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Your Property Tax Bill Also Depends On Rate

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By Lowell L. Kalapa

While most homeowners are still in shock after having received their real property assessments, taxpayers should remember that the assessed valuation of their homes is just one factor in the equation that determines their property tax bills.

The other factor, of course, is the real property tax rate that will be recommended by the mayor in submitting the county budget for the next fiscal year and the rate that will finally be approved by the county council sometime around the middle of the year. That property tax rate will be driven by the demand for expenditures and in wrestling with the county budget, decisions will have to be made about how much will be spent on this or that.

Certainly there are some costs over which the administration and the county council have no control like wages and debt service costs. On the other hand, there are discretionary choices which the county council members can make during their review of the proposed budget. For example, could certain services be outsourced and be put out for competitive bid? Another strategy would be to consider automating the collection and retention of the information that the county collects like those contained on building permits, registrations, and applications. With technology moving into the future at lightening speed, this is one area where future costs can be contained.

It is ironic that on one hand county officials wring their hands, agonizing over the higher property tax assessments and then turn right around and wring their hands and agonize over which programs and services they should cut if they are to lower property taxes. By now, county officials should realize that they cannot have it both ways, lower property tax bills for their constituents and continue expansion of services that their constituents want.

To a large degree, county officials have been able to satisfy both needs, lower property tax bills for homeowners and more services and programs by shifting the tax burden away from homeowners to nonresidential property. Believing that businesses can pass the added tax burden on to their customers, county officials seemingly forget that the customers of those businesses are the very homeowners they are trying to protect. In some ways, this shift of property tax burden merely hides the true cost of running county government and shifts the blame to those businesses because those businesses have to raise prices in order to cover the cost of the increased property tax burden. For example, here in Honolulu where the residential rate is $3.75, the commercial rate paid by the friendly neighborhood grocery is $11.37.

But that strategy has run its course as businesses, from farmers to retailers, point to the fact that the increased property tax burden will soon put them out of business. As real property assessments soar, will county officials just take advantage of this opportunity to fatten the coffers at the expense of not only homeowners but all real property owners or will they find ways to contain the spending that drives the need for revenue?

One of the excuses elected officials give is that all of the services and programs are essential to the quality of life in the county, from police and fire protection to sewers to clean beaches to parks to health and safety issues of the community. The real question here is whether or not real property owners are willing to pay a high level of taxes to maintain these programs and services. Juxtaposing the question of what are essential county services against the issue of property taxes is the apex of accountability.

If property taxpayers don’t want to see their real property tax bills go any higher than they already are, then county officials need to be told that there are programs and services that can be done without. You, as the property taxpayer, have a choice. You can continue to demand the same level of services and pay a higher real property tax bill. Or you can demand that county officials find more savings in delivering those services or cut some of those services and programs and pay less of an increase in your tax bill. 

In any case, a higher property tax bill is not inevitable just because valuations went through the roof. It is now up to county elected officials to decide whether they can provide tax relief by lowering rates and cutting county spending. They need to hear from you.  

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