Tax revenue history

In the process of writing up my thoughts following the tax workshop I have been delving into the property tax data that is available looking for ways to best put taxes into perspective. At the workshop the focus was mostly on individual taxpayers and this fiscal year tax changes, but it is useful to also consider the historical record. Real property taxes pay for most of what county government does so every year the total revenue needs to cover the budget ups and downs, or we have to borrow of dig into reserves to make up the difference.

It is important to keep clearly in mind that tax rates (historical data) and tax revenues are different. The following is all about the revenue which is essentially assessed valuation times the tax rate, and in the case of residential property a number of exemptions and other relief are available to taxpayers. Simply put, the idea is that a $10M hotel will pay half what a $20M hotel pays, both at the same tax rate.

The following graph shows the money the county collects from each class of real property. County tax revenue tripled from 1999 to 2008, and now has returned to those levels, over $100M per year. Note that after the 2008 crash everything goes down (they did not raise the tax rates significantly) and is just now back up to earlier peak levels.

Relevant to the recent homeowner property tax uproar, note that the Homestead tax revenues as a whole have decreased: in fact, it is the only classification that got a break while all the others a sharply up the past couple of years. Yet a lot of homeowners are unhappy about large tax increases - this strongly suggests that many people (who we are not hearing from) saw taxes go down this year, and others (unless they are making all this up) had taxes go way up.

I don't have the data (yet) to do a proper analysis but this actual matches what the administration and council members supporting the recent tax code change are saying - that the tax cap that pegged taxes to modest growth from whatever the tax was many years ago had given some people a big break for all these years. We need more data to say more than this, but the pieces do fit together, though in not the way one would expect at first.

Tax revenue historical data

In compiling this data one number I thought was a mistake, but it seems to check at least the source documents I have from the county clerk. You can see by scanning the table at the bottom here that year to year the revenue numbers generally grow year to year until about 2009, then the drop down and come back up … except for Agriculture and Conservation which are currently at 2001 levels or below. The following chart that shows revenue by classification as a percentage of revenue shows it most clearly.

The chart above roughly groups taxes by who pays. This is an arbitrary choice but I think it makes sense and simplifies the view: if you want to look by classification the interpretation is not that different.

• Homeowners is Homestead and residential
• Business is Commercial and Industrial
• Visitors is Hotel/Resort and Vacation Rental (taxes are passed through as rent)
• and the rest are by single classification, Agriculture and Conservation

Over a decade ago homeowners and visitors each paid for about a third of county revenues with business and agriculture sharing the rest. (Conservation is only a few percent throughout.) Later on visitors got a break as homeowners roughly took up the slack and in recent years those revenues equalled out now at over 40% each. Business contribution to county revenue has slowly dropped over the years - but I would think that if anything there is a lot more business activity now, isn't there?

Ag gets a big tax break

Even more curiously - and this I would really like to understand better - last year agriculture revenues dropped percipitously (very good news for agricultural land owners) from $12.8M in aggregate (2012) to just $4.6M (2013). Since the agriculture tax rate increased over 20% that year there must have been a massive change in assessed value. What suddenly devalued all the agricultural land on the island in the last couple of years? Hotel/resort revenue bumped up somewhat but taxpayers and visitors mostly picked up the tab for agriculture anyway you look at it.

Here are the numbers for fiscal year 2012 (from Resolution 2012-30, Draft 1) compared to fiscal year 2013 (Resolution 2013-41) for ag tax class. Note that in 2013 they stopped breaking out assessment by land and building separately so comparing combined total assessed valuations from both years.

• 2012 ag $2,131,745,065 ($715,691,447 building and $1,416,053,618 land)
• 2013 ag $ 688,437,700

UPDATE: Still looking into the details but the word from the county is that in 2012 a lot of "gentleman's estates" were shifted from agriculture zoning to residential. In principle that sounds reasonable - large homes on many acres of grass with a long coconut lined driveway that aren't farms at all - but I need to research to say anything more. The graph above does bear this out with Ag's sharp drop 2012-2013 matched by Residential heading up at about the same angle that Ag is down. However, the thing is that Ag rate is $1 lower than Residential, so this lowered taxes for the presumably wealthy who live on properties large enough to be zoned agriculture. 

The numbers

Here is that tax revenue, hand compiled going back to 1999, in thousands of dollars.

Fiscal year	Home-stead	Resi-dential	Vac Rental/ Apartment	Hotel/ Resort	Commer-cial	Indust-rial	Ag	Conser-vation	TOTAL
1999	$4,555	$8,189	$4,572	$7,712	$3,731	$1,423	$3,494	$805	$34,481
2000	$4,776	$8,070	$4,786	$8,404	$3,706	$1,445	$4,634	$800	$36,621
2001	$4,868	$8,261	$4,770	$9,022	$3,762	$1,441	$5,120	$815	$38,059
2002	$5,398	$9,227	$5,163	$9,224	$3,695	$1,445	$6,455	$1,127	$41,734
2003	$5,635	$10,258	$6,529	$10,283	$3,942	$1,585	$8,074	$1,223	$47,529
2004	$7,502	$12,250	$8,634	$10,682	$4,667	$1,661	$9,400	$1,262	$56,058
2005	$13,633	$15,529	$11,746	$12,234	$6,529	$2,153	$11,912	$1,502	$75,238
2006	$18,476	$19,480	$12,581	$14,097	$6,812	$2,209	$14,602	$1,764	$90,021
2007	$20,489	$21,736	$15,600	$15,321	$7,181	$2,405	$16,174	$1,805	$100,711
2008	$19,855	$22,367	$15,571	$17,198	$7,675	$2,350	$16,169	$2,326	$103,511
2009	$18,289	$21,640	$16,152	$17,578	$7,882	$2,473	$14,750	$2,021	$100,785
2010	$15,541	$19,739	$13,369	$15,383	$7,726	$2,575	$12,831	$1,796	$88,960
2011	$14,010	$18,405	$12,995	$14,947	$7,237	$2,488	$12,559	$1,749	$84,390
2012	$10,585	$20,911	$12,530	$14,945	$7,115	$2,523	$12,812	$1,677	$83,098
2013	$12,241	$30,068	$19,246	$17,741	$7,699	$2,762	$4,647	$616	$95,020
2014	$10,642	$33,737	$23,242	$23,348	$7,977	$2,785	$5,151	$509	$107,391

Kauai county historical tax rates

With all the uproar about property tax increases I was appalled to discover that it is nigh impossible to easily learn what the tax rates are and how the system works. Here is a first attempt to provide some solid data but it is necessarily the simplest first piece of the puzzle. As I gather more data I intend to write more and in time present more opinions, always attempting to base opinion on solid information.

It's important to say up front that tax rates alone do not determine taxes. Many factors, beginning with changes in valuation, and for homeowners the various exemptions and tax relief provisions, in particular classification as Homestead, Residential, or Vacation Rental, must also be consider.

However, the tax system as a whole is far too complex to grasp without extensive analysis, and it depends on many factors not available publicly (such as tax form filings) that even the most diligent and expert citizen would be unable to determine anything in full detail. The county web site provides plenty of information but it's formidable to actually figure it all out. The applications forms page lists dozens of complicated sounding documents. To learn about exemptions you have a dozen sections to cover: it's infeasible to begin to analyze how all of this impacts each individual homeowner and their taxes. Thus, I think rates are an important first step to glimpse some solid information, interpreted with the understanding that many other considerations must be taken into account to arrive at actual taxes.

I wanted to understand the historical arc of tax rates here but that information was nowhere to be found online (I am pretty sure). In time the county clerk staff began sending me the necessary documents: ordinances, bills, and resolutions, going back to 1989 and I pieced it all together from the original legal documents produced out of the county council. Mahalo to Scott at county for excellent help above and beyond!

Caveats:

• this is hand-compiled data and there may be errors
• rates were split land/building for many years - to simplify I averaged
• classifications and rules changed often so a little comparison of apples and oranges can't be avoided
• these are just rates, and the tax cap would have limited some tax increases for some properties
• overall the details are complex and vary by property, this is only a general guide

The first chart I made when I had it all compiled was eye-opening: check out the tail on the right!
Remember, this is just tax rates: to the extent that property values went up taxes went up even more. There is nothing necessarily wrong with rate increases: however a major change should be done with due diligence and I would say that citizens deserve hearing a clear and compelling reason for such an action.

As you can see above, rates have remained fairly flat until (I have to say) the current council and mayor terms when all the rates suddenly turn up steeply. Only the Homestead (owner-occupied residences, roughly) rate goes down, as well as the owner exemption increased over $100K, and still these are the people crying out loud about tax increases!

For a simple look at tax rates consider them as knobs the council dials in each year based on finance department numbers showing the property valuation totals by classification. For example, this year on Kauai there is over $5.5B residential property; at $6.05 per thousand that gives $33.7M in tax revenue to the county. The council has to turn the dials setting rates they consider to be fair such that the total tax revenue matches the budget, or any difference would be surplus or deficit.

The next chart below shows the percentage change by year by rate. Other than a curious blip where industrial rate was cut significantly for only one year, all the big increases are these past few years.

Using the homestead (owner occupied) rate as a base (100%) look at how all the rates have jumped up relatively. You can see even more dramatically that relative to Homestead all other rates are going even higher - and the home owners are still paying too much. Clearly something these past few years that we need to understand: with the taxpayer angst we are seeing a very good explanation should be given.

And here is the data: tax rates by classification 2014-1989. Finally, once again, remember that tax rates need to be interpreted within the context of the entire tax code as one important part of the system.

Fiscal Year	Home stead	Resi-dential	Vac R/ Apt	Hotel/ Resort	Com-mercial	Indust-rial	Ag	Conser-vation
2014	$3.05	$6.05	$8.85	$10.85	$8.10	$8.10	$6.75	$6.75
2013	$3.05	$5.75	$8.00	$9.00	$8.00	$8.00	$6.75	$6.75
2012	$3.05	$4.55	$7.40	$7.67	$7.40	$7.40	$5.58	$5.58
2011	$3.72	$4.10	$7.40	$7.40	$7.40	$7.40	$5.58	$5.58
2010	$3.72	$4.10	$7.40	$7.40	$7.40	$7.40	$5.58	$5.58
2009	$3.72	$4.10	$7.40	$7.40	$7.40	$7.40	$5.58	$5.58
2008	$3.72	$4.10	$7.40	$7.40	$7.40	$7.40	$5.58	$5.58
2007	$3.72	$4.10	$7.40	$7.40	$7.40	$7.40	$5.58	$5.58
2006	$3.72	$4.15	$7.45	$7.45	$7.45	$7.45	$5.63	$5.63
2005	$3.72	$4.15	$7.45	$7.45	$7.45	$7.45	$5.63	$5.63
2004	$3.72	$4.72	$8.08	$8.08	$8.08	$8.08	$5.95	$6.20
2003	$4.00	$5.00	$8.35	$8.35	$8.35	$8.35	$6.23	$6.48
2002	$4.00	$5.00	$8.35	$8.35	$8.35	$8.35	$6.23	$6.48
2001	$4.22	$5.15	$8.50	$8.50	$8.50	$8.50	$6.38	$6.63
2000	$4.42	$5.25	$8.60	$8.60	$8.60	$8.60	$6.48	$6.73
1999	$4.42	$5.25	$8.60	$8.60	$8.60	$8.60	$6.48	$6.73
1998	$3.92	$4.75	$8.10	$8.10	$8.10	$8.10	$5.98	$6.23
1997	$3.61	$4.44	$7.79	$7.79	$7.79	$7.79	$5.67	$5.92
1996	$3.61	$4.44	$7.79	$7.79	$7.79	$7.79	$5.67	$5.92
1995	$3.61	$4.44	$7.79	$7.79	$7.79	$7.79	$5.67	$5.92
1994	$3.49	$4.44	$7.79	$7.79	$5.90	$5.90	$5.67	$5.92
1993	$3.61	$4.44	$7.79	$7.79	$7.79	$7.79	$5.67	$5.92
1992	$3.61	$4.44	$7.79	$7.79	$7.79	$7.79	$5.67	$5.92
1991	$3.61	$4.44	$7.79	$7.79	$7.79	$7.79	$7.44	$7.69
1990		$4.96	$8.48	$8.48	$8.48	$8.48	$8.48	$8.48
1989		$5.71	$8.48	$8.48	$8.48	$8.48	$8.48	$8.48

Combined rates averaged when land and building rates were separate.
Combines apartment and vacation rental classifications.
No Homestead classification before 1991.