
Keliʻi Akina: Well, whether it’s fair or not, it’s not a good deal.
We saw overall assessments go up by about 12.4%. And in Residential, that’s about 9-point-something. And in Residential A, as high as 39.9%. Plus commercial went up as well.
And as Racquel pointed out, if you’re on a fixed income, the value of your house going up doesn’t mean you are richer. It means you are poorer. And this is the problem we’re facing.
Daryl, I know tonight we’re going to talk a lot about the specific problem of property taxes, but I don’t want to get too far away from the big picture.
Our people in Hawaii are paying too much already as it is. When compared to other states, we’re the second highest in terms of the tax burden, that is what we pay in terms of local taxes and state taxes.
Huff: OK, let me hop over to Calvin Say, though — Councilman Say — who also has the experience of being in a state side, so you’ve been, you’ve basically been responsible for all these taxes that he’s complaining about.
But, you know, do you think that the average person is paying or going to pay a ridiculous amount of taxes or do you think it’s fairly reasonable what’s being expected?
Calvin Say: It all depends on how the general public looks at it, as far as the services that government provides.
So at the state level, yes. You know, you’ve got the Department of Education, which is a big-ticket item. Then you have your public safety, which is your prison system. Then you have your state departments of transportation — highways, airports, harbors et cetera. It goes on and on.
But I was shocked two years ago when I became the chair of the budget committee that I found out the only revenue source that we really had was real property tax. And it was a shock to me.
But, you know, understanding the budget process at the state and county level, I felt that I had an obligation in seeing through what I think the general public forgets also today — Racquel — is the issue of collective bargaining.
For four years, state and county employees did not get a pay raise. And all I’m saying is that when this particular assessment came in, a portion would have to be used for pay raises.
Huff: Let me, let me, Andy Kawano, can you give me a three- or four-sentence explanation — or give the general public — about how this works?
What’s the connection between an assessment and the tax bill? And, No. 2, if we could do a back-of-the-envelope estimate of, let’s say, someone who’s got a $750,000 house and their property taxes assessment went up 20%, how much money is that out of somebody’s pocket?
Maybe I’m asking you to do math live on television, which is probably not fair.
Kawano: You should use rounder numbers, Daryl.
Huff: OK. Give me a rounder number. Give me a sense of how much …
Kawano: Use a million dollars. It’s round.
Huff: OK. Alright. Yeah, yeah, yeah. OK. So I started with a million-dollar house. I’m owner-occupied, so I’m not in the Residential A category, we’ll take that off the table. And it went up 20%, right? What does that add up to?
Kawano: OK, so on a million dollars, the property tax rate is $3.50 cents per thousand, so you’d be paying about $3,500.
Huff: On a million dollars?
Kawano: On a million dollars.
Huff: So if it goes up 20%?
Kawano: So that’s a $200,000 increase. For each $100,000, you’re paying $35.
Huff: So, OK, so it’s $200,000. So it’s $35. So it’s $70 more a year.
Huff: A 20% increase on a million-dollar house.
Kawano: Correction: $350. $350.
Huff: $700 more.
Kawano: Yeah, $700.
Huff: OK. So a million-dollar house goes up 20%. Your taxes have gone up $700 from $3,500.
Huff: So from $3,500 to $4,200. OK. So Racquel. OK, let’s work with that number.
Huff: Is that really something that’s going to chase someone out of their house?
Achiu: Sure. It has the potential to. Those are good numbers because they’re similar to my own mom, who is alone now, fixed income, retired. That’s a hard — you know, any increase — $3,500 already is not an easy thing.
I think in this aspect, there’s ways that can be navigated and we can manage it in a sense where in — generally, the way I see it is if there’s something to be done, something that we can actively do, I believe that people such as my mom with situations such as those numbers, our kupuna and our retirees have to be considered first.
She’s been in her home for over 50 years. She has earned equity, she’s done nothing to her home to make it into this vision on paper of a bazillion-dollar home, but she’s surrounded by them. So I think the impacts of that as to your point of do I, does she, should she suffer what has happened down the street?
Huff: You know, this is a call from [unintelligible 00:12:45] in Makakilo: Why can’t we limit the amount of people coming in from the mainland, which prices us out of real estate?
I mean, Keliʻi, is indeed the out-of-state investment in, for the most part, rental or commercial property — even if they’re buying it, they’re not here, a lot of the foreign buyers — how much is that influencing the amount that an average homeowner’s going to pay?
Akina: Well, actually, Daryl, purchases of homes by foreign or mainland buyers is much smaller than people think it is, and it has much smaller impact on people …
Huff: I’ve seen your guys’ analysis.
Huff: But that is a factor.
Akina: It is a factor. But the reality is, even without outside purchases, we already have huge demand. We’re 15,800 units short in Honolulu County alone.
Research shows clearly that mainland buyers actually is a very small factor in the price and the scarcity of houses here, and I think what’s more important is to look at the real causes.
The real cause of the scarcity and the rising price of housing is all the regulation — both at the state and county level — that developers and individual homebuilders have to go through in order to renovate or in order to build.
Huff: OK, well, OK, stop for a second because …
Akina: We’re one of the most regulated states in the entire nation.
Huff: I need to stop for a second because I don’t want to — I respect you a lot, but I don’t want you hijacking this show off to a overall, you know, cost of living thing. Because that is a problem, but this is a very specific, detailed problem that I’d like to …
Akina: Well, I’m looking forward to the conversation.
Huff: Yeah, no, I — but it, like, for example, another question’s coming in: Who actually buys the homes here — mostly locals, mainland investors?
You feel like that’s not a big factor, but Andy Kawano, how big a factor is outside investment in pushing up prices, in your opinion?
Kawano: I think from a perception standpoint, it is a factor, because people always talk about that, right? Non-residents buying homes at high prices. The perception’s not good.
But, you know, to say that, yeah, the mainland’s causing it, I think is, you know, not totally correct. It is the fact that real estate is scarce, so there’s — we don’t have enough inventory of homes here on Oahu. And when …
Say: Daryl, can I just following up on what Andy said. This is a question of supply and demand.
Say: That’s all it is. And the investors that we have today are just not national investors — international investors and local investors who do speculate also.
You know, if they have the cash available, they will buy and see that they’ll sit on it for one or two years and then sell it.
Kawano: And keep in mind for years, record low-interest rates for mortgages, that drives demand for buying homes as well.
So, yes, you know, the elderly, the kupuna that have homes that are going up — it is an issue. But at the same time, for people that are getting their feet underground, you know, they’re in the workforce, they have opportunities to build equity as well, you know, in their homes.
And we’re also looking at tax credits based on income levels and looking at increasing the income levels such that more people can qualify for the tax credit, low-income tax credit to help.
Huff: Yeah, let me, Racquel Achiu, how does this outside investment — you mentioned that the North Shore, outside or inside or wherever, but people buying up property. How is it — in a microcosm, how does it affect what you’ve observed in your community?
Achiu: We’re overrun by out-of-state purchases, outside money, foreign investment. It’s not just the people who have chosen to relocate, but it’s also developers that come from outside looking to invest in the area and turn it into something that we can’t afford.
So I’m going to respectfully disagree with Keliʻi. But, you know, the North Shore — I’m going to go back 30 years, because that’s the last time I remember it being reasonable or manageable when I got out of high school.
After that, we’ve exploded with an influx of new residents, outside money, developers coming in.
Huff: Right, and it should be said that — I would think you would even agree — that individual pockets, certain areas, are going to be influenced way more than say Mililani or where I live in Makakilo by that sort of effect.
Akina: Absolutely, Daryl. I would agree with Racquel that there are certain pockets where not only the practice of outside buying is high, but the perception as well.
But the overall data — I’ll just throw this out — the overall data shows that across the state, even if we didn’t have outside purchases, we have a huge problem that is really generated by our own demand.
Akina: And we need to solve that first.
Huff: Exactly. So …
Akina: That’s the major cause.
Huff: So Andy, though, let me — just to get back so that people understand how the, you know, how it works specifically with our property tax system. In a place like Racquel’s community, those purchases around her mom’s house would have a fairly direct impact on her property tax assessment, the way the assessments work, right?
Kawano: That is correct, yes.
Huff: Because they’re looking at comparable sales in the neighborhoods.
Kawano: They look within a radius. They start within a certain scope, and they keep expanding it until they have enough comp sales. And the real estate appraisers then make adjustments so that those comp sales are comparable to, you know, the home, subject home being valued.
And once they do that, they go through a couple calculations to come up with, you know, a average, if you will, appraised value. They throw out the high and low values and, you know, come up with a number and, yeah.
Huff: So, yeah, so. OK, so we’re starting to get a lot of questions about what to do about it.
A couple of interesting questions, let me though, Calvin, first …
Say: Yes, please.
Huff: For you, Councilman.
Huff: This phenomenon of very small pockets of really high increases and other places where there’s not much increase — that doesn’t seem fair, right? I mean, the tax equity, and, you know, it doesn’t really seem fair to have that.
I’m not saying that the system is wrong, but when you’ve got neighborhood-by-neighborhood dramatic differences in how much their tax bills are going up, is that something that, at the policy level, needs addressing?
Say: At the policy level, yes. And you’re correct because when I look at the west side, why are the real estate sales lower compared to East Honolulu, the primary urban center?
Because that’s where all the services are being provided. That’s where you have the major mega malls, et cetera. I would like to see — and we did try to request the one Rural Property Tax Advisory Commission to look into that, and they did make some recommendations.
But the overall scope of things is the scarcity of supply and the demand that is out there. I can’t control if Calvin Say today’s property in Palolo is $1 million, and there’s a demand that there’s five or six individuals who want to buy it, and it goes up to $1.5 [million]. It’s going to impact my neighborhood no matter what.
But the reason why the $1.5 [million] was the selling point is because of the proximities of where Palolo Valley is compared to other communities such as the Waianae Coast, et cetera, et cetera.
Huff: OK, so let’s talk a little bit more about what to do about the current situation.
So, two questions. One from Steve on the North Shore, one from De Gray: Why not make a tax increase exemption for kupuna and fixed-income owners?
Exemptions, we start getting into exemptions and all kinds of technical questions.
Say: Well, Daryl, that’s what I said to you earlier. There’s almost 20 something different real property tax exemptions on the books already.
And I think we tried to address it the past two years, and seeing if some of these exemptions could be repealed.
And with the savings that you get from that repeal of the exemptions be used to maybe support the kupunas. It’s just a reallocation.
Huff: So, just to — I want to acknowledge our questions. North Shore Steve — how can they raise home exemptions for kupuna retirees with fixed income?
How much, Andy Kawano, is that in the current response from the city administration been considered? And I know you folks have proposed a $300 across-the-board credit.
Kawano: One-time credit. And we did that because we understand that people are struggling. We also understand that in the last two years, fiscal ’22 and fiscal 2023, we’ve had large increases in assessments that we’ve talked about.
So the one-time credit is to, was put out there to really help people this coming year, you know, starting July 1, 2023, going through June 30, 2024. So the $300 credit equates to about a $86,000 additional exemption for homeowners. It’s going to be provided to homeowners and …
Huff: Owner occupants only?
Kawano: Owner occupants with the homeowner’s exemption, so about 152,000 homes.
And going forward, what we’re going to do is, again, as I mentioned, take a look at the low-income tax credit for homeowners.
And we’re also going to look at the exemption amount.
So currently, the exemption is $100,000 for homeowners with the homeowner exemption. And when those homeowners reach age 65, it goes up to $140,000.
Huff: And then what you’re proposing would be another $80,000, essentially, exemption on top of that.
Kawano: For one year. For one year.
Huff: For one year.
Kawano: It’s a one-time. It’s a, yeah …
Huff: So a person — getting back to the million-dollar house. Now, if they live in the house, it’s $900,000 that gets taxed. If they’re 65 or over, then take another $40,000.
Kawano: $40,000, so $860,000.
Huff: And then one-time [$80,000], so now you’ve taken about $200,000 off of the value of the house that they’re paying on about [$800,000]. Just so I get this.
Kawano: Yeah, yeah, the credit of $300 equates to an additional one-time exemption of about $86,000.
Huff: So why do it that way instead of just decreasing the rate for regular residential?
Kawano: Because we don’t know what’s going to happen going forward, and we wanted to hit it one time and do it quickly.
And as I mentioned, we’re looking at the exemption and the low-income tax credit going forward. So for fiscal year ’25 on, we’ll take a look at that, and we’re having a lot of discussion on that.
Huff: Racquel, let me ask you, how does that $300 sit with you folks?
Achiu: I think it’s a good start. I don’t think it’s enough. It’s a good start. But when you boil down to the, like my mom, the Mrs. Albert, the Papa Rays of this world that are just sitting there trying to figure out what it is, by the time that year is up, it’s done.
And then what? Then what do we do? We have to figure out a way to look at it.
All of the information’s on the system already. Have they been there that long? Do we cap them? We should be capping kupuna and making sure that they don’t have to worry about that anymore.
Where do we make up that difference? We look at these new people that are coming in and paying over asking price for their homes and now increasing the valuation. I think a look at the valuation and how those are come up with matters and to the people that it applies to.
Huff: And Calvin Say …
Say: The simplest approach as far as how I would look at it in trying to help the kupunas: If you want to cap it, we cap it, but we increase the rates on those other categories that can survive.
Huff: Well, that’s a pretty dramatic idea.
Say: Well, it’s an idea …
Huff: So like for everybody over — you say kupuna because kupuna is different from owner occupant, but an owner-occupant kupuna would basically have their taxes capped forever?
Say: Forever up to the point whereby there is a legislational ordinance to say once it’s sold, the city will get maybe a larger portion of that sales, of the difference.
But what I’m trying to get at is this: With the exemptions that are in place, and if you want to address the rates on these particular other classifications, that resources that you do get can be plowed back into helping the kupunas.
Huff: Good. Let me — can we …
Say: And that’s something that’s not going to be a yearly thing, but perpetuity.
Huff: That would be very popular.
But do you — what do you think is a fair way to deal with this?
Akina: Well, as we’re talking about solutions, I want to say that what Andrew and the mayor have come up with is a good idea. The $300 rebate is good, but I agree with Racquel, a starting point.
And at the Grassroot Institute, we’ve calculated that it should be at least $380 to take into account the recent bump in assessments. But in addition to that …
Huff: Wait, wait. Oh, hold on. What number?
Kawano: I’m sorry, $380?
Akina: $380, that’s what we’re proposing.
Kawano: The exemption amount?
Akina: Not the exemption, excuse me, I’m talking about the rebate.
Huff: So $380.
Akina: Per person.
Akina: Yeah. And secondly, the homeowner’s exemption that Bill 40 is talking about is really a good idea as well — $100,000 right now, as you pointed out, Andrew, to go to $110 [thousand].
But we would propose that it go up to $125 [thousand] because we have to keep pace with the rising real estate market, and that’s something that’s very important, along with inflation as well.
Huff: But let me interrupt you because we’re specifically talking about what to do about these recent assessments. You think that increasing it to $380 would be equitable.
What do you think about this idea of capping kupuna, people over 65, in their taxes?
Akina: Well, I like it, but I’m cautious. I like the idea that we want to help out our kupuna and particular groups.
But if we look at the whole population, there are so many groups by which we can divide our society that we’ll find ourselves in a very difficult position of saying we’re going to help this group and that group and so forth.
That’s why I think a more macro approach to bringing about economic reform is much more helpful than all of the engineering we have to do at the micro level.
Kawano: I agree with that. I think if we slice and dice our homeowner occupants in too small amounts, you get such a complicated system. We’ve got to keep it, we’ve got to look at the big picture and keep it so it’s manageable.
And I feel that, you know, what we have works. I think we have to tweak what we have currently, you know, our current tax program. And I think if we all work together and have the discussion, we’ll start to move to something that works better going forward.
Huff: I want to throw out the idea of renters also because, you know, many people live in a house that was owned by someone else and now they’re renting it, and that’s not owner-occupied, so therefore the taxes are going to — they’re not paying the exemption. They could end up falling into the Residential A category, pretty quick, pretty soon.
Kawano: But the renters don’t own the home, right, Daryl?
Huff: Right. But it’s, the option becomes the homeowner, and many of the homeowners are just saying that’s their other house. Well, I’m just wondering whether renters should be factored into this thing, you know.
Akina: Daryl, I think we have to think of renters because they will receive the brunt of any increase in property taxes because owners are going to pass that on to them.
And so the first line of dealing with fairness to renters is to make sure that we are fair to our owners as much as possible.
Huff: Andy, you feel that way too?
Kawano: I feel that way too. Because think about it, you know, our real property tax appraisal team is not that big.
If we were to provide some kind of tax relief, if you will, to renters, how do you go about doing that? All of these renters would have to turn in their leases, would have to …
Huff: Yeah, you’d have to actually put the savings on the owner of the house.
Huff: Right. So it gets complicated.
Councilman Say, you’ve mentioned that we have lots of exemptions for different kinds of properties, and I do have two questions about that.
Moses from Nanakuli saying, “Homestead lessee doesn’t understand why they have to pay property tax for property they don’t own to the city.” And another question, Tom from Wahiawa, “Why aren’t churches charged property tax?”
Huff: Our homesteads are charged property tax based on the value of the building?
Say: I believe so, huh? And not on the land.
Huff: It’s the value of the building that you’re charged for, right?
Kawano: Oh, can you repeat your question again, Daryl?
Huff: It said, “Homestead lessee doesn’t understand why they have to pay property tax for property they don’t own.” Because it’s a lease. But they have to pay property taxes too. And that’s set on the value of the building.
Say: The building? The improvement.
Huff: The improvements. OK. So property taxes it’s on — when it’s residential, it’s not on the land, it’s on the building. That’s one of the things that we didn’t talk about before, but that’s a misunderstanding people have.
Kawano: Well, if you, it’s — the property taxes, there’s two parts, right? There’s the land part and the building part.
Kawano: Yeah so …
Huff: Oh, it’s combined?
Kawano: It is.
Huff: So, but he, but, so, a lessee, whether it’s a lessee on homestead land or a lessee in a leasehold building — if there’s any left — are they gonna be charged the full value, market value, of their property, even if it’s on a lease and they’re only paying …
Kawano: It depends on what the lease says. So if the lease says the rural property tax will be passed through to the occupant, that’s what happens.
Huff: But in your assessment of, say, a leasehold property, it’s assessed, going to be assessed lower than a fee-simple property.
Kawano: Well, our appraisers will compare, you know, the sales information to other sales data on leasehold property to try to get a comp that way, you know, within a certain region.
Huff: OK. So I want to involve — Racquel has been sitting there quietly. Before we move on, what would you like to see in terms of protection? You’re primarily concerned about kūpuna and their increases.
Achiu: I think the kupuna and the retirees are a priority because they’re the ones that have worked all these years to set themselves up to be comfortable in these years. This was not part of their plan, obviously, it’s such a drastic measure.
I think everybody — the overall property tax system is — just needs some, like Andrew had mentioned, you know, some tweaking.
Kawano: Some tweaking.
Achiu: Some attention to address because, you know, times change so quickly that we have to address those times as well.
I think there are options. I have ag land, but I also have — I’m zoned ag, so I have an ag land rate. However, I have the opportunity to dedicate my land, which adjusts my property tax considerably.
Huff: There’s ways around?
Huff: Let me move on to another proposal, which we’ve heard floated at the Council.
“Why can’t we make the property tax based on the cost of living and not vary based on yearly property value assessments?” Councilman, what’s your policy call?
Say: It’s a policy call that I think we’ll be open to it, because if it’s based on the cost of living allowance, and it does not fulfill the obligation of meeting our current services, then we’ll have to ask the mayor and the Council to go back and look at the property tax rates.
Kawano: Yeah. So what happens, Daryl, the mayor and his administration will propose rates that are, you know, applied to the assessed valuations. That’s a part of the budget process.
Those calculated amounts will amount to real property tax revenue. The revenues and other fees that the city collects will have to cover our operating budget. And as Calvin said, what’ll happen is if we can’t balance the budget, something has to give, right? So we either cut services on the expenditure side, or we increase rates on the revenue side to balance the budget.
Huff: Or get the Legislature to give you another way of raising money, right?
Tracy: For first-time home buyers, can they put a kupuna’s name on their deed to lower property taxes?
Say: That I’ll defer to a corporation council, Mr. Kawano. I don’t know.
Huff: And it’s really a bad idea to put random people on your title. I know that.
[Reading new question] “My long-time Hawaii friend bought a house on the mainland before he retired. He had to pay double property taxes on that property until he moved into his house. Why don’t Hawaii do the same to non-Hawaii residents instead of increasing my property taxes?” That’s Larry from Royal Kunia.
Is it possible to tax mainland owners more than local owners of a property? Is that even legal?
Kawano: I don’t think it is, yeah. I think it’s unconstitutional to do that. But we are looking at the empty homes tax. We’re going to do a study to see if that makes sense.
Huff: Yeah, talk more about that. I’m curious about it. How much impact — the numbers I’ve heard are surprisingly …
Kawano: They’re all over the place.
Kawano: You know, you look at different studies, they have different numbers. Some studies say there are, you know, 20,000 to 30,000, you know, empty homes on Oahu; and you read others, and they say it could be up to 80,000.
We don’t know yet, so we put in our FY24 budget, proposed dollars to do a study to understand, you know, the issue and also understand how should we set up a division or unit to actually administer such a tax and do it right.
Akina: Yeah. And I’m very glad to hear that the city is going to do a study on that — the impact of empty homes.
The study has also been done recently by Grassroot Institute — as you were talking earlier — on outside buyers. The bottom line is, we really have to proceed from a research base in formulating our policies because there’s so much emotion involved, and it’s easy to come to conclusions because we see something happening in our neighborhood.
But I really am glad that the city is going to take a good quantitative look at that because that’s what we use as the basis for good policy.
Huff: You know, speaking of dividing and conquering, here’s another group that people suspect are not paying property taxes.
Paula from Facebook says, “If it’s not mainlanders, then who are the buyers/sellers? Military stipend for off base is $750,000 then turn around to sell their home for over seven because owners relocate. This is a large factor in higher housing prices.”
Do you think …
Akina: I can answer that, Daryl?
Huff: Oh, OK.
Akina: Who is buying the homes? I was in a meeting with Kamehameha Schools, Hughes and other developers on Kaka ako Mauka, and the developers — according to their own statistics — tell us that the majority of those apartment units are purchased by local people.
And what kind of local people? For example, if you have owned a home in Pearl City for 30 years now, you’re a millionaire, and you’ve got equity with which to buy an apartment to help your children get started. So, the vast majority of home sales, according to the research, is by locals.
Huff: You know, I’m going to throw out another question. We’ve a lot of questions, you know, thank you, audience, there’s a lot of very smart questions.
This person asks, you know, “Wait a minute, this exemption amount is a fixed amount based on a policy,” and I don’t know how long ago it was set …
Kawano: It’s law …
Huff: So if you think about it, and this is Joel from Hilo, the question is complicated, so I’m not going to read the whole question, but I completely understand what he’s saying.
He’s basically saying, back in the day when they said, “Your exemption is $100,000, that’s when the house was probably worth $300,000.” So 30% of that house was being exempted at that time.
Now, it’s 10%. So, policy man over here, would it be fair to dramatically increase that exemption? It’s an existing exemption, why not just get it up to the 30% level?
Say: Well, if you ever do that particular route or that path of taking 30%, where do you make up that particular 20% loss?
Huff: I don’t care, I just want to pay less taxes.
Say: You see? I mean, that’s where I’m saying to myself, I’m looking at it from both being a responsible City Council member in trying to address government services. That’s one. That’s important for me.
And secondly, looking at all these other exemptions that we can maybe try to repeal and use that as part of the overall funding to address that particular issue. But I don’t think you’ll ever get to 30% at this point.
Huff: Not again?
Say: No, because of the supply, and the question of the demand is one. And secondly, the bigger issue is Hawaii’s the most best place, special place to live in the world.
Huff: Real quick.
Huff: Real quick. I know, thank God we live here.
Anonymous wanted to point out — and I appreciate this — that homestead occupants pay a minimal tax of $300 a year regardless of property. Does that sound right?
Kawano: That’s a certain class. It’s carved out in ordinance. That’s correct.
Say: That’s — can I just say this? But looking at the number and amount of exemptions by the county of Oahu, Hawaiian Homes, there’s a seven-year program, there is 116, which is about 77,000; and then we have the Hawaiian Homes Commission, another 314 numbers as far as individuals; and finally, the biggest one was the Hawaiian Homes land — 3,891 individuals at a loss of $2.5 million to the general fund.
Huff: OK, thanks. Thanks — I keep wanting to call you representative or speaker. I’m used to your old titles.
Say: You can call me Uncle, I told you I wanna be called Uncle today.
Huff: OK, Uncle.
Huff: OK, so, a couple questions that are maybe not related, but I’m gonna relate them.
So Bob by email says, “Given all the condo building over the past 30 years and many foreign buyers,” if that’s not true, I’m not sorry, “How have property taxes grown over this period?”
And then the second question is, “Is the City and County of Honolulu using the increase in property tax rate to pay their salaries? Where’s the extra money going?”
Really, with all of the increase in values of property in this island, is city government too big? I mean, is it — have we spent so long chasing the taxes and rising with the taxes? Should we think more about what we’re spending?
I think you’re also involved in the spending side of the equations, right?
Kawano: Yeah, and we look at all of our agencies that provide services, you know, to the public. And in general, the public wants more service.
They want better service. They want more service. They want more public safety. They want more water safety on all shores around the island where there’s beaches that people go to.
So, you know, the demand for more service is actually endless. So I think that, you know, you’re right, we have to manage the cost side because the revenue side is limited.
Say: Yeah, and I think Mr. Kawano is correct. You look at what happened, maybe what — 10, 20 years ago? I wasn’t here, but when we created the Waianae — is it the Waianae Station? How many years?
Huff: Police station?
Say: Police station?
Huff: The one that’s still not completely done? Is that …
Say: You see? And then you look at all the other services that we really do need. I’m telling you.
And that’s why I’ve really tried to support all of the county employees. They are our first responders.
When you need them for an incident — as a, you know, domestic abuse — the officers are there. When you have a medical issue, the fire department is there. And when you have to have a medical ambulance, they’re there.
All I’m saying, we are the first responders to everything.
And finally, I really have to say, and I say this a lot of times at the Council meetings, I support my opala workers. If they don’t pick up the rubbish, who’s gonna pick it up? Right?
Akina: Well, I agree with you that we need these services, but I get nervous when we have to boost the county budget every year because of that.
Last year, $1.5 billion came in through property taxes. With the increased assessments, probably $1.6 to $1.7 [billion] will come in this coming year.
We really have to look at lowering the cost and increasing the efficiency of our government services.
Huff: Well, yeah, that would be great, [laughs] but I don’t know.
Akina: Well, there are many ways to do it. We could …
Huff: Racquel, just as a person who, on the North Shore — an area that always needs more help, more police officers, more parks and so on — do you feel like the city and county is, can save money, or do you feel like they’ve gotta find a way of taking better care of the residents who are here?
Achiu: I think overall, we have to start paying more attention to the people that are of this place. I think it’s more of a management-and-navigating-as-we-change-with-the-times issue.
The North Shore with a 20% increase — the reason that stings so hard is because we’re paying so much more, but very little investment is put back into our communities. Our roads are horrible, our parks are in disarray. We don’t see that investment being put back in. We’re a cash cow, I like to call it.
The tourists come out there in droves, so we are the ones that are sacrificing — if I can be so blunt — is we’re sacrificing our way of life, and now our ability to stay in our homes, to adjust for all of that.
I think the vacant tax is a great idea. However, I think we also need to be careful with — what if I take my mom out of her home to live with me to care for her? How do I adjust for that? You know? Or if I move outta my home to go and live with her to take care for her?
I think we have to focus more on the actual people that are of this place, of our community, that have been here forever, and there is a way to look at that. It’s all of the information’s there, it’s just a matter of coming up with a plan.
Huff: You know, this is an interesting question, and I think it’s is another big picture that we can move to as I kind of watched the clock here.
I realize the city makes a lot of money from property taxes, but is there another way the city could get revenue besides raising our property taxes? This is John in Kailua.
Andy Kawano, you know, is there any hope of getting more money out of the state? People say, I don’t know whether it’s state or county, you know, but the, you know, people don’t care where the services are coming from, but they know that the money’s coming out of their pocket.
Kawano: The opposite is happening. More of the responsibility of covering costs is actually being pushed to the county.
So we’re in the process right now of taking over all of the operations for emergency services, you know, EMS ambulatory service, and that’s a $50 million annual budget.
And so the state fully covered that cost until a couple years ago. We’re in year three going on year four, where they’re phasing out the subsidy to cover it.
So we’re gonna have to, you know, put in a system to bill for the services related to ambulance and find ways to close the gap. Because I think the operating loss on that $50-million-or-so budget is about $20 million.
Huff: Let me ask Calvin Say that same question. I mean, you were at the Legislature.
Huff: You know what their attitude is toward the counties. Do you think that there’s any hope of the state Legislature allowing the counties to raise more money?
Now they did give the counties, you know, 3% on the hotel room tax, which they immediately all got a hold of.
Is there other things that you think the state could consider or should consider now that you’re seeing it from the city side?
Say: At this point in time, I would have to be very candid and honest, and the answer is no. I do not want to take the income tax from the state. I don’t want to take the general excise tax because it is the most regressive.
So general excise tax is a big-ticket item for the state, income tax is a big-ticket item, and the TAT. If there’s any, you know, druthers, I’d rather see an increase in the 3% TAT to all four counties.
Akina: Daryl, there’s a certain philosophical side to this too.
We really have to move away from thinking that the way to raise more money is to tax our people. Because the more we tax our people, the less money we ultimately will be able to raise.
We need to be thinking creatively. For example, I like the idea of the short-term rebate by the mayor of $300 per household, but what about giving a short-term rebate of $300 to every business in the City and County and so forth?
Huff: Well, I was gonna ask, I mean, how much of our property taxes come from business property? I mean, I know the resorts are taxed pretty heavily. I mean, that’s been going up.
I mean, Andy Kawano, how much of this is from business, and what about hitting businesses from what with more property tax?
Kawano: Well, the current split right now is about 56, 57% from residential properties and the rest from hotel, commercial, industrial — I don’t have the breakdown in my head.
Huff: What? [laughs]
Kawano: I don’t, I mean it’s …
Kawano: Yeah. I just …
Huff: But is that a number that you can just say, “OK, policy-wise, we’re going to crank that to it’s 50/50.” You know, and just, and compute the rates in that way.
Kawano: I think we need to break things down and look at the numbers before we do that because, you know, the hoteliers are already saying they’re paying too much, right? In taxes overall, not just to the county but to the state as well.
So we need to kind of break things down and do a reality check before we do that.
Huff: Of course, we have our business-climate complaints already.
Kawano: Yeah. We’re so expensive, right?
Akina: And I don’t think it’s the right direction for us to think that the way we are to raise revenues is to tax our businesses more because that’s the goose that lays the golden eggs.
We want to foster business and the economy here, and that’s going to produce the tax revenues in the long run.
Kawano: For the state.
Akina: Well, but also for the city.
Huff: I mean, I’m going to move to Calvin Say really quickly. In terms of the — one of the things I hear from state legislators all the time is they point out that Hawaii — Oahu and the county’s — property taxes here are much lower than what people are paying on the mainland in most places.
I mean, is it fair for people to say, “Oh, actually all of this, you know, complaining — our property taxes are actually pretty low.”
Say: It is low compared to the mainland, and it’s probably because the mainland as far as the states or the counties, they have the responsibility of the Department of Education, which is a big-ticket item, if you look at the state budget.
If we were to take it over, I hope they would give us the general excise tax of what they’re paying out right now.
Akina: Right. I think we have to draw a real distinction between property tax rate — which is very, very low — and property tax itself, which isn’t that low.
We’re 29th — if we take the most recent survey of two years ago — in the country in terms of the amount that our individuals pay in property tax, and it’s probably higher now actually since …
Huff: Wait, let me parse out that number, so people understand it.
Huff: So, what’s 29%, what’s 29th?
Akina: We’re ranked 29th in the nation.
Huff: Comparing what to what?
Akina: Of all 50 states.
Akina: For the property taxes that the people of Hawaii pay, and that’s rising. We’re probably higher now.
And I’m pointing this out because the amount of property tax we pay is not really that low. The rate we pay is low. But because property costs so much here in Hawaii, we end up paying more property tax than most states in the nation.
Huff: But is that a macro figure that is “Here’s all the property tax being paid on Oahu versus a similarly sized place on the mainland” or is that based on homeowner taxes or residential taxes? I mean, is our residential tax rate exceptionally low?
Akina: Yes, it’s across the board — Residential, Residential A and Commercial.
Say: The rate is low, Andy, at $3.50 per thousand?
Kawano: It’s on the far low end. But keep in mind that we also have about the highest cost of living too, Keliʻi.
Kawano: And, you know, everything has — the revenue stream has to balance with the expenditure stream, you know, and we always have to get to a balanced budget.
And I think that, you know, the devil’s in the details. Because we can look at property taxes per capita paid by all cities and municipalities — but as Calvin said, you have to look at the services provided as well, you know. Does the city or county provide educational services?
Huff: Because it certainly costs us more to provide services.
Kawano: And then, you know in general, Hawaii’s, again, cost of living is higher. All of our food — most of our food is still shipped from the mainland right now.
Huff: I paid $8 for a loaf of bread the other day.
Huff: So I’ve got several questions here, and I want to go through these quickly, and primarily by Andy, because these are specific questions people have about their tax situation.
For example, if they are unhappy with their appraisal, can they do anything about it? Can I get an independent appraisal if it came in at a lower amount and compare that? Your chance to do that this year is gone, right? The appeal process.
Kawano: Yeah, the appeal window is from December 15th through January 15th.
Huff: And how did the appeals go this year? I mean, did people win appeals or were more than usual?
Kawano: It’s, you know, I talked to our assessment office, and it’s about the same. The … about 30% of the time, the appellant gets wins, and 70% of the time, you know, the city prevails. So it’s about a 30-70 split.
Huff: So does that make you feel like your appraisals generally are pretty accurate? I mean, is that what that figure tells you?
Kawano: Generally speaking, yes. But at the same time, you know, we want to help taxpayers as well. So we are working on our website to be more informative so that people know their rights and, you know, ensure that, you know, next time around, if they missed it this time, they actually file appeal on time.
Huff: And we also talked about the age 65 exemption, which I’m particularly fascinated by. Is there a deadline for filing that one? I mean, can I call your office tomorrow and say …
Kawano: It should be automatic because when you file for exemption the first time, you provide your birthdate at that time, so the system kind of tracks it.
Huff: That was 27 years ago. I don’t remember.
Say: Hey Daryl?
Say: This is why it’s so important that we have this type of discussion. The dissemination of information is benefiting all of those that are watching tonight.
And I think what Andy just said is the truth that you are creating a new — how would you say it — public relations type of a …
Kawano: Yeah, they’re trying to — assessment team, they’re trying to do more outreach and share information with the public.
Huff: That’ll cost more too. That outreach stuff. [laughs] It’s expensive.
Kawano: We’re trying to do it efficiently.
Huff: [reading a question:] “Our family has a vacant lot on Oahu for several generations — and there’s a lot of homeowners property owners like that, it’s just a carry over, there’s too many people who are owners, and they can’t really make an improvement — they haven’t been able to improve it. The cost to build a house is extraordinary too. Is there anything we can do without having to sell the lot?”
Is there a break available for people with vacant land or is the system basically make it so you better develop that property? Anybody want to pitch in on that?
Say: The present policy is that you can’t sit on it, you’ve got to do something with it — if it’s a raw piece of land — because you’d be paying the real property tax just on the fee itself and not the improvement.
Huff: Without getting any benefit out of it.
Say: Out of it. Yeah.
Huff: OK. I missed the deadline to contest my property evaluation.
Wait till next year.
Huff: Oh here, some big economic questions. Do you think the Fed interest rate hikes are going to dampen home prices here in Hawaii and ultimately lower property taxes?
Are you starting to crank that in? I mean are you anticipating that they’re gonna be lower?
Kawano: We’re looking at it. Well, Board of Realtors, right? In January and February of ’23, they reported a drop in the median price on home sales to under a million dollars.
So it is cooling off and, you know, we don’t know what’s gonna happen come next year when we do next year’s assessment. But, you know, the trend is — it’s kind of scary.
Kawano: We just know there’s a lot of uncertainty out there.
Say: Daryl, what I heard this morning was the fact of the matter that, for the third quarter of this year, there will be a major slowdown.
And a lot of the projects that are in the private sector construction will be all shifting to government construction, where they pick up the slack at that period in time for investment purposes.
Huff: Racquel Achiu, is there any consolation or comfort in knowing that maybe your real estate price will go down and so will your taxes?
Huff: Doesn’t make you feel any better, right?
Achiu: You know, so many people have lost faith in it, that I think it’s based — you know, I’m looking at my community every day, and I just see, it’s hard to watch. It’s hard to watch, and it’s hard to watch people struggle, and it’s hard to watch people who have been there before dirt now contemplating whether they should really be here or not.
I think, as to your point earlier, it’s not so much the rate, it’s the valuation and the ability to really kind of navigate that and assess it in a different way — look at it different way, give consideration to, again, I’m gonna always go back to the people that are of this place and the kupuna.
But also to the fact of, to the point of the property tax being lower here than on the mainland — that’s a large reason the mainland guys buy here because they can afford to sit on it, and they are not owner-occupant.
So it’s affordable for them compared to where they’re at, so they can come back and forth. And now, not only have you — you’re not paying your really fair share, but you took that house out of that market for anybody to rent or buy locally. So that’s a consideration too.
Huff: Let me ask any Andy Kawano — last question, we’ve only got about 20 seconds.
How much is the property tax as a driver of cost of living in this island anyway? I mean, we’ve been having a long conversation about it. But really, out of a typical family budget, how much of that is property taxes?
And now I’m down to 10 seconds because my question was too long.
Kawano: I think, I think there are other larger drivers — fuel, food and so on, you know, that’s driving inflation. I don’t think it’s property taxes.
Huff: OK. Well, thank you, Andrew Kawano, and thank all of you for joining us tonight.
And we thank our guests, council member Calvin Say and Racquel Achiu.
Say: Uncle, Uncle.
Huff: Uncle Say. [laughs]
Kawano: Uncle Calvin.
Huff: Andrew Kawano and Keliʻi Akina.
Next week, “Insights” will be taking a break. Instead, please join us for Kakou, Hawaii’s Town Hall, regarding concealed carry laws. We’re asking the question, “Should the government restrict where guns are allowed?” Please join us then. I’m Daryl Huff for “Insights” on PBS Hawaiʻi. Aloha.