- Associated Press - Thursday, October 20, 2016

HONOLULU (AP) - A judge has ruled in favor of a group of Honolulu property owners who challenged the city’s residential tax on homes valued at $1 million or more.

Tax Appeal Court Judge Gary Chang determined Monday that the Residential A tax classification is unconstitutional, The Honolulu Star-Advertiser reported (https://bit.ly/2dp1PpL).

The classification, approved by the City Council in 2013, applies to million-dollar properties that don’t come under a homeowner exemption granted to properties that house owner-occupants. It requires Residential A owners to pay $6 per $1,000 of assessed value, while standard residential properties are taxed at $3.50 per $1,000.

Residential A owners say they’ve been arbitrarily taxed based on their properties’ value and that the classification makes it difficult to live on an island where a home valued at $1 million is not always considered luxury.

City officials have argued that the category helps ensure longtime residents are shielded from higher tax bills.

Ray Kamikawa, attorney for the property owners who brought the suit, said it’s not right for the city to set up more than one tax classification for residential properties.

“Residential use is residential use,” said Kamikawa, a former director of the Department of Taxation. “There can only be one classification for residential. The way the ordinance works, (the city) is not permitted to set up a subset of residential based on a $1 million-based value and whether a homeowner exemption is granted for that property. And the court agreed with that view of the ordinance.”

City Corporation Counsel Donna Leong said Honolulu officials maintain that they are right on the issue.

“The city believes the Residential A classification is legal and constitutional and that there is a rational basis for the classification,” Leong said in a statement. “The city also believes that the court should give deference to the City Council’s policy decisions in tax matters, and that the law should be upheld based on such deference.”

Leong said the city plans to appeal the judge’s decision.

Records show the city is expected to collect an estimated $39.3 million in revenue this year from the roughly 8,800 Residential A property owners.

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Information from: Honolulu Star-Advertiser, https://www.staradvertiser.com

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