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Kaua‘i council chair plans to fund tax breaks with reserves

LIHU‘E — Each year, Kaua‘i puts tens of millions of dollars into its reserve fund to be used for unanticipated costs during emergencies.

At a Wednesday, April 12, 2023 meeting of the Kaua‘i County Council, Chair Mel Rapozo proposed to reduce the amount allocated to that fund in order to pursue a series of tax breaks for property owners.

Under his plan — a draft of which was introduced in Resolution No. 2023-37 — the county would allocate 27 percent of the previous year’s general fund revenues toward the reserve fund instead of the 30 percent that it traditionally puts aside.

Rapozo proposed that the extra funds could be used to reduce taxes on commercial, industrial, agricultural, conservation and commercial-home-use classes by 10 percent each — while cutting the homestead tax rate by 5 percent (in addition to a proposed 10 percent cut included in the mayor’s budget). The homestead tax class applies to most local homeowners’ primary residences.

Kaua‘i would free up an estimated $5.67 million in reserve fund money from the plan, while losing $4.69 million in tax revenue, leaving a surplus of about $1 million.

Rapozo cited rising property values as a primary reason to pursue the tax cuts. Total revenues are expected to increase 16 percent this fiscal year as compared to last year, largely a result of increasing property values.

“We’ve got to start looking at property tax relief because we’re in this financial position because of property taxpayers,” said Rapozo.

Rapozo said he felt like the reserve fund would be a better vehicle to cover lost tax revenue than cutting positions or programs from the mayor’s proposed budget.

The proposal prompted a discussion about the benefits of tax breaks for commercial, agricultural and conservation land. These types of properties are often controlled by large landowners, who are not guaranteed to pass their tax savings on to the small businesses or farmers who lease the land from them.

“Most of our local businesses do not own the building they do business out of,” said council Member Billy DeCosta. “They rent the building. The commercial break goes to the landowner, who owns the building.”

He later added — “If you’re asking me to give Costco and Walmart and Zuckerberg a tax break, I’m not willing to do it.”

Council members, including Rapozo, suggested these larger landowners could be distinguished through tiered property taxes, which allow the county to tax higher-value properties at higher rates. The tiered tax option was introduced in a county council bill that passed last summer, but has yet to be implemented.

Mayor Derek S.K. Kawakami testified that he supports the intent of Rapozo’s plan, but requested time to work with his finance team to work out options in order to “strike the right balance between revenues and expenses.”

The resolution was referred to the Finance Committee, and will be discussed again at an April 19 meeting.

The 30 percent reserve fund allocation was first introduced in a 2017 resolution, which designated that the fund could be used for disaster response, insurance provisions, revenue volatility and legal claims. Last year, the council amended the resolution to include affordable housing infrastructure or land acquisition as potential uses for the fund.

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Guthrie Scrimgeour, reporter, can be reached at 808-647-0329 or gscrimgeour@thegardenisland.com.
Source: The Garden Island

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