Honolulu failed to collected $1.8 million in potential property tax revenues due to various inconsistencies and failures at the city management level, according to a recent audit.

On Wednesday, Honolulu Auditor Edwin Young issued a 133-page report that criticized the city’s Real Property Assessment Division for not properly calculating property tax bills for city residents.

In particular, the city auditor hammered on shortcomings related to tax assessments of historical properties.

Historic properties can get tax breaks so long as certain requirements are met, but the auditor found many violations that resulted in non-compliance with the rules.

This means the city was missing out on extra tax revenue.

Based on what the auditor discovered, the city could increase its proper tax takings by at least $550,000 if the Real Property Assessment Division enforced the regulations for historic properties.

This isn’t the first time the city’s historic property ordinance has come under scrutiny. In 2010, the Honolulu Star-Advertiser reported on the city’s lax oversight of the tax breaks.

(Of note: Honolulu Mayor Kirk Caldwell was one of the beneficiaries of the tax break. He was acting mayor at the time the story was published. He has since given up his tax exemption.)

The auditor also found that the Real Property Assessment Division didn’t follow industry-wide standards when it came to calculating property taxes.

Our sample results indicated real properties were inconsistently classified because tax assessment staff was not following best practices such as performing physical inspections, focusing on data quality assurance, maintaining and updating databases, or complying with existing administrative policies and procedures.

As a result, tax assessments were inconsistent and inequitable; exemption and dedication property requirements were violated, and taxes assessed did not reflect the highest and best use of the properties.

Honolulu Budget Director Nelson Koyanagi disagreed with the audit, saying it provides “inflammatory and misleading results.”

The report notes that this is a “typical response” from the budget department, and that the Auditor’s Office stands by its findings.

Photo: Honolulu Hale (Civil Beat)

—Nick Grube