Committee on Finance Meeting - February 4, 2026: Bill 128 to Create Tier 3 Residential Property Tax Class
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Committee on Finance Meeting - February 4, 2026
The Committee on Finance, chaired by Vice Chair James Eustace, met on February 4, 2026, at 9:00 a.m. in Hilo chambers. The primary agenda item was Bill 128, which proposes a new residential tier three real property tax classification for properties with a net taxable value over $4 million. The committee heard public testimony, discussed the bill, and voted to forward it to the full council with a favorable recommendation.
Consent Calendar
- Communication 23.28: Report of fund transfers authorized December 16–31, 2025, from Controller John Marbles, dated January 6, 2026. Motion to close file passed unanimously (8-0, with Councilmember Connelly Kleinfelder absent).
- Communication 574.1: First quarter report of non-capitalized donations, October 1–December 31, 2025, from Finance Director Diane Nakagawa, dated January 14, 2026. Motion to close file passed unanimously (8-0). Councilmember O'Nishi recognized his nephew Ryan Higa for a $5,000 donation to the HyPal program.
Public Comments & Testimony
- Corey Harden testified in support of Bill 128. He cited statistics from UHER: each 10% increase in home prices correlates with a 10% increase in homelessness, and Hawaii's homelessness rate is more than twice the national average. He noted that off-island investors drive high housing costs, referencing Civil Beat data showing out-of-state ownership percentages on Oahu, Maui, and Lahaina. He suggested potential mitigations (e.g., exemptions for purpose-built rentals, tax credits for rent-controlled landlords, deferrals for inherited homes) and concluded that Bill 128 is a viable path to address housing issues.
- Tanya Yamanaka Anasazian, representing the Hawaii Tax Fairness Coalition, testified in strong support. She argued the bill replaces the old two-tier system with a three-tier structure targeting high-value non-owner-occupied residential properties, shaping a fairer, more balanced tax system. She emphasized that without such changes, working people and kupuna will continue to be marginalized.
Discussion Items
Bill 128 – Real Property Tax: New Residential Tier Three Classification
- Councilmember Kagiwata (co-introducer) explained that the bill creates a third tier for properties over $4 million within the residential tax class (which excludes homeowners, affordable rentals, and long-term rentals). It does not set a tax rate; that will be determined during budget season. The existing $9 million housing and homelessness fund allocation (from tier two) is preserved, and the bill provides flexibility to address county needs like wastewater projects.
- Councilmember Eustace (co-introducer) noted that the tier helps shield residents from tax increases and shifts burden to investment properties, moderating housing price escalation. He acknowledged the $9 million housing fund expiration in June 2027.
- Property Tax Administrator Lisa Miyara and Assistant Administrator Katie Joe provided data: 842 parcels in the residential class have net taxable values over $4 million, representing approximately $5.3 billion in assessed value. The difference between the current tier two rate ($11.10) and tier one rate ($13.60) generates an additional $13 million in revenue from these parcels. Implementation is straightforward as the current system can accommodate a third tier.
- Councilmember Viegas expressed support, recalling the creation of tier two and noting that wealthy property owners' threats to leave did not materialize. She asked about implementation ease; staff confirmed no system changes are needed.
- Councilmember O'Nishi sought clarification on whether hotels and resorts are included; staff confirmed that the hotel/resort tax class excludes residential properties in resort zones, but residential units in resort areas (e.g., condos) are included if they fall into the residential class.
- Councilmember Galimba asked about the philosophical intent: whether the revenue is general or directed. Councilmember Kagiwata replied that no stipulations are in the bill; the use will be determined through the budget process. She noted existing revenue losses from the new long-term rental tax class (estimated $1.4 million based on 691 applications) and DHHL rate reductions (under $2 million), creating a potential shortfall.
- Councilmember Kimball asked about the relationship to the housing and homelessness fund: the bill maintains that tier two and tier three contributions go to that fund, up to $9 million. He also confirmed that short-term vacation rentals (whole-house) could fall into tier two or three if valued over $2 million or $4 million, respectively, but homeowners with a homeowner exemption stay in tier one. He expressed concern about adding complexity versus simply adjusting tier two rates, stating he could not support the bill as is.
- Councilmember O'Nishi reiterated that properties valued under $4 million are not affected. He questioned testimony that implied the bill protects housing markets, clarifying that the bill targets high-value investment properties, not workforce housing.
- Councilmember Eustace responded to Kimball's concern about complexity, arguing that the tier three captures the very high end (e.g., $10 million+ properties) and provides a gradient, whereas simply raising tier two rates would affect those closer to the $2 million threshold.
Key Outcomes
- Motion: To approve Bill 128 and send it to the full council with a favorable recommendation. Moved by Councilmember Kagiwata, seconded by Councilmember Eustace.
- Vote: 7 in favor (Councilmembers Galimba, Eustace, Kagiwata, Kirkowitz, O'Nishi, Viegas, and the acting chair [Inaba]? Actually the transcript shows the acting chair voted no, but the final tally is 7 in favor, 1 opposed, with Councilmember Connelly Kleinfelder absent. The roll call: Councilmember Galimba aye, Eustace aye, Kagiwata aye, Kirkowitz aye, O'Nishi aye, Viegas aye, and the acting chair (Inaba) voted no. The motion carried.
- Next Steps: The bill will be taken up by the full council. The committee adjourned at 9:45 a.m., with the next meeting (Policy Committee on Public Works and Mass Transit) scheduled for 10:30 a.m.
Meeting Transcript
Aloha, good morning. Welcome to the 28th session of the Committee on Finance. I am your vice chair and presiding officer for today, James Eustace. We are in the Hilo chambers. It is 9 a.m. We are joined by Councilmembers Kimball, Inaba, O'Nishi, Kirkowitz, and Kalgiwana. Councilmember Viegas will be joining us shortly. At the moment, we are absent with Councilmembers Kalimbo and Connelly Kleinfelder. Mr. Clerk, if you could start us off with any testifiers. Thank you so much, Chair. Just noting that we do not have any testifiers at a remote sites. We do have two here at our Hilo chamber. The first of which is Corey Harden to be followed by Tanya Yamanaka Anasazian, both testifying on Bill 128. Corey, when you're ready to begin, you can press that button at the base of the mic to turn it on, introduce yourself, and you'll have three minutes. Council members, Corey Harden in support of Bill 128 regarding property taxes. And continuing, if the county has adequate money in its coppers, it can afford to do all the things that makes a community a place where people want to buy a house or land worth over 4 million, even if they're not going to live here. It means the county can provide roads, emergency services, food treatment, drinking water, and so forth. There are some scary statistics from UHER across states. Each 10% increase in home prices correlates with a 10% increase in the rate of homelessness. Also, Hawaii's rate of homelessness is more than twice the national rate. And Hawaii is the most expensive state in the nation for housing. Off island investors seem to be driving at least partly the high cost of housing. Civil Beat found that people from out of state made up 13% of property owners on Oahu, almost one third on Maui, and more than half of the property owners in Lahaina had an out of state mailing address. So of course, some difficulties can arise, unattended consequences from higher taxes. I got some ideas from Chat GBT, so that's a place to start, not reliable, but a place to start researching. Sometimes landlords will just sell their property or not build in the first place. But you could exempt or discount purpose-built rental buildings, or you could lower rates for long-term rentals versus short-term or vacant homes. Sometimes owners will raise rents to offset the tax, but you could offer tax credits for landlords who keep rent growth below a benchmark. Sometimes people inherit a very expensive home that they didn't expect to. You could allow tax deferral until the home is sold, or have income-based caps. Sometimes people get stuck with an expensive home because of job relocation, or maybe they had to move temporarily to care for a relative elsewhere. So you could allow temporary exemptions. So in conclusion, Bill 128 offers a viable path toward addressing our critical housing issues, and there are ways of dealing with the difficulties that may arise. Thank you so much. Our next testifier is Tanya. Tanya, when you're ready to begin, you could just introduce yourself and you'll have three minutes. Aloha, good morning. And I'm testifying here in person because that's how important I think this bill is. I want to thank the introducers. I'm part of the Hawaii Tax Uh Fairness Coalition, and I strongly support Bill 128 because it continues to shape and form a tax system that's fair, it's more balanced, and it's responsible. I know how we get our money as the county. Property taxes is huge. There's also a bill out there just floating around in the state. I don't remember the number. I'm pretty sure councilwoman Kaguana knows it. Amy Prusso introduced it, and it's threatens our ability as a county to have the sole proprietorship over the county uh property taxes. This bill, though, um is really smart because it replaces the old two-tier, which is new, with a three-tier, and it targets the high-value non-owner occupied residential properties. These are the people that we need to um get more money from. We need to really work the tax system to shape the behaviors that we want so that we can have a more affordable Hawaii.
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