Nonprofits May Face Property Tax Hike - Hawaii News Now - KGMB and KHNL

Nonprofits May Face Property Tax Hike; Homeowners' Exemption Remains Unchanged

Ann Kobayashi Ann Kobayashi

HONOLULU (HawaiiNewsNow) - A lucrative property tax exemption enjoyed by 145,000 homeowners on Oahu is likely to remain unchanged, in spite of a recommendation by a citizen's commission that it should be scrapped, the chairwoman of the Honolulu City Council's budget committee said Tuesday.

Oahu property owners who live in their homes automatically receive an $80,000 property tax exemption, reducing their property tax bills.  Even though the city's  Real Property Tax Advisory Commission wants to get rid of those exemptions and base tax breaks instead on people's income, Ann Kobayashi, who chairs the council's budget committee, said too many people rely on the exemption to help them get by.

"We're gonna keep looking at everything, the tax system as a whole, but the home exemption is sort of a sacred exemption," Kobayashi said.

But city council members are considering hiking property tax bills for hundreds of nonprofits on Oahu, like credit unions.

Critics wonder why the Elks Club, which owns a $20 million beach front property along Kalakaua Ave. in Waikiki, is able to get an exemption for nearly $4 million of its value, paying $55,000 a year in property taxes. 

"I question why they're taxed at the lower residential rate rather than the commercial rate," said Holly Huber, a tax equity activist and downtown resident.

"That's why we have to see what their mission is," said Kobayashi.  "Maybe they should have an exemption.  So that's why we're looking at the whole system."

A phone message left with the Elks Club was not returned Tuesday.

Other nonprofits like the ARC in Hawaii own nine houses on Oahu.

"They house people who are mentally challenged.  and if they didn't do that, government would have to find a way to help them.  And they don't have the money to pay regular property tax on these nine homes," Kobayashi said.

The American Cancer Society owns the Nuuanu land where its offices are located and pays just $600 a year thanks to the nonprofit exemption for its properties that the city assesses at about $2 million in value.

The City Council is considering a formula under which nonprofits may have to pay taxes based on 10 percent of their properties' value, Kobayashi said.

The council budget committee heard testimony from numerous nonprofits about changes in the property tax code in a special meeting Tuesday morning at Honolulu Hale.

Kobayashi said she and fellow council members will take the public's written and oral testimony into account as it and reexamines the city's property tax system while it deliberates on Mayor Peter Carlisle's budget proposal that will be unveiled in early March.  The council has until mid June to pass a balanced city budget.

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