Opinion ID: 1348704
Heading Depth: 1
Heading Rank: 1

Heading: A. Real Property Tax Valuation

Text: Under the Revised Ordinances of Honolulu 1990 (ROH) chapter 8, article 7, [3] the Director of Finance of the City and County of Honolulu is responsible for the valuation and assessment of property for the purposes of real property taxation. [4] ROH § 8-7.1(a) provides that: The Director of Finance shall cause the fair market value of all taxable real property to be determined and annually assessed by the market data and cost approaches to value using appropriate systematic methods suitable for mass valuation of properties for taxation purposes, so selected and applied to obtain, as far as possible, uniform and equalized assessments throughout the county.... We have stated the general principles of tax valuation as follows: The `ultimate purpose of valuation, whether in eminent domain or tax ... proceedings is to arrive at a fair and realistic value of the property involved.' Our statutory scheme of real property taxation adopts this principle by identifying `fair market value' as the relevant measure of the value of property. And we have previously defined `market value' as `the value in money of any property for which that property would sell on the open market by a willing seller to a willing buyer.' In re Amfac, Inc., 65 Haw. 499, 502, 654 P.2d 363, 366 (1982) (citations omitted). We review the valuation of the Steiner property in light of these principles. The Department of Finance has established more specific guidelines for real property valuation in the Procedure and Reference Manual of the Real Property Assessment Division, Department of Finance, City and County of Honolulu ( Procedure and Reference Manual or Manual ). The Manual provides two basic methods of land valuation, the market data approach and the income approach (used for income generating properties). Procedure and Reference Manual §§ 991.00-912.00. The market data approach is described as follows: [T]his method involves obtaining all available sales data, qualifying these as being transacted at `arms-length' conditions or being `bona fide' transactions, and comparing these recently sold properties to the one being appraised, making adjustments as necessary for comparisons. Unit prices demonstrated by actual sales, either adjusted or unadjusted, provide valid estimates of market value. Adjustments for dissimilarities in the market data approach to value are made by plus or minus of dollar amount or percentages, from the comparable parcels to the subject, benchmark or typical parcel in the neighborhood. The major factors which should be considered in the adjustments include the time of sale, terms of sale, location of compared parcels, differences in physical characteristics among them, and all other factors which might have been significant so as to influence the prices paid for the properties. Procedure and Reference Manual § 911.00. Section 941.31 of the Manual directs assessors to consider three general factors affecting the value of urban and suburban residential lands: location, neighborhood characteristics and site characteristics. Site characteristics include: (1) size and shape of lot; (2) topography and soil conditions; (3) landscaping; and (4) accessibility. Another section of the Manual notes that the topography may be such that expensive excavations are required. Procedure and Reference Manual § 913.00. Under these circumstances the appraiser is instructed to note any adjustments for these conditions on the appraisal card as a percentage reduction in the value of the affected parcel. Id. In assessing shoreline properties, the most important factor of value is the quality of the shoreline itself. Procedure and Reference Manual § 941.34. Appraisers are advised to consider the amount, kind, and quality of shoreline, the quality and condition of the surf and water, the view, and the accessibility to the shore, and including the hazards or detriments because of the natural wave action. Id.