UPDATED 5/8/2012 9:30 p.m.
It wouldn’t be a political debate without a Civil Beat Fact Check.
Last Wednesday night was the first showdown between mayoral candidates Kirk Caldwell, Peter Carlisle and Ben Cayetano. You can read more about how that went here: Playing To Type In First Honolulu Mayoral Debate
The topic of this Fact Check: property taxes.
They make up the lion’s share of the city’s revenue base, and are one of the only ways that a mayor can get into constituents’ wallets. (The Hawaii Legislature has kept taxing authority to itself, and the counties can generally only raise fees to cover specific services.)
The debate moderator, Steve Petranik of Hawaii Business News, did his best Grover Norquist impression and asked all three candidates: “Gentlemen, will you commit to this pledge: Property tax rates will not rise under my administration.”
None were willing to sign on the dotted line, but the discussion was interesting.
“I’ve worked very hard not to increase them, but I’m not going to make a promise that may not be able to be kept, because you don’t know what’s going to happen with the economy,” said Caldwell, the first to answer. He said allowing developments, like Disney’s Aulani resort, can raise property values and thus property tax revenues without impacting property tax rates.
He said Carlisle hasn’t taken advantage of those opportunities as mayor as much as he might have, and thus had to raise taxes.
“He did raise taxes the year before, just a skosh, but a little bit, real property taxes,” Caldwell said of Carlisle.
Carlisle later responded that the city was “revenue neutral” in the Fiscal Year 2012 budget.
“We did not take in more money, any more tax revenue from the entire island from the previous year,” Carlisle said. “This year there will be no increase.”
So, which is true? Did property tax rates increase from Fiscal Year 2011 to Fiscal Year 2012 under Carlisle’s watch?
First, a general word of caution: The mayor’s powers to set the property tax rate are far from absolute. The Honolulu City Council has a major role to play, so you can evaluate the executive both on the rate they proposed and the rate adopted by the council. In the case of Carlisle’s first budget, his proposed rate was adopted without change by the council, though that came after the council limited his options with a new law.
Carlisle’s response at the debate sidestepped the issue a bit. We’re talking about rates, not revenues. Both Carlisle and Caldwell talked about the potential to increase revenue without raising rates by encouraging land-value-increasing development.
But Carlisle also mentioned the rates of $3.42 and $3.58 the year before he took office and $3.50 after his first budget. And that’s where the crux of this Fact Check can be found.
When Mufi Hannemann was mayor and Caldwell his managing director, the city created a special class of taxpayers for those properties where the owner did not live in the home. Those folks paid $3.58 per $1,000 of assessed value, and homeowners who did live in their homes paid $3.42 per $1,000 of assessed value. Essentially, property owners perceived to be investors — they were either renting them out or using them as second or third homes — were charged higher rates.
Carlisle did away with the two-tiered system, setting the rate for residential properties at $3.50 per $1,000 of assessed value regardless of who lives in the home. That represented an eight-cent tax increase for resident homeowners, but an eight-cent tax cut for non-occupant homeowners. Civil Beat described the change as a “tax hike” in its coverage of Carlisle Fiscal Year 2012 proposed budget: Carlisle Proposes Raising Honolulu Budget by 6%)
UPDATE Carlisle’s proposal came after the council in 2010 passed by a 7-1 vote an ordinance eliminating the two-tier system. In the days immediately after he was sworn in, Carlisle returned Bill 35 to the council without his signature, saying he would prefer to have flexibility in designing his budget.
Some new council members elected after that bill became law raised concerns about the tax proposal it caused. In April 2011, Breene Harimoto said he would prefer other ways to balance the budget rather than increasing property taxes and Stanley Chang expressed disappointment that Carlisle didn’t explore a fairer way to balance the budget, according to Budget Committee minutes.
About 53 percent of Oahu’s 256,000 residential parcels were owner-occupied versus 47 percent that were categorized as non-homeowner, according to a property tax report. The split was roughly the same for about $140 billion of assessed residential property value, another report shows.
“This means that those homeowners who lived in their homes, which was a majority, paid a higher tax rate of .08 cents (sic) per $1,000 in value,” Caldwell wrote in an email explaining his comment at the debate. “Peter chose a different course from the one I followed.”
That’s true, but it tells only part of the story. The course that Caldwell followed as managing director for Fiscal Year 2011 can safely be described as a larger tax hike than the one Carlisle put forward for Fiscal Year 2012.
The two-tier residential rate system marked an increase of 16 cents for non-occupant homeowners from what they had paid the prior year, meaning 47 percent of residential taxpayers paid 16 cents more per $1,000 of assessed value. The other 53 percent saw their rates stay flat at $3.42 from the year before.
Under Carlisle’s system, 53 percent paid 8 cents more per $1,000 of assessed value, and 47 percent paid 8 cents less.
The Hannemann-Caldwell administration also raised taxes a year before splitting residential properties into two tiers. In Fiscal Year 2010, 100 percent of residential taxpayers paid 13 cents more per $1,000 of assessed value than they had a year earlier.
(Per $1,000 Assessed)
|Fiscal Year 2013 (proposed)||$3.50|
|Fiscal Year 2012||$3.50|
|Fiscal Year 2011||$3.58 (non-homeowner)
|Fiscal Year 2010||$3.42|
|Fiscal Year 2009||$3.29|
Source: Civil Beat analysis of city property tax resolutions
BOTTOM LINE: In his first year as mayor, Carlisle raised property taxes for 53 percent of residential property owners. But Caldwell’s claim that Carlisle raised property taxes a “skosh” is Mostly True because while the facts support the claim, it is missing important information — that Carlisle lowered property taxes an equal amount for the other 47 percent of taxpayers. Additionally, it should be noted that residential property taxes were raised more when Caldwell was managing director than when Carlisle became mayor.