Honolulu’s New Budget Includes Higher Property Taxes For Short-Term Rentals
Council members stuck with the higher tax rate in part to avoid cutting more services in the city’s $4.5 billion budget, $115 million of which is allocated for hazard back pay from the pandemic.
Owners of Honolulu short-term rentals will pay more in property tax this year under a budget approved by the City Council Wednesday.
New park lighting and more money for hazard back pay are also included in the $4.5 billion spending plan, which funds routine operating expenses such as employee salaries and construction projects. The budget will take effect when the new fiscal year starts July 1.
Council members also approved a plan to restructure the Honolulu Salary Commission, which last year gave a controversial 64% raise to council members that commissioners said was long overdue. Voters will have final say on the plan during the general election since it requires amending the city charter.
Higher Property Taxes For Short-Term Rentals
The council created a new property-tax category last year to charge short-term rentals a rate between that of residences and hotels.
Many short-term rental owners testified in opposition to the new rate, which will more than double what they pay.
Currently, residential properties not occupied by their owners are charged $4 per $1,000 of assessed value up to $1 million, and hotels are charged $13.90.
Short-term rentals will be charged $9 per $1,000 of value up to $800,000 and $11.50 for anything over that.聽The owner of a $1 million house, for example, would be charged $9,500 according to the new tax rate.
Kelly Lee, president of the Oahu Short-Term Rental Alliance, testified in opposition.
鈥淭he higher rates will destroy the intent to have STRs register and pay the appropriate taxes. Less STRs will also further reduce tourism numbers,鈥 she said .
The issue of how to regulate short-term rentals has long plagued Honolulu lawmakers. Opponents say they reduce the city’s limited housing supply, while supporters say they can be an economic lifeline for homeowners who rent out their properties for extra income.
Oahu Short-Term Rental Alliance members and council member Andria Tupola said the new rate will discourage people from registering their short-term rentals.
Council member Matt Weyer was sympathetic to this argument. But he said that short-term rental owners need to pay more.
Other council members worried that lowering the proposed rate would require cutting spending in the budget they had just approved. The proposed rate passed 8-1, with Tupola voting no.
Park Lighting And Hazard Pay
Millions of dollars for lighting in parks around Oahu is included in the city budget, a far bigger investment than in previous budgets.
Palolo Valley District Park, the baseball field at Asing Community Park, Hauula District Park and Herbert K. Pililau Community Park are some of the ones that will benefit.
鈥淕oing from the daylight transition to nighttime, we lose almost half of that facility,鈥 Waianae resident Kalei Wilbur testified about Pililau Community Park. 鈥淎nd yet we still are trying to service a lot of the keiki.鈥
The budget allocates about $100 million for affordable housing and homelessness services, and about $375 million for police, up from $354 million for the current year.
It sets aside almost $62 million for a pedestrian and bicycle bridge over the Ala Wai canal, with the added condition that a lower-profile bridge be considered after some residents opposed a design that’s 180 feet high.
The spending plan includes $500,000 to plan and design a new Ocean Safety First Responder center on the North Shore, where residents and city officials are concerned about a lack of ambulances in the stretch between Waialua and Kahuku.
The budget allocates $250,000 for a rejuvenated transit construction mitigation fund and $50,000 for the city鈥檚 new restricted parking zone program.
Extra money for hazard pay during the pandemic is also included in the budget. The city recently allocated another $35 million, bringing the total to $115 million.
In Maui County, a 2022 arbitration decision found that over 1,300 government employees were owed 20% of base pay for work that took place over two years.
Something similar could be decided for Honolulu, but negotiations are still underway.
In discussions, council members expressed support for city workers despite the fiscal blow.
鈥淲e are the last county to get this done. We just want to make sure to show a lot of appreciation,鈥 Tupola said.
Council members also approved a plan to restructure the Honolulu Salary Commission, which last year gave a controversial 64% pay raise to council members that commissioners said was long overdue.
The restructuring would include a 5% cap on the council鈥檚 yearly raises, tying them to collective bargaining agreements and removing the council鈥檚 option to reject salary increases.
Council members had turned down salary increases for years because it looked good politically, commissioners said, and the big increase they recommended last year was intended to correct this.
鈥淚 think this resolution and draft amendment is one step toward maybe building public trust in government again,鈥 council member Augie Tulba said.
