Caldwell proposes two-tier property taxes - Hawaii News Now - KGMB and KHNL

Caldwell proposes two-tier property taxes

Posted: Updated:
HONOLULU (HawaiiNewsNow) -

Faced with mounting bill for city worker raises, Honolulu Mayor Kirk Caldwell is looking to increase some property taxes and city fees.

Appearing on Sunrise this morning, Caldwell said he is proposing a two-tiered property tax system that will increase rates for people who own high-end homes that they don't live in.

"For me, I'm looking to create a two-tier tax system where those who own second or third homes in Honolulu, in places like Kahala and other high end real estate, over $1 million -- maybe $2 million -- at a higher rate," he said.

City Council Budget Chair Ann Kobayashi said the proposal will spare owner occupants.

"We're actually getting those who buy an expensive piece of property but don't actually live here, maybe they come here a few times a year," she said.

But real estate and tax experts say the plan will hurt the market.

"Because you're skewing people's attitudes towards, let's say, more expensive properties, they avoid investing in them and it may cause the economy to falter," said Lowell Kalapa, president of the Tax Foundation of Hawaii.

Local real estate consultant Stephany Sofos added:

"Interest rates are already going up and if you put on top of that new real property taxes, that could be the last weight to sink you."

The city has set aside enough money for raises awarded this year for city blue- and white-collar workers for the 2013-2014 fiscal year.

But Kobayashi says recent raises awarded to police officers and other workers will increase the city's costs by about 50-million dollars the following year.

"We have to get the money from somewhere and ... Our residents are already paying more for their water. Their sewers bills are going to go up," Kobayashi said.

The full city council will hear the property tax bill on Wednesday and if it passes additional hearings are planned.

Copyright 2013 Hawaii News Now. All rights reserved.