Property tax payments are due on Aug. 21 but county officials haven’t said what their plan is for residents and businesses whose property is gone.
Maui faces a significant blow to its tax revenue at a time when the county government needs it to help cope with devastating wildfires in West Maui that have left thousands of residents without shelter, food and other basic essentials. Businesses have been obliterated.
Now, many of those residents and businesses are facing property tax bills due in just seven days.
County officials have not said whether they will forgo tax revenue on properties that no longer exist. But one county council member indicated it will be hard to make people pay taxes on properties that have been destroyed.
Tax experts say the blow to Maui’s coffers will be significant and long lasting.
Kalbert Young, former director of budget and finance for the state, said he “would not be shocked” if it’s in the $40 million to $50 million range of lost annual property tax revenue. “I would fear it could be worse, to tell you the truth.”
The wildfires decimated the town of Lahaina, one of the most popular tourist destinations in the state and an economic engine for the Valley Isle. At least 96 people were killed, making it the deadliest wildfire in the U.S. in more than a century, and officials expected the death toll to rise as search and recovery efforts continue.
Already Losing Over $1 Million A Day In Visitor Spending
Preliminary numbers provided by the state Department of Business, Economic Development and Tourism estimate the state is already losing over $1 million a day in visitor spending on Maui since the fires broke out last week.
The formerly picturesque seaside town with a rich cultural history as the former seat of the Hawaiian kingdom is also home to billions of dollars of property. Officials could not yet provide an estimate of lost property tax revenue, but an analysis of property tax data by Civil Beat indicates it will be substantial.
The census defines Lahaina as including not just the town, but also the Kaanapali and Kapalua beach resorts that have avoided major damage thus far. Property values in Lahaina totaled more than $4 billion in the 2023 fiscal year, which ended in June, according to lot-level county data. Over $3.3 billion of that is taxable value.
Calculating the extent to which certain properties were damaged for tax purposes is complicated. For property where the building was incinerated, building values will likely go to zero. Land values may also face significant depression given the reported toxicity in the area from lead, asbestos and other hazardous materials present in many homes.
Still it seems certain the county will face massive revenue losses from the worst-hit parts of Lahaina. That encompasses Front Street and the area to the west of Route 30, commercial areas with assessed values totaling $1.5 billion for tax purposes, worth at least $11 million in potential tax revenue to the county. These areas were wiped out.
All of Lahaina could have been expected to bring in as much as $25 million in property tax revenue for fiscal year 2024.
These estimates are at the low end. According to a press release from Maui County, there has been estimated $5.52 billion capital exposure in the Lahaina area alone, and the county is still dealing with fires in the center of the island in Pulehu and Pukalani.
The estimates of lost tax revenue were created using each property lot tax class and the 2023 county tax rates. For tiered tax classes, the lowest rate was used, providing a bottom threshold of at-risk tax revenue for the county. Certain exemptions like non-taxable parcels were not factored in.
Marilyn Niwao, the immediate past vice chair of the Hawaii Council on Revenues, thinks the county will have no choice but to defer payment and reassess the entire area.
"You could have lost revenues for years," she said. "Maui County is going to be in a world of hurt."
Property tax bills are due on Aug. 21 and the county has not announced a change in payment date yet. County officials did not respond for comment on possible plans to defer payment.
Chair of the County Council's budget, finance, and economic development committee Yuki Lei Sugimura said she has not heard about plans to defer payment but that "if people don't have their houses it will be hard to justify" any charges.
'It's Going To Be Devasating'
In Maui County, revenues from property taxes were projected to be over $500 million and make up more than half of the county's entire estimated revenue for its 2024 operating budget. Those estimates are now out the window, according to Niwao.
"The problem we have is that the budget for this next fiscal year was all done," Niwao said. Niwao expects that the state and Maui County will have to redo their budgets.
The loss of revenue takes on greater import in a county that will need to spend billions of dollars to rebuild basic infrastructure like roads and utilities, along with schools and other public buildings.
Some of that money will come from federal and state aid. Gov. Josh Green has said he may call the Legislature into a special session to address providing money for Maui. And Hawaii's federal congressional delegation also has promised federal aid. But as Niwao points out, those dollars can be slow to trickle in.
"The problem with federal relief funds is that it takes a long time," Niwao said. "There's going to be a period when people won't have funds. So there's not going to be relief for people. It's going to be devastating."
FEMA spokesperson Robert Barker noted it's still early in the crisis.
"We're not even in really the recovery phase yet," he said. He added that relief timing depends on project size complexity and a "multitude of factors," but it's all done on a "project by project basis."
The county will also face a hit to its transient accommodation tax, which was expected to bring in another $60 million. The trickle down effect will be difficult to fully grasp, but the compounding nature of needed additional spending for emergency services and reconstruction with lost revenue mean certain basic government functions will face belt-tightening.
"I don't think we even have a number we can fall back on," Sugimura said of the total revenue loss, adding that it would be huge. The county had added more than $28 million to its "rainy day" fund for this year's budget, giving the county roughly $76 million in emergency dollars.
The wildfires are by far the greatest destruction of property value the state has ever seen. The 2018 volcano eruption on the Big Island cost the county $5 million in lost property value, but that area was also not a major economic hub like Lahaina. In that instance, former Mayor Harry Kim issued a proclamation suspending the tax assessment and payment schedule for affected properties.
In Paradise, California, which was nearly leveled by wildfire in 2018, the state of California agreed to backfill lost property tax revenue for the three years following the damage. A 2020 report from the town estimated it would take anywhere from 15 to 25 years to recover its expected property tax growth before the disaster.
Updated: The article incorrectly identified Marilyn Niwao as the sitting vice chair of the Hawaii Council on Revenues. She is the immediate past vice chair.
Civil Beat's coverage of Maui County is supported in part by grants from the Nuestro Futuro Foundation.
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