Tax relief for properties that house Lahaina residents

from Grassroot Institute of Hawaii November 15, 2023

The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the Maui County Council Committee on Budget, Finance and Economic Development on Nov. 16, 2023.
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November 16, 2023, 1:30 p.m.

To: Chair Yuki Lei Sigimura
Vice-Chair Tasha Kama
Maui County Council Committee on Budget, Finance and Economic Development

From: Jonathan Helton, Policy Researcher
Grassroot Institute of Hawaii

Comments on Bill 95

Aloha Chair Sigimura, Vice-Chair Kama and other committee members,

Thank you for considering Bill 95 (2023), which would exempt from the Maui County property tax all residential real property in Lahaina and other residential real property that was damaged or destroyed by the fires in Kihei and Upcountry.

Bill 95 would also provide tax relief to hotel and short-term rental owners who use their properties to provide shelter to residents displaced by the fires. These exemptions and relief programs would cover fiscal years 2024 and 2025.

Since this bill was first introduced, Maui County’s Finance Department has proposed an amendment that would rewrite the bill and specify how relief will proceed for homeowners and those who provide shelter to displaced Lahaina residents.

The Grassroot Institute of Hawaii appreciates the intent of the proposed amendment, which would provide that the residents whose homes were destroyed can keep their homeowner exemptions for fiscal year 2025, unless they sell their properties in “arm’s length transactions,” at which point it would be up to the new owners to apply for homeowner exemptions.

The amendment also would give a tax break to long-term rental and short-term vacation rental properties whose owners use them to provide shelter to individuals and families displaced by the fires. And it would give that relief by increasing the value of the current long-term rental exemption from $200,000 to $300,000 for those owners for fiscal 2025 and 2026.

At the current tax rate of $3 per $1,000 for the first $1 million of a rental property’s value, this additional $100,000 exemption would save each owner at least $300 a year.[1]

This is a good gesture. However, we encourage the committee to increase the value of this exemption by an additional $200,000 in order to further incentivize property owners to house displaced residents. This would provide owners an annual tax break of at least $900.

Additionally, the Council should not totally shelve tax relief for commercial, industrial and other residential real properties.

Once the county real property team completes its fiscal 2025 assessments in the coming months, the Council could craft a measure providing tax relief to those whose properties were completely destroyed or damaged during the fires. Such a measure would protect these property owners from the possibility of losing their livelihoods to tax foreclosure.

Overall, the Institute welcomes Bill 95, either in its original form or as it might be amended. Keeping costs down for property owners in Lahaina and for those who serve displaced residents will help Maui residents afford to stay in Maui.

Thank you for the opportunity to testify.

Jonathan Helton
Policy Researcher
Grassroot Institute of Hawaii
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[1] “County of Maui Real Property Tax Valuation For Fiscal Year 2023 – 2024 (In Thousands of Dollars),” Technical Branch, Real Property Assessment Division, Department of Budget and Fiscal Services, City and County of Honolulu, July 2023.