POSTED: 28 MARCH 2005 - 8:30am EST

Property Tax Suit

by Ray Chuan on 25 March 2005

The most amazing thing happened in the Garden Island this morning. We see a full confession by our Finance Director about the way he and his colleagues extract millions from us in ways that are in violation of their own Tax Code. I was prompted to write a letter immediately to the Garden Island to thank Mr. Tressler for his candor. As always, I am quoting what I hope is a letter that I hope the Garden Island will see fit to print.


To the Garden Island

Let me quote you from your own tax code (Chapter 5A of Kauai County Code)

"Section 5A-8.1 (a):
The director shall cause the fair market value of all taxable real property to be determined and annually assessed by the market data and cost approaches to value using appropriate systematic methods suitable for mass valuation of properties for taxation purposes, so selected and applied to obtain, as far as possible, uniform and equalized assessments throughout the county"

The rest of this section deals with the treatment of agricultural land which is not pertinent to the current question regarding how you follow the law. The underscoring is mine to emphasize how you are violating your own law.

The law says "shall", not "may";

The law says "fair market value", not 75% or whatever you choose for convenience; The law says "all", not some properties in some parts of the island at one time and some others at another time;

The law says "uniform and equalized assessments throughout the county", not 75% or xx% here and there now and then.

There is an entire Article in Chapter 5A on "RATE", meaning tax rates. Those elusive words never crossed your mouth. The reality, of course, is that the tax rates have been essentially and willfully kept constant by the Council, varying by not more than a couple of percentage points (for appearance's sake); so that with your variable and arbitrary and illegal ways of reaching at the total assessment and then multiplying that by the constant tax rate, you can make the Revenue (revenue=assessment x tax rate) come out anyway you like.

The reason there has been such a torrent of complaints this year compared to previous years is that you and your colleagues have gone to extremes this year, apparently confident that after all these years of pulling the wool over the eyes of the public, nobody would notice the difference.

Bad habits and arrogance have finally failed you and your colleagues this time! You will be hearing from the public! Better start lining up expensive outside lawyers, with our money, of course!

Raymond Chuan
Hanalei, Kauai

I quote below some pertinent sections of the Tax Code. This is not to say that I think this is a good tax code, because it isn't, which is why the Real Property
Tax Task Force spent a year coming up with a reform plan which was promptly buried by the Council. The current tax code still allows the assessment of your
property to go up when someone near you (the nearness can be miles away, according to the assessment records) goes up because of a transaction. The Task Force Plan would allow an assessment rise only to the property that has gone through a transaction. Here I am not comparing the relative merits of the current tax code, but only to point out, as Mr. Tressler himself has proclaimed, that the County has been violating even this not so good tax code. Here are some highlights in the Kauai County Tax Code...

Article 6 Section 5A-6.1 Rate and Levy

Except as exempted or otherwise taxed, all real property shall be subject to a tax upon one hundred per cent (100%) of its fair market value determined in the manner provided by ordinance at such rate as shall be determined in the manner provided in Sec 5A-6.3.

Section 5A-6.3 Real Property Tax; Determination of Rates
(a) (definitions of classes of property)

(b) (dates for setting and notifying the tax rates)

(c) The council shall set the tax rates for each class of property using the following method:

(1) Net taxable lands and net taxable buildings within
each class of property shall be assigned a percentage
of the total revenue to be derived from real property.

(2) The percentage of revenue to be raised from net
taxable lands and buildings within each class shall be
multiplied by the total revenue to be raised from real
property in order to determine the amount of revenue
to be derived.

(3) The amount of revenue to be raised from net
taxable buildings within each class shall be divided
by the net taxable value of buildings in that class to
determine the tax rate which shall be expressed in
terms of tax per $1,000 of net taxable buildings
computed to the nearest cent.

(4) The amount of revenue to be raised from net
taxable lands within each class shall be divided by
the net taxable value of lands in that class to
determine the tax rate which shall be expressed in
terms of tax per $1,000 of net taxable lands computed
to the nearest cent.

(d) If the tax rates for the tax year are increased or decreased, the council shall notify the director of the increased or decreased rates, and the director shall employ such rates in the levying of property taxes as provided by this chapter.

(e) The director shall, on or before May 1 preceding the tax year, furnish the council with a calculation certified as being as nearly accurate as may be, of
the net taxable real property with in the county, separately stated for each class established in accordance with Sec. 5A-8.1(c) for net taxable lands and for net taxable buildings plus such additional data relating to the property tax base as may be necessary.

(f) Provisions as to dates are directory; other provisions are mandatory.

(g) Minimum tax of $25 a year.

Article 8. Valuation, in General
Section. 5A-8.1 Valuation; Considerations in Fixing

(a) The director shall cause the fair market value of all taxable real property to be determined and annually assessed by the market data and cost approaches to value using appropriate systematic methods suitable for mass valuation of properties for taxation purposes, so selected and applied to obtain, as far as possible, uniform and equalized assessments through the county; provided that the value of land located in the agricultural State Land Use District and used for agriculture, whether such lands are dedicated pursuant to Sec. 5A-9.1 or not, shall, for real property tax purposes, be the value of such land for agricultural use without regard to any value that such land might have for other purposes or uses, or to neighboring land uses, as determined as provided in subsection (e) (1) of this section. In making such assessment and determination, the director shall
separately value and assess, within each class established in accordance with subsection (c) of this section: (1) buildings, and (2) all other real property, exclusive of buildings.

(b) So far as practicable, records shall be compiled and kept which shall show the methods established by or under the authority of the director, for the determination of values.

The drama is fast developing. What we would like to see is for every neighborhood association on the island to sponsor a forum on property tax, with
representatives of the County and the Kauai Ti Party explaining their respective positions. If you know the responsible persons in your neighborhood
association please contact them to arrange the forum.

The Kauai Ti Party will go anywhere, any time, to get its message out to the people. Please help!



POSTED: 22 MARCH 2005 - 8:30am HST

Property Tax Suit

by Ray Chuan 21 March 2005

March 16, 2005 will go down in Kauai history as Black Wednesday, or Day of Infamy. I began receiving first-time calls from people in panic that very day;
and the calls haven't stopped. In fact, I am having trouble writing this message.

Let me skip to the end of this message first by announcing that, with a small number of friends, I have decided the only relief the taxpayers can hope for is a CLASS ACTION LAWSUIT AGAINST THE COUNTY OF KAUAI. I have no doubt the ranks of victims who have been injured by the willful violations of their own
tax laws by the elected officials of the County of Kauai will swell exponentially once the word gets out.

But I have to warn you of the ultimate irony and insult that will accompany this lawsuit. Our money extracted from us by these crooked officials will pay for high-priced lawyers from Honolulu to defend the County!

There is perhaps no better way to start this message of awakening by quoting from a letter in today's Garden Island by someone unknown to me but about whom I have received a couple of calls extolling this person's credentials. Here is Steve Faunce's column:


KAUAI Opinion - Viewpoint for Monday - March 21, 2005
Letter to the mayor on budget
If one can believe the article in yesterday's issue of The Garden Island (Wednesday, March 16), the budget increase for the coming year "stems from a significant increase in projected real-property-tax revenues generated by a 48-percent increase in real-property assessments of Kaua'i properties this year."

I don't know whether the article's an accurate reflection of the mayor's presentation or not. If it is, I'm appalled at the lack of logic that has our county's budget being driven by increases in property values. I would have assumed that the county would start by determining how much it will cost to provide needed services to our residents this year and submit a budget that reflects that level of spending.

That number would then be divided by the total of all of the current real-property assessed values for the County of Kaua'i (i.e. the "tax base"), and the result would be the real-property tax rate applied to the our assessed valuations to determine the taxes due for next year. I've observed over a period of many years that the assessed valuations for properties all over the island were typically well below their market values (as indicated by the sales prices whenever the properties actually sold). It makes perfect sense to me that, if the adjustments have been made equitably, we should begin to see assessed valuations that are more in line with market values.

What doesn't make sense at all is that the budget for providing county services would magically rise by $22,400,000 next year (including a $10,500,000 line item in the budget which may or may not be returned to the taxpayers as "tax relief" in the future). The budget process must begin to separate the issue of how to equitably assess the market values of individual properties from the issue of how much it costs to provide the services needed by Kauai residents.

Do the budget first, then figure out what tax rate will be needed to pay the bills with the current tax base. If you continue building the budget based on fixed rates and increasing property valuations, we may find ourselves on very "slippery slope." It undoubtedly looks like a great idea now with property values rising each year. However, I suspect it will look a lot less attractive when we hit one of our inevitable market slumps and the property values stay the same (or even decline) from one year to the next.

Will it suddenly cost any less to run the county than it does now? Will the assessed valuations be reduced? Where will salary and collective-bargaining increases come from? When the voters approved the amendment to the county charter in the last election, I was opposed to it because it seemed to take care of those of us who've lived in our homes for many years at the expense of those purchasing after a certain date. I was sure that the reasoned judgment of our elected officials together with the recommendations from their key staff members would come up with a more equitable solution.

As of today, I am not as confident that this is likely to be the case. The county cannot continue to base its spending plan on the increases (or decreases) in property values. Every office holder must understand that a change in the size of the tax base is a totally separate issue from the amount needed to provide county services. If that difference isn't clear, that person shouldn't be involved in our budgeting process.

The tax rates for our properties should probably change (both up and down) from time to time to reflect changes in the relationship between the tax base and the cost of providing needed services. For example, with the huge (48-percent) increase in the tax base this year, I would assume that the tax rates should probably be reduced. Please take the time to consider making this basic change and do not assume that, just because the market values of all of our properties go up, you have a mandate to spend more.

Steve Faunce
Koloa, Kauai, Hawaii


With that letter as an introduction I immediately fired off a response to the Garden Island (we'll see if it gets published



Letter to the Editor of the Garden Island News
It's interesting how reader Steve Faunce described as a sensible and logical way to raise property tax revenues to support the services provided by the County of Kauai is precisely what is mandated in
Chapter 5A, Kauai County Tax Code: Figure out how much you need, then figure out a tax rate to apply to the assessed value of real property (whatever that may be, depending on the real estate market)to yield the necessary revenue. Clearly, the County government has been doing it backwards!

Figure out the assessed value first. Then, without changing the rate, come out with the revenue. In a rising real estate market that calculated value will, of course, keep rising. The incredibly candid words of Mayor Baptiste, as reported in the Garden Island on March 16, descbribed precisely how the County has been violating its own Tax Code all these years!!

Our county government is the only one in the nation that DOES NOT explain on the property tax statement it sends out to the property owner how that number is arrived at. The latter just says "This is how much you owe." What is hidden, of course, is the TAX RATE, which magically does not change by more than a few insignificant percentage points, when the assessment could increase by as much as three hundred percent, as has been happening around the island.

To add insult to injury, both the Council Chair and the Mayor boastfully announce every year near the beginning of the new Fiscal Year: "We have again not raised the TAX!" Carefully left out, and apparently with the desired result of keeping the taxpayers in the dark, is the little word RATE! This deception has been used so many times that our officials are obviously starting to believe in it themselves, as was apparently revealed by His Honor the Mayor himself on the front page of the Garden Island.

A good example of this deception on the part of the Council was revealed during the well attended meeting at the Convention Center when Chair Kaipo Asing, with his slide show, told the audience how he had actually reduced the TAX by showing a bunch of new TAX RATES that differed from their previous values by maybe three or four percent. What he did not point out on the same slides was that the assessment had gone up 61%!!

Since the County government has, in effect, boasted how it has been violating its own tax code all these years, the logical solution would be for all the elected officials - the seven members of the Council and the Mayor- to resign immediately. The only effective alternative to this would have to be a taxpayers revolt through a class action lawsuit
against the County of Kauai.

The final irony in this drama is that the County government will be using, guess what, our money to hire high-priced lawyers to defend itself. If these officials have any conscience at all at this point, they should resign and not squander any more of our money!

Raymond Chuan
Hanalei, Kauai, Hawaii


The reason for the shock delivered to the taxpayers this year may well be that the Assessor's Office no longer has over it an experienced and dedicated Deputy Finance Director. In essence, the Assessors now think they can go all the way to maximize the real property tax revenue for the coming year. And the Mayor was proud to announce that to the public in his Wednesday, March 16 pronouncement in the Garden Island.

I have a feeling this county government has opened the gate, inadvertently of course, to a torrent of outrage on the part of the taxpayers. Please pass this message to everyone you know. We will do whatever we can to get the message out to the general public as soon as possible.

In the mean time I will prepare another message that will try to explain why we think the County has been violating its own Tax Code all these years, by quoting for you appropriate passages in this 75-page document.

What we will need the most in preparing this lawsuit are examples of serious injuries being done to property owners, especially modest income locals and Native Hawaiians who, by their cultural background, are not prone to complain to the government, but more often than not, suffer in silence, as they give up their homes and move in with relatives or move to Las Vegas.

Just to keep you awake let me close by citing a case to show how crazy this tax scheme can be. The assessment of land along the shore of Hanalei Bay is somewhere around $12 million an acre. At a tax rate of, say, $4.50 per thousand, the tax on the land alone for this parcel of around half an acre would be
$27,000! What is the tax bill on this property? $25.00. Twenty-five dollars, that is. You figure it out!

Editors Note:Here are some links to more:
Ray Chuan 5
Ray Chuan 4
Ray Chuan 3
Ray Chuan 2
Ray Chuan 1
(this article ends with strategy for appealing tax assessment)