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Administration warns Bill 29 could open large tax-exemption expansion, committee postpones action
Summary
Bill 29 would allow mortgage documents to substitute for regulatory agreements for certain low-income rental tax exemptions; Budget and Fiscal Services warned it could add roughly 2,000 qualifying projects and reduce tax revenue by up to $40 million, and the committee postponed the bill for further study.
Councilmember dos Santos Tam introduced Bill 29 (2026) to permit mortgage documentation to stand in for a regulatory agreement when property owners seek the city’s rental-project real-property tax exemption. The sponsor said the bill is intended to streamline the paperwork required for projects that use a variety of financing sources and regulatory regimes.
Director Andy Kawano of the Department of Budget and Fiscal Services told the committee that BFS "strongly opposes" the mortgage-document substitute as drafted. He warned that a mortgage document generally lacks the specific, enforceable commitments in a regulatory agreement and said the department’s review suggested "there could be 2,000 more projects on this island that could qualify under the program" and that, at the high end, the change could "reduce our tax revenues by about $40,000,000." Kawano added the city’s existing program already provides a 100% exemption for projects meeting the 20% low-income-unit threshold.
Property Assessment Administrator Steve Takara and other BFS staff explained the current certification process requires regulatory agencies (HCDA, HHFDC or a city department) to provide a 15-year regulatory agreement and annual certifications (including rent rolls) that allow Real Property to verify ongoing compliance; they said a mortgage document would not provide the same assurances.
Councilmembers asked for follow-up data after the administration’s analysis, and Chair Okimoto postponed action on Bill 29 so staff and council offices can reconcile the concerns and possible refinements.
Next steps: administration data and a follow-up working session were requested before the committee schedules further action.
