property valuations slightly higher

WAILUKU – Real property valuations have come in slightly higher than expected and are up about 10.9 percent

over last year but will likely “stagnate” in the coming year, said Finance Director Kalbert Young.

The certified value of all taxable property in Maui County came in at around $41.1

billion, around $400 million above earlier projections and up by $4 billion from last year, Young told council members Thursday. Mayor Charmaine Tavares has proposed cutting prop-

erty tax rates to keep revenues – and tax bills – nearly flat in 2007-08. But rising costs and major liabilities on the horizon mean the rates may have to go up again next year, Young warned.

“The bold move to reduce tax rates is not to say that level can be sustained even one year out,” he said.

Real estate sales during the first third of 2007 indicate the market is slowing, Young said. He predicted valuation growth would slow significantly, and new developments, which make up only a small fraction of the total inventory, wouldn’t have enough of an impact to boost taxable property values.

“To be conservative, I would probably say it would be flat in terms of valuation next year,” he said.

The Maui County Council Budget and Finance Committee is currently reviewing tax and fee proposals for Tavares’ 2007-08 budget plan. The council will set property tax rates for the year after a public hearing at 6:30 p.m. Thursday in the Council Chamber.

Tavares proposed a tax rate of $1.85 per $1,000 of assessed value for the owner-occupant class, down from the current $2.50. Other proposed rates include $4.70 for improved residential properties (down from $5), and $4.55 for apartments (down from $5).

Council members expressed some reservations about the proposal, especially plans to include hotel and time-share properties in the rate cuts. Hotels would be taxed $7.30 per $1,000 value under Tavares’ plan, down from $8.20; time shares would be charged $12.75, down from $14.

Council Member Mike Molina said that with so many capital improvement projects and other expenses, he was “on the fence” about cutting tax rates in those areas. He said Friday that he planned to propose at least maintaining the rates at current levels.

“It’ll be a challenge for this council . . . to see a reduction,” he said.

And Council Member Gladys Baisa was concerned the rate cuts wouldn’t provide enough tax relief for low-income residents, because of the increase in property values. She said the county should “overhaul” the tax assessment process.

“Some people may wind up paying more,” she said. “It is a strain for people on fixed incomes.”

Young said that, while the county can’t control the real estate market, which drives property values up or down, it can offset valuation increases by lowering tax rates. Tavares’ proposed rate cut should mean that most residents’ tax bills should stay the same as last year, even if their property valuation went up, he said.

While the county can pay for current programs and services using existing revenues this year, Young warned that major expenses are looming on the horizon.

The county’s expected liabilities for employee retirement and health benefits will together cost the county as much as a billion dollars, well over the county’s debt limit, he said. Plans to relocate the Central Maui Wastewater Reclamation Facility away from the shoreline to a more inland location could cost another $500 million.

Young said the county has for several years been considering how to plan for the costs and has made a concerted effort to minimize borrowing in preparation.

“That’s with the intention that in the very near years there’s going to have to be a very large ramp-up of debt,” he said.

Council Chairman Riki Hokama said the county had to keep in mind the looming costs as it made decisions on taxing and spending.

“Politically it’s always easy to do the popular thing,” he said. “However, in my experience, 90 percent of the time the right thing is not the popular thing to do.”

The Budget and Finance Committee is expected to finalize its proposal for the 2007-08 county budget next week.