Honolulu will allow property owners to pay their next tax bills in four-part installments to give breathing room to individuals and businesses affected by the pandemic.
The twice-annual tax payments are usually due in February and August. This year, taxpayers can break their August payments into chunks due Aug. 20, Sept. 20, Oct. 20 and Nov. 18.
“We know in an emergency and in crisis, we need to try to work with the public in terms of the challenges of paying real property taxes,” Mayor Kirk Caldwell said at a press conference on Wednesday.
All property owners will receive “coupons” with their August bill and will not need to prove a hardship. There will be no penalties or interest for those who take advantage of the extra time. Council members introduced a resolution in support of the extension, but the action is already within the city administration’s authority, according to Budget Director Nelson Koyanagi.
City officials were clear that this is a tax deferral plan, not forgiveness. Koyanagi said that the city will work with property owners who fall behind, but the law does allow the city to foreclose on those who do not pay. However, he said that would not happen right away.
“The properties are collateral for the real property taxes,” he said.
Property taxes are the city’s main source of revenue. Caldwell said the payments are essential to continue core city departments including police, fire, ocean safety, facility maintenance, parks, housing and homeless initiatives, and bus and Handi-Van operations among other services.
The city is already facing a projected $130 million shortfall in the next fiscal year, which starts in July. During the island’s shutdown, the city has seen reduced revenue from the vehicle weight taxes, vehicle registration and parking fees, according to Council Budget Chair Joey Manahan.
To balance the budget, officials cut $135 million from the mayor’s original proposal, Koyanagi said. The cuts were primarily in the transportation department including rail, bus and Handi-Van operations. Federal funds can help make up the reductions for the bus and Handi-Van but no federal money will be used for rail, according to Koyanagi.
The city also cut vacant positions “substantially,” Koyanagi said. Next year, he said agencies will have to hire new people using savings within their own departments.
In the future, the city could take a hit from property tax revenues if assessed values fall, Caldwell said.
Wednesday’s announcement follows the introduction of a bill in early April by Councilwomen Carol Fukunaga and Ann Kobayashi, which would have deferred payments for small businesses that had to shutter part or all of their operations because of COVID-19. Kobayashi said she would like some of Honolulu’s $387 million in federal relief funds to help small businesses struggling with their tax burdens.
“We’ve got to find a way to help people who don’t even have the money to pay in installments,” she said.
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