Opinion ID: 2518820
Heading Depth: 1
Heading Rank: 4

Heading: amendment to the charter of the county of kaua`i

Text: Shall the Kaua`i County Charter be amended by the addition of a new Article XXXI to read: ARTICLE XXXI. RESIDENT PROPERTY TAXES. Section 31.01. Resident Property Taxes. It is the policy of the County that resident taxpayers should be equitably protected when there are significantly rising real estate values and government costs. Therefore, for County residents who have owned and occupied their place of residence beginning in or before the fiscal year 1998-1999, then for the next fiscal year after the adoption of this section real property taxes with respect to such residence shall not exceed the amount of such tax assessed for the 1998-1999 fiscal year. For County residents acquiring their place of residence after the fiscal year 1998-1999 their real property taxes with respect to such residence for the next fiscal year after the adoption of this section shall not exceed the amount of tax assessed for the fiscal year the ownership and residence commences. For all such taxpayers in no fiscal year after the year in which the tax was restored to the amount in 1998-1999 or the year of acquisition, whichever is applicable, shall the percentage increase in real property tax with respect to such residence exceed the lesser of the percentage rate applicable at the commencement of such fiscal year for cost of living adjustments in retirement benefits by the Social Security Administration, or two percent (2%). Promptly following its adoption the County shall notify in writing all owners of residential property in its property tax records of the principal terms of this section. The County shall adopt such ordinances, laws, rules and regulations as are necessary to carry out and are consistent with the purpose of the foregoing policy and the terms of this section. (Capitalization and line breaks in original.) (Internal quotation marks omitted.) (Underscored and bold emphases added.) Similar to the proposed charter amendments discussed in Smallwood, the Charter Amendment can be described as consisting of roll-back and cap provisions. Indeed, the above underscored language can be described as a roll-back provision, and the above bolded language can be described as a cap provision. Guided by the rationale of the court in Smallwood, we believe the cap provision of the Charter Amendment in the instant case does not divest the county council[] of the ability to set the property tax rates. Rather, [it] would merely . . . preclude[] a particular type of enactment by the legislative body, namely[,] the power to collect property taxes above the specified cap. Id. at 1232. As such, the cap provision of the Charter Amendment operates as a limitation on the power of a legislative body to raise revenue, Smallwood, 608 A.2d at 1231, and is, therefore, proper charter material. Id. As previously indicated, the Smallwood court invalidated the roll-back provisions inasmuch as it violated Maryland Code, Tax-Property Article § 6-302(a), which mandates that the governing body of each county is to set the property tax rate for the next year. Id. at 1234. Here, the County appears to advance a similar argument that the Charter Amendment attempts to repeal certain real property tax ordinances of the Kaua`i County Code and that, therefore, the Charter Amendment is void under the RCCK. However, inasmuch as [a] basic tenet of municipal corporation law is that an ordinance which conflicts with an express provision in a charter is invalid, Fasi, 72 Haw. at 518, 823 P.2d at 744, and there is no dispute that the Charter Amendment was properly initiated and enacted, id. at 519, 823 P.2d at 744, the County's argument is without merit. Consequently, the circuit court erred in concluding that the Charter Amendment is void under the RCCK. The inquiry whether the circuit court erred in entering summary judgment in favor of the County does not end here, however, because the circuit court additionally concluded that the Charter Amendment violated the Hawai`i Constitution. 2. Whether the Charter Amendment Violated Article VIII, Section 3 of the Hawai`i Constitution The Appellants contend that the circuit court erred in concluding that the Charter Amendment violated the Hawai`i Constitution. Essentially, the Appellants maintain that the circuit court should have followed the rules of constitutional construction that mandate the examination of the unambiguous text of article VIII, section 3 of the Hawai`i Constitution. (Capitalization omitted.) Specifically, the Appellants argue: The circuit court concluded that the Hawai`i Constitution delegates the real property taxation power exclusively to county councils. Article VIII, however, does not contain the words county councils, but plainly delegates real property tax power simply to the counties as political subdivisions, leaving it up to the respective county charters how that power is exercised[.] . . . . Adding language to the [c]onstitution that is not in the text is particularly damaging. Had the framers of [a]rticle VIII intended that county councils were being delegated the exclusive authority relating the [sic] taxation of real property, it would have been a very simple matter for the people to have just said so. The circuit court wrongly relied upon a few references in a committee report to support its conclusion, but sources such as committee reports should not be examined unless there is an ambiguity in the constitutional text. (Footnote and citations omitted.) The Appellants further assert that the counties means political subdivisions, not county councils. Specifically, the Appellants claim that: The ordinary meaning of the word county is the political unit next below the State in the U.S. . . . the inhabitants of a county. The American College Dictionary 276 (1953). A dictionary roughly contemporary to the 1978 amendment of Haw. Const. art. VIII defines county as the people of a county . . . the largest territorial division for local government within a state of the U.S. Webster's New Collegiate Dictionary 258 (1980). Moreover, the Appellants assert that, [e]ven if the circuit court determined that a term in [a]rticle VIII is ambiguous, the court should have examined the term's use in other parts of the [Hawai`i] Constitution before relying upon outside sources, claiming that: [S]ections 1 and 2 of [article VIII] . . . ma[ke] clear that the term the counties refers to political subdivisions[,] not county councils. [Article VIII, § 1] states: The legislature shall create counties, and may create other political subdivisions within the State, and provide for the government thereof. Each political subdivision shall have and exercise such powers as shall be conferred under general laws. Haw. Const. art. VIII, § 1 (emphas[e]s added). [Article VIII, § 2] similarly provides: Each political subdivision shall have the power to frame and adopt a charter for its own self-government within such limits and under such procedures as may be provided by general law. . . . Charter provisions with respect to a political subdivision's executive, legislative and administrative structure and organization shall be superior to statutory provisions, subject to the authority of the legislature to enact general laws allocating and reallocating powers and functions. Haw. Const. art. VIII, § 2 (emphas[e]s added). It is plain that the term counties in [a]rticle VIII means just that: the counties are political subdivisions, not county councils because county councils do not frame and adopt a charter, the county itself does. (Emphases in original.) [23] The County, on the other hand, contends that the Charter Amendment is unconstitutional. Specifically, the County argues that: [C]ontrary to [the] Appellants' contention that the ordinary meaning of the counties refers to the people of the county, . . . the overwhelming weight of authority is that[] [a] county is a political subdivision of the state, created for the purpose of acting for the state in local matters. Bd. of Educ. of Calhoun County v. Warner, 853 So.2d 1159, 1169 (Miss. 2003). The term county is generally defined as: The largest territorial division for local government within a state, generally considered to be a political subdivision and a quasi-corporation. Every county exists as a result of a sovereign act of legislation, either constitutional or statutory, separating it from the rest of the state as an integral part of its territory and establishing it as one of the primary divisions of the state for purposes of civil administration. Black's Law Dictionary 350 (6th ed.1990) (emphasis added). The term is even defined in the dictionary sources used by [the] Appellants as a political subdivision. By most definitions, a political subdivision is [a] division of a state that exists primarily to discharge some function of local government. Id. (Some brackets in original and some added.) (Footnote omitted.) Moreover, the County asserts that, if the meaning of `counties' in [article VIII, section 3] is not entirely clear on its face, it is well-settled that extrinsic aids to interpretation may be consulted. (Citation omitted.) The County relies on, inter alia, the Committee of the Whole Report No. 7 and Standing Committee Report No. 42 in support of its position that the real property taxing power [was] delegated exclusively to the county councils. Here, resolution of the disputed issue, that is, whether the Charter Amendment violates article VIII, section 3, requires us to interpret the aforementioned constitutional provision. The fundamental principle in construing a constitutional provision is to give effect to the intention of the framers and the people adopting it. This intent is to be found in the instrument itself. When the text of a constitutional provision is not ambiguous, the court, in construing it, is not at liberty to search for its meaning beyond the instrument. However, if the text is ambiguous, extrinsic aids may be examined to determine the intent of the framers and the people adopting the proposed amendment. State ex rel. Anzai v. City & County of Honolulu, 99 Hawai`i 508, 519, 57 P.3d 433, 444 (2002) (citing State v. Kahlbaun, 64 Haw. 197, 201-02, 638 P.2d 309, 314 (1981)) (format altered). Indeed, we have acknowledged, in gleaning the intent of the framers and the people, that an examination of the debates, proceedings[,] and committee reports of the Constitutional Convention is useful. Such evidence, however, does not have binding force on this court[,] and its persuasive value depends upon the circumstances of each case. Pray v. Judicial Selection Comm'n of State, 75 Haw. 333, 343, 861 P.2d 723, 728 (1993) (internal quotation marks, brackets, and citations omitted). Moreover, a constitutional provision must be construed in connection with other provisions of the instrument, and also in the light of the circumstances under which it was adopted and the history which preceded it. Blair v. Harris, 98 Hawai`i 176, 179, 45 P.3d 798, 801 (2002) (citation omitted) (format altered). As previously indicated, article VIII, section 3 provides: The taxing power shall be reserved to the State, except so much thereof as may be delegated by the legislature to the political subdivisions, and except that all functions, powers and duties relating to the taxation of real property shall be exercised exclusively by the counties, with the exception of the county of Kalawao. The legislature shall have the power to apportion state revenues among the several political subdivisions. (Emphases added.) Generally, [a]rticle VIII of the Hawai`i Constitution (1978)[] delineates the legal status and general powers of local government,  i.e., the counties and other political subdivisions within the [s]tate. Richardson v. City & County of Honolulu, 76 Hawai`i 46, 65 n. 26, 868 P.2d 1193, 1212 n. 26 (1994) (citing Haw. Const. art. VIII, § 1) (some brackets added and some in original) (emphases added); see also Marsland v. First Hawaiian Bank, 70 Haw. 126, 132, 764 P.2d 1228, 1232 (1988) (recognizing that [a]rticle VIII of the Hawai`i State Constitution defines the relationship between the state and county governments  (emphasis added)). We have previously determined that [t]he plain language of [article VIII, section 3] clearly indicates an intent to confer exclusive authority over real property taxation to the counties. Anzai, 99 Hawai`i at 519, 57 P.3d at 444; see also Gardens at W. Maui Vacation Club v. County of Maui, 90 Hawai`i 334, 341, 978 P.2d 772, 779 (1999) (stating that Section 3 was expressly and manifestly designed to transfer to the counties broad powers of real property taxation). However, we have yet to specifically determine whether the phrase the counties, as utilized in article VIII, section 3, means the people of a county, as urged by the Appellants, or local governments or county councils, as urged by the County. The contrary authorities offered by the parties with respect to the ordinary meaning of the counties demonstrate the ambiguity created by the utilization of the phrase the counties in article VIII, section 3. Consequently, we examine the committee reports and debates of the 1978 Proceedings of the Constitutional Convention of Hawai`i to glean the intent of the framers and the people as to the meaning of the counties as utilized in article VIII, section 3. The Committee on Local Government's standing committee report on then-article VII (1968), entitled Local Government, covered then-article VII, sections 1, 2, and 3. The Committee recommend[ed] that [s]ections 1 and 2 of [a]rticle VII be retained in their present form[,] [24] reporting that: Your Committee finds that many of the local government issues attempt to define the relationship between county and State and the division of powers between the two. Presently, the State Constitution vests the State legislature with complete authority to determine what powers counties may have and exercise. The heart of the question raised by proposals to grant counties more authority is whether the grant of powers to local government through the Constitution best promotes effective service to the people, which is the common goal of State and local governments. . . . . . . . [T]he Constitution permits local government powers by the allocation method, rather than by the shared residual powers method. Under the allocated powers method, powers are granted by the State to local governments. Under the residual powers method, all powers not granted to the State by Constitution, charter or other law belong to the local governments. Stand. Comm. Rep. No. 42, in 1 Proceedings of the Constitutional Convention of Hawai`i of 1978 [hereinafter, 1 Proceedings of 1978] at 593 (1980) (emphases added). The Committee on Local Government proposed to amend article VII, section 3 by adding the following underscored language and deleting the following bracketed language: Section 3. The taxing power shall be reserved to the State except so much thereof as may be delegated by the legislature to the political subdivisions, [and the] provided, that the power to levy a tax on real property shall be exercised exclusively by the counties. The legislature shall have the power to apportion state revenues among the several political subdivisions. (Underscored emphasis and brackets in original.) Id. at 594. With respect to the proposed amendment to article VII, section 3, the Committee reported: Presently, under the [HRS], the State is responsible for assessing all real property in the State that is subject to the payment of real property taxes, and for levying and collecting all such taxes, and adjudicating taxpayer appeals. Basic policies defining real property, setting the basis for assessment, determining the manner in which rates are set, setting exemptions and describing the appeal process are the responsibility of state lawmakers. The various county councils, on the other hand, establish the specific tax rate to be applied, expressed in terms of dollars per $1,000 of assessed value of property in each county. All revenues derived from the tax, less costs incurred by the State in administering property assessments and collections, are remitted by the State to the counties for their use. . . . . Your Committee concludes that the power to levy a tax on real property should be granted to the counties for the following reasons: (1) County governments are completely responsible and accountable for the administration of their local affairs. It is felt that in order to have complete authority over their county finances that real property tax function should be given to the counties. (2) By placing total responsibility for the real property tax program with the counties, public confusion as to who or which level of government is responsible for the real property tax bite would be eliminated. (3) County administration of the real property tax is consistent with home rule. (4) There are certain program elements which do not invoke issues of statewide concern and/or which do not lend themselves to single, statewide solutions. In other words, there are different economic bases and needs of the counties which cannot be addressed by statewide real property provisions. . . . [E]ach county would be able to [levy a general excise tax of up to 25% of that levied by the State] should that county council decide an additional tax source was needed. Id. at 594-95 (emphases added). During the debates of the Committee of the Whole, Delegate Yvonne Izu proposed to amend article VII, section 3 to read: The taxing power shall be reserved to the State except so much thereof as may be delegated by the legislature to the political subdivisions; provided that all functions, powers and duties relating to the taxation of real property shall be exercised exclusively by the counties, except the county of Kalawao. The legislature shall have the power to apportion state revenues among the several political subdivisions. Comm. of the Whole Debates, in 2 Proceedings of the Constitutional Convention of Hawai`i of 1978 [hereinafter, 2 Proceedings of 1978] at 252 (1980) (internal quotation marks omitted). Delegate Izu explained that: I speak in favor of [my] amendment as I believe it will clarify the intent of the Committee on Local Government. As Standing Committee Report No. 42 states, the intent of the Committee on Local Government is to give all functions, powers and duties relating to the taxation of real property to the counties. However, subsequent to the time of decision-making of the committee and the drafting of the committee proposal, a question was raised as to whether or not the word levy is all-inclusive; specifically, the question was raised as to whether it includes the power to exempt property from all or a portion of the tax. The latest edition of Black's Law Dictionary defines the word levy in terms of taxation as: . . . the legislative function and declaration of the subject and rate or amount of taxation . . . and so forth. According to Black's, the word levy in terms of taxation is defined as its broadest function. This definition appears to concur with what I believe was the committee's intent in the use of the word levy. However, in view of the fact that this word caused some concern, I propose this amendment to make it clear that all the functions, powers and duties relating to the taxation of real property shall be exercised by the counties. This amendment also exempts the county of Kalawao from the power of taxing real property. Id. (internal quotation marks and ellipses in original). Subsequently, the following colloquy ensued among the delegates regarding the exclusion of the county of Kalawao: DELEGATE [ADELAIDE FRENCHY] DE SOTO: . . . May I ask why Kalawao was excluded? . . . . DELEGATE [ALLEN] BARR: I can answer that question for the delegate. Kalawao is administratively handled by the Department of Health. It does not have any county government of any description of its own. They would like to have some input on some things but they are not, it appears, going to get that. However, they certainly are not  the people in Kalawao  not at this time prepared to take over full functioning of a county government, including the property tax. If we were going to do that to the people in Kalawao, we would probably have no choice but to make them a part of the County of Maui. Now, I'm not sure we're unwilling to do that, but that's not the issue at this point. The point is that Kalawao at this time has no county government that can inherit these functions of property tax . . . . . . . . . . . I would like to emphasize how extremely important the counties  the county governments, the county officials and those who are close to county governments  feel that this particular issue is. This amendment will give us the language that will give us a power we feel is very, very important. . . . . . . . DELEGATE DE SOTO: Mr. Chairman, I have another question. If you would allow me to direct my question to Delegate Barr, I would like to know why we have to give [a] constitutional basis to clearly outline or exempt Kalawao when, because of their circumstances, they are already exempt. Being by nature a suspicious person, I am looking at whether or not there will be any patients there in ten years and the area would then, under this clause, be exempt from any kind of levy of taxes. . . . . DELEGATE BARR: . . . Kalawao is an unusual situation as you are aware. We don't make a great number of distinctions in Hawai`i government among the levels of municipality. We just have the one category  county. We call Kalawao a county although it has no direct governmental relationship in the way it operates with any of the other counties. So in order for the law to apply just to those counties which in fact operate as municipalities, we must say except the county of Kalawao. It's because the same word is used  county  but the reality of the area is different. Id. at 252-53 (emphases added). Delegate Helene Hale then made the following remarks in speaking in favor of Delegate Izu's amendment: . . . I do ask your support to make the complete responsibility for real property tax  the revenues of which go exclusively to the counties  the responsibility of the county government. In the interest of responsible government, the taxation power and the taxes that are derived from this power should rest squarely with the local government units. If there's any further rise in real property assessed values and in taxation, the people will know where to go to put their concerns. . . . Id. at 254 (emphases added). After some discussion by the delegates, Delegate Michael Crozier stated: Mr. Chairman, I have a question. I see we're giving the local governments the right to set their own tax. Now, what if they become derelict and didn't collect enough taxes? . . . If the county governments became lax, would the State have to come in and supply the necessary money to take care of the projects that the counties couldn't handle? Id. at 255 (emphases added). Chairman Floyd Pulham responded: I'm sure you could be correct in certain instances. However, I don't see this as a valid happening unless you have no faith in your county government at all. Id. (emphasis added). Subsequently, the delegates voted to approve Delegate Izu's amendment. Id. After approving Delegate Izu's amendment, the delegates debated on Delegate James Shon's proposal to delet[e] all amendments to the current constitutional language in [s]ection 3 of [a]rticle VII and returning it to as it was[, i.e., Haw. Const. article VII, section 3 (1968)]. Id. at 258. In speaking against Delegate Shon's proposed amendment, Delegate Riki Hokama stated: I speak in favor of transferring the entire real property tax program to the counties. In addition to being consistent with trends toward greater local self-government, the transfer proposal is an idea whose time has come. The county governments have told us that they are willing to take on the responsibility and they have presented solid arguments reinforcing their request. . . . [In addressing a] concern over the loss of exemptions[,] . . . we have not heard any talk of a county drastically amending the present types of exemptions. Practically speaking, the pressure would be on extending or raising exemptions. This does not mean that the county councils will not adjust exemptions in the context of other measures of tax relief such as a circuit breaker approach, for example. I should think we would want the county councils to take a fresh look at the real property tax. We have got to realize that the real property tax is the single most important local tax of the counties. Since exemptions affect the real property tax base and have a direct impact on local revenues, each county should have the authority to judge which exemptions are appropriate in the context of its own financial condition. The county councils, not the legislature, are better able to assess local conditions and determine whether an exemption would serve a worthwhile purpose within that affected county. . . . The legislature presently has responsibility for granting exemptions, and under this proposal the county councils would be the ones responsible. If either legislative body were to remove an exemption which could be translated into higher operating costs and higher utility bills for the taxpayer, you may be assured that the people would be well aware of when and where that action originated. Id. at 260 (emphases added). In speaking in favor of Delegate Shon's proposed amendment, Delegate Yoshio Kojima stated: I simply have more confidence in the state government in levying taxes than in the county governments.  Id. at 265 (emphasis added). In speaking against Delegate Shon's proposed amendment, Delegate Leon Sterling stated: In our county, the County of Hawai`i, it is the county council that has to face the daily problems. It is the county council that gets all the phone calls and complaints. It is the county council that has to appear before the public in public hearings and other hearings that are held to explain certain positions, or why they can't get certain things, or why other things have to be placed on priorities. He, the councilman, is in daily contact  he or she  with his constituents. He can't say, I can't answer that until the next legislature. He's the one who must make the decisions every day. I think this is what we mean when we speak of home rule. Again, like everyone else, we have our checks and balances. He has to run for office  he or she has to run for office again. He's committed to do the best he can for his people. But I think we're losing sight of the implementation of any program, that it is the elected person who must answer. . . . Id. (emphases added). The delegates ultimately voted to reject Delegate Shon's proposed amendment. Id. at 268. Subsequent to the debate, the Committee of the Whole recommended to amend article VII, section 3 by adding the following underscored language and deleting the following bracketed language that was earlier recommended by the Committee on Local Government: The taxing power shall be reserved to the State except so much thereof as may be delegated by the legislature to the political subdivisions [provided, that the power to levy a tax on]; except that all functions, powers and duties relating to the taxation of real property shall be exercised exclusively by the counties, [except] with the exception of the county of Kalawao. The legislature shall have the power to apportion state revenues among the several political subdivisions. Comm. of the Whole Report No. 7, in 1 Proceedings of 1978 at 1008 (internal quotation marks omitted) (underscored emphases and brackets in original). The Committee of the Whole reported: Your Committee changed this amendment to include the phrase all functions, powers and duties relating to the taxation of real property in order to clarify the standing committee's intent to grant all taxing powers relating to real property to the counties, except Kalawao. There was some question under the earlier language as to whether or not the counties would have the power to set exemptions. Although the mover of the amendment[, i.e., Delegate Izu,] explained that the power to levy did include the lesser power of setting exemptions, this amendment was adopted as having the better language. Your Committee of the Whole exempted Kalawao because the members felt that at this point Kalawao had no county government that could inherit these powers but that possibly in the future there would be a governmental organization for Kalawao, at which point it could assume its proper role. It is merely labelled [sic] a county today although in reality it does not rise to the level of a county. Your Committee of the Whole defeated several other amendments to this section of taxation and finance. . . . Your Committee rejected an amendment to return this section to its original language which rests all taxing powers with the State[, i.e., Delegate Shon's proposed amendment]. Some members argued that this section should not be capriciously tampered with in light of the social policies already set forth by the State through its enactment of exemptions. Other members pointed out that the trend is toward more home rule and that the county governments want to take on more responsibility. That branch of government that is responsible for running certain affairs should have the responsibility and right to collect revenues. It is anticipated that county councils, with their daily contact with constituents, will be more responsive. . . . Id. at 1008-09 (emphases added). As previously indicated, article VII, section 3 was renumbered [to article VIII, section 3] and amended to include [the] provision vesting exclusive taxation authority over real property in the counties[] following the 1978 Constitutional Convention. Anzai, 99 Hawai`i at 510, 57 P.3d at 435. Based on our reading of article VIII, section 3, the debates of the 1978 Constitutional Convention pertaining to article VIII, section 3, and the Standing Committee's and Committee of the Whole's reports, we conclude that the counties, as referred to in article VIII, section 3, clearly means county or local governments, i.e., county councils. Such a conclusion comports with our prior decisions that have generally recognized that article VIII of the Hawai`i Constitution delineates the general powers of local government,  i.e., the counties and other political subdivisions within the state. Richardson, 76 Hawai`i at 65 n. 26, 868 P.2d at 1212 n. 26; see also Marsland, 70 Haw. at 132, 764 P.2d at 1232. Anticipating that we might so conclude, the Appellants finally argue that, even if the phrase the counties means county councils, the enactment history of article VIII, section 3 does not indicate that the `broad' delegation of the power to the county councils was intended to preclude the people of the counties also exercising the power. (Emphasis added.) Moreover, the Appellants also appear to argue that, because the real property taxation power was delegated to the county governments and the people of Kaua`i are the county government, the Charter Amendment is constitutional. The Appellants, however, do not point to anything in the debates of the 1978 Constitutional Convention pertaining to article VIII, section 3 and the Standing Committee's and Committee of the Whole's reports that support their position that the people of the counties somehow share the functions, powers, and duties relating to real property taxation with the county or local governments, i.e., the county councils. Additionally, inasmuch as the delegates expressly recognized that the county of Kalawao has no county government that can inherit [the] functions of property tax and that it has no direct governmental relationship in the way it operates with any of the other counties, it clearly follows that the delegates did not intend that the phrase county governments equates to the people of the counties. Thus, because the Charter Amendment usurps the county government's/county council's functions, powers and duties relating to the taxation of real property, we hold that the Charter Amendment is unconstitutional pursuant to article VIII, section 3 of the Hawai`i Constitution. Accordingly, we hold that the circuit court not err in granting summary judgment in favor of the County on the basis that the Charter Amendment violated article VIII, section 3 of the Hawai`i Constitution.