Waikiki Commercial Properties May Pay Special Tax to Maintain Waikiki Beach

The Honolulu City Council is being presented with bills that would allow the Waikiki district to tax the owners of all commercial properties in Waikiki an additional 7.63 cents per $1,000 of assessed value.  By levying this tax, the Waikiki district hopes to collect approximately $600,000 a year from these commercial properties to help maintain the sand on Waikiki Beach.  The balance of the $1.3 million that it costs to retain sand on Waikiki Beach will be paid for by the state Department of Land and Natural Resources.  According to the DLNR, the beach is eroding at a rate of about one foot per year.  The beach will be need to be replenished every five to ten years to keep up with this loss.

Commercial property owners in Waikiki already pay between 12.5 cents to 50 cents per $1,000 of assessed value into the Waikiki Business Improvement Fund.  This is in addition to their regular property tax bill.  The Waikiki Business Improvement Fund pays for the streetscape maintenance, the "aloha ambassadors" in Waikiki, and overtime hours for the Honolulu Police Department officers.

Source: Honolulu Star Advertiser, 1-18-2015, www.staradvertiser.com
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Controversy Still Surrounds New Residential "A" Tax Classification

In 2013, the City and County of Honolulu created the Residential "A" Tax Classification, which significantly increased the property taxes for all Oahu residential properties valued at $1 million or more, where the owner does not have a homeowner's exemption.  Residential A owners now pay $6 per every $1,000 of assessed value while those with homeowner exemptions pay just $3.50 per $1,000 of assessed value. There are approximately 8,557 properties on Oahu that have been designated as Residential A.

Opponents of the tax law argue that it is not ethical, rational, fair or legal to create tax classes based upon assessed value, when they are all built for residential use.  Previously, property tax classes were based on use, for example residential, hotel/resort, agricultural, or business.  As property values increase, there will be more and more homeowners who may be pushed into Residential A class. There is now discussion about challenging this law in court.

Source: Honolulu Star Advertiser, 1-11-2015, www.staradvertiser.com
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City Council to Tackle Illegal Short-Term Vacation Rental Problem

Ikaika Anderson, the zoning chairman for the Honolulu City Council, is seeking suggestions from his colleagues and the general public as to how to improve city regulations to deal with illegal short-term vacation rentals on the island of Oahu.  Operators argue that the bring an infusion of visitors to local neighborhoods, helping small businesses and the economy. Some residents, on the other hand, argue that the illegal rentals are taking away housing from Oahu residents, disturbing the peace, overtaxing the infrastructure, and increasing crime rates.  Finally, there are some people who would not mind seeing the rentals become legal provided that they pay their General Excise taxes and Transient Accommodation taxes, something that most illegal operators are not currently doing.

Anderson stated, "At this point the only thing that's clear is there is no solid, definitive answer as to how to solve this problem. I'm not going to stand up here today and come to any predetermined conclusion or be closed-minded on any proposal that comes forward either from my colleagues, their communities or from the mayor."

Source: Honolulu Star Advertiser, 1-3-2015, www.staradvertiser.com
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Illegal Vacation Rentals Have Many Residents Frustrated

There has been a recent expansion of illegal vacation rentals throughout the island of Oahu and visitors hope to gain new experiences other than being in traditional hotels and tourist destinations. While small businesses have welcomed these visitors to their local economies, many residents argue that the volume of visitors have hurt the quality of life in their sleepy neighborhoods. According to research conducted by the Honolulu Star-Advertiser, the North Shore of Oahu and Kailua are the most popular areas for illegal vacation rentals and as many as 80 percent of these vacation rental owners are operating outside of city restrictions. Donna Wong, a member of the Kailua Neighborhood Board, commented, "It's creating a lot of conflict and hostility. Kailua used to be a quaint, small town where everyone knew everyone. Now, it's a resort. The North Shore has a similar situation. Visitor traffic used to be contained to surf season. Now, they've got it 24/7, 365 days a year."

In 1986, a law was passed that prohibited vacation rentals rented for less than 30 days in neighborhoods outside of designated resort areas.  In 1989, another law was passed prohibiting any new bed-and-breakfast homes in all zoning districts. However, the Hawaii Tourism Authority has noted that the city has failed to enforce these laws and rental property owners are blatantly violating regulations in recent years. It is estimated that between 78 percent to 87 percent of the North Shore and Kailua rentals are operating illegally.

Some tourism industry leaders believe that the city should relax restrictions and make these types of rentals legal, provided that homeowners pay the transient accommodation tax (TAT) and general excise tax (GET). Critics argue that illegal rentals should be stopped, as it increases traffic and crime in residential neighborhoods, drains community resources and reduces the supply of residential housing.

Source: Honolulu Star Advertiser, 12-28-2014, www.staradvertiser.com
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Rail Project Expected to Be Over Budget

The Honolulu Rail Project is now estimated to be between $550 million to $700 million more than originally planned.  Members of the Honolulu Authority for Rapid Transportation blamed the booming construction market to be the major source of the problem, and noted that construction companies came in with higher bids than what was anticipated.  At this point, 40 percent of the work has yet to be contracted out, making critics of the Rail Project extremely nervous as to what the final price tag will be.

The city has several options to raise the additional money needed to complete the rail project.  The first option is to attempt to extend the 0.5 percent general excise tax surcharge past its 2022 expiration date.  Another suggestion was to divert more than $200 million in federal funds currently used to support the city's bus system.  Finally, rail officials are suggesting splitting the work into smaller contracts, hoping that construction companies will offer more competitive bids.

Source: Honolulu Star Advertiser, 12-19-2014, www.staradvertiser.com
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Assessed Property Values Increase Throughout the Island of Oahu

The City and County of Honolulu will be sending residents real property assessments for the upcoming 2015 fiscal year.  For residential properties, the gross assessed value went up from $169.2 billion to $174.5 billion, or a 7.2 percent increase.  Gary Kurokawa, the city deputy director of budget and fiscal services, stated, "When we look at the numbers, I think that it's pretty similar to last year's increases. The market has been relatively stable as far as the values of properties."

The standard residential tax rate is $3.50 per $1,000 of assessed property value. However, Residential A class dwellings, which are defined as properties worth more than $1 million that are not owner occupied, will pay $6 per $1,000 of assessed value.  For owners who wish to dispute their real property assessment, they may file appeals up until January 15th.   Visit the Real Property Assessment Division's website at www.realpropertyhonolulu.com and click on the "Assessment Appeals" link.

Source: Honolulu Star Advertiser, 12-14-2014, www.staradvertiser.com
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Backlash on Increased Property Tax Rate for Non Resident Owners

At the end of last 2013, the City and County of Honolulu passed a bill that increases the property tax rate for any non-owner-occupied homes on Oahu that valued at above $1 million. These properties, classified as "Residential A", are now required to pay $6 per $1,000 of assessed value as compared to the standard $3.50 per $1,000 of assessed value that owner-occupants are paying.  While city officials are defending the increase, many high-end property owners around Oahu are furious.  Some owners claims that they didn't realize that they were eligible for the home-owners exemption or didn't bother to claim it.  Others simply feel that the assessment is much too high.  So far almost 2,100 property owners have filed appeals with the state.

Source: Honolulu Star Advertiser, 7-31-2014, www.staradvertiser.com
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Mayor Wants to Increase Property Tax Rates for Hotel and Resort Owners

Mayor Kirk Caldwell has stated that he would like to increase the property tax rate for hotel and resort owners in an effort to raise money to address the homeless situation in Waikiki.  Under Caldwell's proposal, hotel and resort owners would pay $13.40 per $1,000 of assessed value, a slight increase from the current amount of $12.40 that is currently being paid. The increase would generate an additional $4.1 million, out of which $2 million would go to the Wai­kiki Business Improvement District for rental vouchers that could give shelter to homeless individuals and families.  Furthermore, $900,000 would go to the district for grants that provide outreach and other services for Waikiki's homeless and $750,000 would go to paying for the removal of items left on the sidewalks. Finally, $250,000 would go to increasing the frequency of sidewalk, bathroom and public area cleanings, and $200,000 would go to increasing security patrols. 

Source: Honolulu Star Advertiser, 5-26-2014, www.staradvertiser.com
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Possible Tax Increases for High End Properties

Honolulu City Council Budget Chairwoman, Ann Kobayashi, is proposing increasing the property tax for high-priced homes on Oahu.  Under Kobayashi's suggestion, all Residential A class properties, which refer to single family homes and condominiums priced at $1 million or more, would be taxed at $6 per every $1,000 of assessed value.  This is considerably more than the $3.50 per $1,000 of assessed value that owners are currently paying. However, it should be noted that Residential A class properties does not apply to primary residents, regardless on the value of the home.  Kobayashi stated, "Your house can be $10 million, but if you have an exemption, you're still in the residential class, not Residential A. The reason we put the $1 million figure is because we wanted to protect renters, and most people do not rent a home that's more than $1 million." Furthermore under Kobayashi's proposal, hotel and resort properties would be taxed at $12.90 per $1,000 of assessed value.  This would be slightly more than the $12.40 that hotel and resorts are currently paying.

The Honolulu Board of Realtors disagrees with Ann Kobayashi's suggestions and notes that the real estate industry defines luxury homes in Hawaii as those valued at $2 million and more. HBR suggests homes below $2 million pay $3.50 per $1,000 of assessed value, those properties that are valued between $2 million and $4 million pay $4.50 per $1,000 of assessed value, and those homes valued at more than $4 million pay $5.50 per $1,000 of assessed value.  Julie Meier, the President of the Honolulu Board of Realtors, stated, "We believe the threshold for any additional taxes should begin at $2 million. Any new property tax rate increase will have a negative impact on renters, because any rate increase will be passed onto them. We would like to see the city defer action on this measure until a more equitable, tiered rate structure can be considered."

Source: Honolulu Star Advertiser, 5-13-2014, www.staradvertiser.com
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State Increases Share of Transient Accommodation Tax Revenue for Various Counties

The state Legislature has agreed to increase the amount of revenue that each of the counties will get from the state's transient accommodation tax.  Previously, the four counties (Honolulu, Maui, Hawaii/Big Island, and Kauai) received a total of $93 million a year.  However, under the new agreement, the state will give a total of $103 million.  This comes out to an additional $4.4 million for Honolulu County, $2.3 million for Maui County, $2 million for Hawaii County, and $1.5 million for Kauai County.

While the four mayors agree that the additional funds will help a little, the $10 million increase was significantly less than what they had hoped for.  City Council officials may now need to make some tough choices as to which programs to cut for the following budget year.

Source: Honolulu Star Advertiser, 4-29-2014, www.staradvertiser.com
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Honolulu Rail Project Update - Tax Surcharge to Continue Forever?

In 2005, state of Hawaii and Honolulu City Council Lawmakers passed a law creating a 0.5 percent general excise tax (GET) surcharge for the entire state of Oahu to help pay for the Honolulu Rail Project.  Collection for the surcharge started in 2007, and to date, approximately $1.2 billion has been gathered.  Under the current law, the 0.5 percent surcharge will end in 2022 and would have raised approximately $3.4 billion during that time. Now some lawmakers, including Honolulu Mayor Kirk Caldwell are suggesting to continue collecting this amount forever.  Caldwell stated, "If it goes in perpetuity, it would be applied to operation and maintenance of the rail system, along with our bus system."

It is estimated that once completed, the operation cost for the rail system will be over $110 million per year.  The concern is how the rail project will pay for this amount once the tax surcharge goes away in 2022.  Honolulu City Council's Budget Chairwoman, Ann Kobayashi, commented, "If it did not have a sunset date, I would not have voted for it (in 2005). I assumed that that was all the money that was necessary.  I just don't know. I just have to trust them, what they tell me, that it's going to be on time and on budget and that the operations will be covered by ridership and whatever else."

Source: Honolulu Star Advertiser, 4-6-2014, www.staradvertiser.com
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Possible Property Tax Increases for Transient Vacation Units and Bed-and-Breakfast Homes in Honolulu

The Honolulu City Council is considering a bill which would increase the property tax rate for all transient vacation units(TVU) and bed-and-breakfast (B&B) homes on Oahu. Currently, both endeavors are taxed at a residential property tax rate which is $3.50 per $1,000 of assessed value.  In comparison, hotel/resort owners pay $12.40 for every $1,000 of assessed value. Under Bill 23, argues that transient vacation units and bed-and-breakfast homes are business activities, and would be fall somewhere in between residential properties and hotel/resort properties.

Bill 23 will also include legislation to help crack down illegal vacation rental homes as well as a new process for people interested in legally turning their property into a transient vacation rental or bed-and-breakfast to be able to do so.  According to the city Department of Planning and Permitting, there are currently only 48 legal B&Bs and 810 TVUs in Honolulu.  However, it is estimated that there are probably triple that amount of illegal operators.  For information on Honolulu's current rules go to: http://www.honoluludpp.org/ReportsNotices/tabid/85/aid/5/Default.aspx

Source: Honolulu Star Advertiser, 3-12-2014, www.staradvertiser.com
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Honolulu Mayor Proposes Tax Increases for Owners of Luxury Homes and Hotel/Resort Properties

Kirk Caldwell, the mayor of Honolulu, has proposed a new tax increase for those who own luxury homes as well an increase in taxes on hotel and resort properties on Oahu.  Under the plan, those homes that are considered to be "Residential Class A", which is defined as properties valued at $1 million and above and not receiving homeowner's exemption, would see tax rakes increase to $5.50 per $1,000 of valuation.  This is a significant increase from the current $3.50 per $1,000.  Hotel/resort properties would see their tax rate go up to $13.40 per $1,000 of assessed value, an increase from the $12.40 per $1,000 of value currently being charged.  These two proposals would generate approximately $34.6 million per year in revenue for the city and would help close the $46 million revenue gap in next year's operating budget. Furthermore, Caldwell would like to institute a $10 monthly garbage pick up fee and allow for advertising on the sides of city buses. The garbage fee would raise another $20 million a year for the city and bus advertisement would raise another $1.5 million per year.

City Councilman Stanley Chang commented, "In Hawaii a $1 million home can be a very modest, old family property.  I think it's deceptive to use a cutoff of $1 million." Ernie Martin, the City Council Chairman, added that he would anticipate that hotel and resort owners would request some type of relief if the new tax is imposed."

Source: Honolulu Star Advertiser, 3-1-2014, www.staradvertiser.com
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Counties Want State to Lift Cap on Their Share of Hotel Room Taxes

In 2011, the State of Hawaii government passed a bill that capped each counties' share of the hotel-room tax revenue at $93 million a year to help balance the state budget.  In 2013, the state decided to make the cap permanent.  However, county officials are now trying to change the law to remove the cap and give the counties 44.8 percent of the hotel room tax that they collect annual.  This would be broken down further and would give Honolulu 41.1 percent of this share, Maui County 22.8 percent, Hawaii (Big Island) County 18.6 percent and Kauai County 14.5 percent.

Honolulu Mayor Kirk Caldwell and Maui County Mayor Alan Ara­kawa stated that the counties pick up a significant portion of the costs of tourism, such as parks, roads and public safety, and therefore they should enjoy a greater share of hotel room tax revenue.  Mayor Caldwell stated, "So we're really looking for help here. As mayor, I have not been afraid to go and propose fees and increases in taxes where necessary to provide the services that everyone demands and needs. And so we're here today to ask for some help to make sure that we keep ourselves on the front edge of tourism in the world."  Mayor Arakawa  added, "The counties need to be made whole. It's a fairness issue."

State Representative James Tokioka argued that the state lawmakers are frustrated with some of the county policy choices while the state government was making budget cuts during the recession.  Tokioka stated, "You know how frustrating it is for us sitting over here that our friends and our cousins from the counties are doing these things while we're furloughing teachers and cutting ag inspectors and all of these positions. So that's the kind of thing that is very frustrating when we sit in this seat."

Source: Honolulu Star Advertiser, 2-26-2014, www.staradvertiser.com
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State Council of Revenues Now Projects Only 3.3 Percent Revenue Growth in 2014 Fiscal Year

The state Council on Revenues has lowered the state of Hawaii's revenue forecast for the 2014 fiscal year to a 3.3 percent growth.  In September 2013, the council had predicted that the islands would see a 4.1 percent growth for the 2014 fiscal year.  This difference of 0.8 percent, equates to an estimated $43 million loss to the state. However, the council has still kept their 7.4 percent revenue growth prediction for the 2015 fiscal year, stating that an improving construction market would boost Hawaii's economy and tax revenue.

State lawmakers use the revenue projections as guidelines when they draft their budgets proposals.  Governor Neil Abercrombie had previously requested an increase of $283.8 million, or $12.2 billion supplemental budget, for the 2015 fiscal year.  However, with these lower numbers for 2014, state House and Senate leaders have stated that they will have to move cautiously and reexamine the numbers.  Representative Sylvia Luke, who is the chairwoman for the House Finance Committee, stated, "When we are getting ready to prepare for the budget and session, this is what we've been kind of hinting at.  The economic growth is not going to last forever."

Source: Honolulu Star Advertiser, 1-8-2014, www.staradvertiser.com
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Higher Taxes for $1 Million and Up Residential Properties

The Honolulu City Council has approved Bill 42 which has created a new tax classification for residential properties valued $1 million or more.  Currently, owners pay $3.50 for every $1,000 of assessed value.  The tentative plan would be to increase the tax amount to $4.50 for ever $1,000 of assessed values for non-owner occupant homes valued at more than $1 million.  This would generate an additional $10 million per year for the city of Honolulu.  Bill 42 will not affect owner occupants who have filed for homeowners exemption.

Source: Honolulu Star Advertiser, 9-15-2013, www.staradvertiser.com
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Higher Tax For $1 Million And Up Properties Proposed

The Honolulu City Council is a proposing to create a new tax classification for houses and condominiums valued at $1 million or more.  Under this proposal, the city would be allowed to tax them these owners at a higher rate than other residential properties.  However, under Bill 42, those residents who are occupying the property as their primary residence and who have filed for home exemption would not have to pay any extra taxes.  Mayor Kirk Caldwell has stated that he supports the bill if it is passed by the Honolulu City Council.

Source: Honolulu Star Advertiser, 9-11-2013, www.staradvertiser.com
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Police Officers to Receive 16.8 Percent Pay Raise Over Four Years

A state arbitrator has made a decision to award police officers throughout the state of Hawaii a 16.8 percent pay raise over the next four years.  This will cover a total of 2,900 police personnel with the City and County of Honolulu and the counties of Kauai, Maui and Hawaii (Big Island of Hawaii) from lieutenants to the newest recruits.  The State of Hawaii Organization of Police Officers President, Tenari Ma'afala, stated that he was happy with the arbitrator's decision and that this amount was very close to what his union had requested.

However, county officials throughout the state are very concerned by what they are calling a "massive pay increase" and warn that if they are going to pay for the raise, residents may face cuts in services or be forced to pay more in property taxes to cover the additional expense.  Honolulu Mayor Kirk Caldwell stated, "Supporting our police officers and paying them competitive salaries is very important to recruiting and maintaining the strongest police force for Hono­lulu and keep us one of the safest big cities in America. However, the wage increases set by the arbitration panel are far more than we anticipated.  It is clear that the city administration and the Hono­lulu City Council will need to address revenue enhancements while looking for additional cost savings if we are going to meet our financial obligations."

Honolulu City Councilman Ikaika Anderson added that the city should be able to afford the pay increase through the 2013-2014 fiscal year, but would be forced to cut costs in other areas or raise additional revenue after that.  Anderson stated, "The arbitrators' decision is more than we anticipated, but we are obligated to pay it and we should pay it.  Our police officers, firefighters and other first responders are at the center of the core services provided by the county government, and without them our safety would be severely compromised. Although this is more than we anticipated, I can't say that it is undeserved."

Source: Honolulu Star Advertiser, 7-6-2013, www.staradvertiser.com
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Personal Income in Hawaii Decreases During the First Quarter of 2013

According to a report issued by the Federal Bureau of Economic Analysis, personal incomes decreased by 0.8 percent during the first quarter of 2013.  Experts believe that this is due to an increase in federal payroll taxes that went into effect on January 1, 2013.  Workers across the nation saw an increase in payroll taxes of 2 percent at the start of the year, equating to less take home pay.  The state of Hawaii's Department of Business, Economic Development and Tourism is predicting a 5 percent increase in personal income for Hawaii residents by the end of 2013.

Source: Honolulu Star Advertiser, 6-29-2013, www.staradvertiser.com
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Governor Signs Bill Helping Low to Mid-Income Families Qualify for Mortgage Loans

Governor Neil Abercrombie has signed a Senate Bill 1025 into law, allowing more low to mid-income families the opportunity to qualify for mortgage loans.  The bill updates the Hawaii based Hula Mae Single Family Mortgage Loan Program and eases requirements for potential home owners.  Under Hula Mae, buyers may be able to qualify for lower than market value interest rates and receive down payment and closing cost assistance.  Executive Director of the Hawaii Housing Finance and Development Corp., Karen Seddon, stated, "It absolutely makes loans more available to more people in the state.  We're able to give them a hand up by making mortgage loans available to folks that wouldn't otherwise be able to get one."  The HHFD will oversee the Hula Mae program.

Abercrombie added, "This is really something that can change people's lives.This is really a hope bill.  I think it fosters economic prosperity, as well.  It's a commitment to a sense of confidence that you can't feel otherwise unless you're able to make this change."  The law takes effect on July 1, 2013

Source: Honolulu Star Advertiser, 6-22-2013, www.staradvertiser.com
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