Both eminent domain and property taxes are hot topics of the moment.
Eminent domain because the recent approval by the Honolulu city council of the multibillion dollar mass transit project will require the taking of private property. Home and business owners are rightly concerned about their options if the transit system, where ever it is eventually located, will run through or near their property.
Property taxes are in the headlines because in Honolulu, property values, according to the City, rose an average of 15% since last year, and property tax bills are expected to increase accordingly. Also, in February 2007, the Hawaii Supreme Court will hear arguments in an appeal on how the counties structure their property tax systems that may have lasting impact statewide.
These two issues intersect in an obscure statute that property owners who are contemplating appealing their tax assements should know about. Generally, in eminent domain proceedings, a landowner’s testimony regarding the value of her property is admissible as evidence of the property’s fair market value under Haw. Rev. Stat. § 101-12:
In addition to rules of evidence otherwise provided by law, in all proceedings brought under this part the valuation claimed by the taxpayer shall be taken into account.
That statute also provides that if an owner disputes the county’s valuation of the property in a tax assessment appeal, the owner’s claim of value is admissible in any eminent domain action:
The valuation claimed by the taxpayer in any appeal regarding the assessment of real property tax shall be admissible in evidence as an admission of the fair market value of the real property as of the date of assessment irrespective of the fact that the assessed value from which the taxpayer appealed is adjusted to one hundred per cent fair market value
Thus, there are two competing dynamics at play. On one hand, in a tax appeal, a property owner is claiming their property has been overvalued by the government, and therefore overtaxed, because it is worth less than the government claims. In eminent domain proceedings, on the other hand, the property owner should seek to maximize the fair market value of the property, and seek to prove that it is worth more than the government claims.
What section 101-12 tells a property owner is be careful if you intend to challenge the tax assessment if you believe that your property may be subject in the near future to condemnation. Because if so, your claims that your property is worth less “can and will be used against you in a court of law.”