INDEX - ECONOMICwww.islandbreath.org ID# 0506-04
SUBJECT: REAL ESTATE TAXES
SOURCE: RAY CHUAN firstname.lastname@example.org
POSTED: 10 April 2005 - 4:00pm HST
County cheating on tax collection
by Ray Chuan on 10 April 2005
According to the survey conducted by the Kauai Ti Party, most if not all home owners on the island saw a 25% increase in their 2005 assessment of their building value over their 2004 building assessment.
When some of us called the Assessors Office for an explanation of this sudden one year increase, when in prior years the yearly increase had run between about 2% and 5%, we were told the Assessors were doing "catching up", meaning they had not charged us enough increase over the past several years as building costs were increasing; so that they needed to put in this 25% one time increase to even things out.
On first hearing, such an explanation seemed plausible. Upon doing the necessary math and assuming a building cost inflation rate of 5% per year (which is a generous allowance, as it is more than twice the Hawaii inflation rate, the Consumer Price Index) this explanation turned out to be either a BLATENT LIE or
the result of sloppy match. Let me explain.
Compounding a building cost inflation of 5% for five years gives an answer of 27.6%. In other words, if you divide the correct 2005 building assessment by the 2000 value the result should show an increase of 27.6%.
What are the actual increases manufactured by the County if you compare your 2005 building assessments with your 2000 values? You will find the number is more like 40% to 50%, way above the conservative theoretical value of 27.6%! In my own case the County's numbers show a five-year increase of 43.3%.
In the case of a friend, the number is 50.8%! The fudging of numbers by our assessors is in reality worse than these numbers show. In arriving at the annual building assessment we have been told that the formula the assessors use is replacement Cost minus Depreciation (plus Improvement, if any.) Let's be conservative and let the depreciation be calculated on a Straight Line 40-Year basis. That would give you a negative assessment change of 2.5% per year. When you subtract that from the generous allowance of 5% building cost inflation you should get a net 2.5% building assessment increase from year to year. For most of us the total increase over a five year period, based on this honest use of the formula, would come out to be 13.14%. Not 40%!! Not even 25%!!
Let's see how our Finance Director, whom I thanked a while back in the Garden Island for admitting in a public document that he had not been following his own
Tax Code, would respond to this little expose?? Maybe the Finance Director, the Mayor and the Council Chair should recite in unison, publicly on Hoike, Kauai
County Code Chapter 5A (the Tax Code, Section 5A-8.1 and Section 5A-6.3.
One way to appreciate how really bad this county's property tax taking from the public can be is to compare our per capita taking of about $1,200 per capita with Honolulu's $580 per capita, or a factor of 1.7. If you throw in a rating of the service we get compared to Honolul's that factor is certainly wayover 2.0. As a matter of fact, it is exactly the miserably poor performance of this county government that leads to our huge property tax. By performance I mean the performance of both the executive and the legislative sides of the government. For all its grandstanding, the Council exercises absolutely no control over the spending by the executive branch.
A Balanced Budget takes on an entirely new meaning when attained in Kauai County. Instead of going through the give and take hassle between the two sides
of the government to arrive at a spending figure which is then balanced by generating the necessary income (primarily by adjusting the property tax revenue), the Council allows the Administration to play with the assessment process, while both sides agreeing to an essentially constant tax rate, to yield the necessary revenue to balance the budget. In a rationally, and legally arrived at balance budget, if our officials were to comply with their own Tax Code, the last thing that happens before the beginning of the new fiscal year (which is July 1) is the fixing of the tax rates.
But guess what? Our Council has already set the new tax rates (which are the same as the old tax rates) in its Resolution 2005-30 on March 31! Of course, they
will go through the annual charade of Budget Review which magically always ends up giving the Mayor whatever he wants - give or take a couple of million dollars that can be easily absorbed, plus or minus, by the Slush Fund, euphemistically referred to as the Unappropriated Surplus, that keeps growing year after year and will probably stand at around $8 million for the coming year.
How about some examples of how this game is played. That's easy; you don't really need an auditor to get at a fairly decent picture, if you understand the
basic principle of operation of this county government. It's a very simple principle, based on No Accountability, No Responsibility, No Supervision, No Boat-Rocking. Once hired, you're on for life, whether you are in the union or not, and can look forward to a good pension. And if you are in some supervisory position you can count on hefty raises a few years before you retire, since your pension is related to
the highest salary in your last three years of employment. The beauty of this system is that the elected officials, once voted in, can expect, at each election, something around ten thousand votes from the County workers and their ohana. How do you suppose Council Chair Asing has managed to be there for twenty two years? The $90,000 plus a year senior officials, all nearing retirement or have retired, have been there through the tenures of at least the last four mayors.
The celebrated Olohena Bridge, which spans a small mostly dry gulch, is to be replaced with a new bridge, the construction of which, on an expedited basis, is
to take seven months, at a cost of close to $4 million, with the county contributing around $750,000 (the rest being federal money.) It has taken time, of course, like five years, to get to the current status, so understandably the cost has gone up from less than $2 million to the current figure; and, of course, the County's matching fund has kept pace. To meet that requirement the Council has to authorize another $500,000. Where does that come from? The Slush Fund!
None of the lawyers in our County Attorney's Office is said to have had any trial experience, so when a real lawyer is needed we have to hire an expensive real
lawyer from Honolulu. The $300,000 in the County Attorney Office budget for that purpose is quickly exhausted, understandably, when you toss in the County suing the County itself over the Property Tax Charter Amendment. Hundreds of thousands are thus routinely appropriated - out of the Slush Fund.
Our Chief Trash Manager (who spends eight out of the Public Works Department's annual budget of $32 million) recently found, unexpectedly, that he had to apply for a permit from the State to pile another 25 feet on top of the 60-foot high landfill.
Since we never expect our officials to know how to write a routine permit application, a quickie appropriation of $190,000 (quickie because it didn't even go through an approval process by the Council) was executed to pay a consultant to write the application. Out of the Slush Fund, of course.
You don't have the time to read on, and I don't have the time to write on, so let's leave it at that.
Suffice it to say that the Council will never approve the hiring of a real auditor, since such an act would undoubtedly rock the comfortable boat all our elected
officials ride in.
In The Meantime,
our Finance Director and our Mayor continue to furnish us with evidence supporting our allegation that they have been violating their own Tax Code by blabbing in the Garden Island. So I close this message with Thank you, Mayor Baptiste and Finance Director Tressler!
Previous articles on this issue:
Island Breath: Property Tax 2 an article on Kauai property tax law suit by Ed coll
Island Breath: Property Tax 1 first article on the Task Force for Real Estate Tax reform