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Finance committee forwards Bill 128 to council to create a third residential property-tax tier
Summary
The Finance Committee voted 7–1 to send Bill 128 to the full Hawaii County Council with a favorable recommendation. The measure would add a residential "tier 3" for non-owner-occupied properties with taxable value above $4 million, encompassing 842 parcels and roughly $5.3 billion in net taxable value.
The Hawaii County Finance Committee voted to forward Bill 128 to the full council with a favorable recommendation after members and staff described the measure as a targeted tool to raise revenue from high-value, non-owner-occupied residential properties.
Vice Chair James Eustace, a co-sponsor, told the committee the measure creates a new residential tax classification for properties with a net taxable value exceeding $4 million without immediately changing tax rates. "This is not today we're talking at all about tax rates," Eustace said, adding the council will decide rates during the spring budget process and that the bill preserves an existing $9 million housing-and-homelessness dedication now set to expire in June 2027.
Supporters and two in-person testifiers framed the proposal as a way to protect long-term residents while asking higher contributions from out-of-area investors and luxury second-home owners. Corey Harden spoke in favor of the bill and cited UHERO research and local reporting to argue that outside investment has pushed up housing costs; Harden suggested targeted exemptions and tax-deferral options to reduce unintended harms. "Bill 128 offers a viable path toward addressing our critical housing issues," Harden said.
Tanya Yamenaka Anasazi, who identified herself with the Hawaii Tax Fairness Coalition, also urged the committee to approve the ordinance, telling members the three-tier structure focuses on "luxury homes, high-end condos, vacant residential land [and] speculative properties." She cautioned that a pending state bill could affect the county's taxing authority and encouraged the council to preserve local control.
Lisa Muir, the county's real property tax administrator, provided parcel and revenue estimates. Muir said 842 residential parcels currently exceed the $4 million threshold and that the net taxable value above $4 million for those parcels is about $5.3 billion. Using current tier-2 rates for a comparison, staff said those parcels currently contribute roughly an additional $13 million in revenue; the final figure depends on the rates the council later sets.
Councilmembers asked how the tier would interact with existing classes. Muir clarified that bona fide hotels and resorts are excluded and remain in the hotel/resort tax class, while residential properties located in resort zones could fall into the residential classification unless they qualify for a homeowner exemption. Members also discussed revenue implications from recent changes — such as a long-term rental classification that has produced significant applications — and staff said the county will refine shortfall and revenue estimates during the budget process.
The committee debated the policy's design and administrative impact, with several members saying they supported a targeted approach that minimizes pressure on homeowners and working families. One member urged a simpler approach of raising existing tier-2 rates instead of creating a new tier; others said the third tier better distinguishes very high-end properties and preserves administrative flexibility.
On a roll call, the committee recorded seven ayes and one no (Acting Chair Nava); Councilmember Connie Kleinfelder was absent. The committee's favorable recommendation sends Bill 128 to the full council for further consideration. The committee adjourned at 9:45 a.m.
