Wild Fluctuations in Tax Revenue On Waikoloa Highlands Property

posted in: November 2016 | 0

In January 2014, the Hawai`i County Department of Finance prepared a list of those properties it intended to auction on January 16 for failure to pay property taxes. Ten of the 76 parcels belonged to Waikoloa Mauka, LLC.

At virtually the last minute, on January 12, the back taxes, penalties, and interest – amounting to $1,275,870.30 – were paid off. And the payment wasn’t from Waikoloa Mauka, according to a source in the Finance Department, but rather from one of its creditors, fearful that the auction would impair the value of land securing its notes.

Not included in the properties proposed for sale at auction was the 731-acre parcel where Waikoloa Mauka plans to build its Waikoloa Highlands subdivision and the 2,153-acre parcel across Waikoloa Road to the north.

To be clear, large tax arrearages did build up on those parcels as well from 2009 to 2012. By July 2012, taxes, penalties, and interest charged by the Finance Department on the smaller of the two lots came to $135,283.84. Most of that ($105,897.22) was in taxes, with $9,119.34 in penalties and $20,267.68 in interest.

On July 23, 2012, the entire arrearage was paid off on that parcel. The arrearage on the larger one was dealt with four months later, in November 2012. By then, the total amount owed came to $143,631.64.

Since then, Waikoloa Mauka and its successor, Waikoloa Highlands, Inc., have kept current on their taxes, missing payment due dates by days only on a few occasions.

However, with the property taxes having been reduced on those two parcels together to less than $750 a year, paying them should not be a problem.

Property taxes on the 731-acre lot were $73,756.39 a year in 2006, immediately following its sale to Waikoloa Mauka. On the larger lot, taxes in 2006 were $40,832.34.

By 2016, they had been reduced to $189.63 and $557.78, respectively.

Even though the County Council and Land Use Commission have approved zoning changes that should, if anything, have increased the value of the smaller property, the county’s tax revenue took a nosedive. (A staffer with the county Finance Department explained that regardless of zoning changes, tax rates won’t change until work actually starts.)

The dramatic reduction in the tax bill is a result of Stephan Martirosian, a principal of Waikoloa Mauka, having applied for an agricultural use rate starting in 2011 for the larger lot and 2013 for the smaller one.

The application to be taxed at the rate for pasture use on the Highlands lot was dated August 8, 2012, 16 days after the accumulated taxes and penalties on the property had been paid.

Meanwhile, on a 10-acre Agriculture-zoned lot at the corner of Waikoloa Road and Pua Melia Street – the only Hawai`i property still owned by Waikoloa Mauka, LLC – taxes went unpaid from 2010, the year the parcel was carved out of a larger lot, until June of 2015, by which time the arrearage (taxes, penalties, interest) came to $19,045.48. In that same period, the annual bill went from $2,552.60 to $2,819.40, where it now stands.

For this property, at least, no agricultural use has been declared, meaning that although it is 1.4 percent the size of the Highlands parcel, the property tax on it is nearly 15 times that of the larger parcel.

A question arises as to why tax bills could be allowed to go unpaid years without the properties being put up for auction at county tax sales. A staffer at the Finance Department stated that as a general rule, the county will consider properties for sale after two years of delinquencies. However, he added, “it depends on the tax collectors.” The Big Island has three collectors, each of whom is responsible for the tax sales in their area of jurisdiction, he continued.

“Just because something is delinquent over two years, it doesn’t mean it’ll be on the tax sale,” he said. Other factors come into play, and, he added. “Especially if it is land only, sometimes it will be delinquent for a while before the tax collectors put it up for sale.”

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— Patricia Tummons

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