The Honolulu City Council on Tuesday overrode Mayor Kirk Caldwell's veto of a bill that increases the standard home exemption on property taxes while advancing his proposal to hike the tax rate on hotels and resorts.
The council's budget committee also approved operating and capital improvement budgets for the city and the $9.2 billion rail system, earmarking $25 million in local funds required by the federal government as a condition of its release of money for the transit project.
The home exemption, which reduces a property's value for tax purposes, will increase in the next fiscal year from $80,000 to $100,000. The change will lower the property tax bill for most O?ahu homeowners by about $70.
Just how much residents will pay in the end, however, depends on the council's final action on property rates and city property assessments.
The mayor had opposed the exemption increase because it would reduce city revenues by $10 million at a time when costs are escalating, not least of all because of the rail line under development.
While the council handed the mayor a defeat on the home exemption, its budget committee recommended passage of the administration?s proposed property tax rates for 2019-2020.
Residential rates would remain level at $3.50 per $1,000 of appraised value, but hotel and resort rates would increase from $12.90 to $13.90 per $1,000. The rate for residential property that is not a primary home and valued over $1 million, such as a vacation condo, would also rise — from $9 to $10.50 per $1,000 appraised value.
Rates for other property classes, including commercial, industry and agriculture, would remain the same.
The committee considered a revised version of the rates but agreed in the end to back the mayor?s original proposal.
Committee members heard objections from hotel industry representatives who said the higher property taxes would come as hotel occupancy and revenue have been dropping and competition has increased from short-term rentals advertised online by Airbnb and other platforms.
After the budget committee advanced his proposal, Caldwell said the higher rate for hotels and resort property places the burden on visitors and hotel owners.
"So I think it's putting the burden where it should be, and not putting it on the homeowners who live here. And I'm hopeful that this bill will continue to move forward and become law by early June," he said.
Caldwell estimated that if the rates are approved by the council, the increase in the hotel/resort rate will bring in $17 million in added revenue and the hike in the residential rate for property valued over $1 million and not used as a primary residence will draw in $14 million more.
Residents can estimate their property taxes by following these instructions on the city's website.
In other budget committee action, members advanced to the full council for further review a:
• $202 million city executive operating budget for fiscal 2020, covering agencies and obligations for the next fiscal year.
• $1 billion city capital project budget, including improvements to parks, roads, fire and police stations.
• $23 million legislative operating budget that outlines spending for the council and its staff, the city clerk and city auditor.
• $406.4 million Honolulu Authority for Rapid Transportation operating budget.
• $2.4 billion HART capital improvement budget, which includes $100 million in federal funds, $1.9 billion in bond funds and $348 million from the transit fund.
The full council is next scheduled to meet on June 5.
