Council gives initial approval for extended real property tax relief

Maui County Council members have given initial approval to Bill 85, which extends property tax relief to longtime residents who face high tax bills because of rapidly rising property values in their neighborhoods.

The full Council’s action by a unanimous vote Friday follows the May 15 recommendation of the Budget, Finance and Economic Development Committee. First-reading approval came with an amendment proposed by Council Member Tamara Paltin to extend eligibility for tax relief to owners of building’s with gross assessed values beyond $1 million, although at less than 100%.

With the amendment, properties valued at up to $1 million will get 100% of the circuit breaker tax benefit. Properties valued at $1,000,001 to $1,100,000 will get 80%; $1,100,001 to $1,200,000, 60%; $1,200,001 to $1,250,000, 40%; $1,250,001 to $1,300,000, 20%. Higher valued properties will not qualify for the tax relief program.

The current maximum building value for program eligibility is $750,000.

The amendment came from a suggestion submitted in written testimony from Jonathan Helton, policy researcher with the Grassroot Institute of Hawaiʻi.

“Increasing the maximum value of the credit is a good idea because it would offset the effects of increased assessments and higher tax bills,” Helton said.

He noted that the income limit was first imposed in 2013 and has not been adjusted since. Meanwhile, median income has gone up by 19%, from $84,900 to $101,100.

“So, the proposed 26% increase in the annual income limit would more than offset the increase in Maui’s median income, creating a buffer that would allow the Council to wait a few years before increasing it again,” Helton said.

“Since the median sales price of a single-family home on Maui has increased by more than 67% since 2020, from $747,150 to $1.25 million, an update is in order here too,” he said.

The circuit breaker bill amendment to the Maui County Code would be effective Aug. 1, 2024, so it would not affect the fiscal year 2025 budget, which goes into effect July 1, 2024. The measure will begin to impact Maui County revenue in fiscal year 2026. Then, the total amount of estimated tax credit would be approximately $475,000, similar to amounts in fiscal years 2021 and 2022, according to a committee report on the bill.

Bill 85 also increases the maximum amount of the circuit breaker tax credit from $6,500 to $8,200 and raises the maximum household income to qualify for the credit from $100,000 to $126,000.

Currently, the Circuit Breaker program is for property owners who qualify for a homeowner’s exemption and real property taxes exceed 2% of a taxpayer’s gross income. Taxpayers are required to apply for the program with signed copies of their IRS tax account and return transcripts. Applications are available and accepted Aug. 1 through Dec. 31.

Property owners most impacted by higher property values are families who lived near the ocean for generations.

In other Council action Friday, council members approved on first reading Bill 57. The measure amends the current fiscal 2024 budget for the Department of Housing and Human Concerns by adding a new appropriation of $16,425,000 for the Homeowner Assistance Fund under the American Rescue Plan Act of 2021.

The funding comes from a supplemental award from the State of Hawaiʻi to assist homeowners impacted by the COVID-19 pandemic. The state chose to reprogram remaining funds of the Oʻahu allocation to Maui County.

The purpose of the Homeowner Assistance Fund, established under the federal American Rescue Plan, is to ease financial hardships of homeowners impacted by the coronavirus pandemic. The program provides funds to eligible recipients to prevent homeowner mortgage delinquencies, defaults, foreclosures, loss of utilities or home energy services.

Lahaina homeowners have been included in the program because COVID-19 impacted the West Maui community as a visitor destination. The federal government also relaxed the program’s eligibility to allow more people to receive the funding.