In Re: The Tax Appeal of Schuyler E. Cole and Marilyn J. Cole v. City and County of Honolulu. S.Ct. Opinion, filed 02/12/2024 [ada], 154 Haw. 28.

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Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
15-NOV-2024
02:17 PM
Dkt. 80 OP

IN THE INTERMEDIATE COURT OF APPEALS

OF THE STATE OF HAWAI#I

–––O0O–––

NO. CAAP-XX-XXXXXXX

IN THE MATTER OF THE TAX APPEAL OF
SCHUYLER E. COLE and MARILYN J. COLE,
Appellants-Appellants
(CASE NOS. 1TX151000243, 1TX161000012,
1TX161000017, 1TX161000018, 1TX161000019)

AND

IN THE MATTER OF THE TAX APPEAL OF
THOMAS J. O'KEEFE, Trustee of the Thomas J. O'Keefe Trust
created under the Helen Geymann O'Keefe Revocable Trust
established under Declaration of Trust dated May 12, 1996,
and
THOMAS J. O'KEEFE, Trustee of the Thomas J. O'Keefe
Family Trust established under Declaration of Trust
dated February 10, 1981, as amended,
Appellants-Appellants
(CASE NO. 1TX161000011)

AND

IN THE MATTER OF THE TAX APPEAL OF
DEAN L. CASH and ELIZA L. CASH,
Co-Trustees of the Kalakane Trust dated September 3, 2011,
Appellants-Appellants
(CASE NO. 1TX161000028)

AND

IN THE MATTER OF THE TAX APPEAL OF
RANDOLPH G. MOORE, Trustee under that certain unrecorded
Revocable Living Trust Agreement dated June 4, 1981,
Appellant-Appellant
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(CASE NO. 1TX161000034)

AND

IN THE MATTER OF THE TAX APPEAL OF
NORMAN MARCK and LINDA B. LICHTER, Trustees of the Lichter Marck
Family Trust under unrecorded Declaration of Trust dated
March 15, 1997,
Appellants-Appellants
(CASE NO. 1TX161000026)

AND

IN THE MATTER OF THE TAX APPEAL OF
HENRY JOSEPH MATSON and PAULETTE BARRETT-MATSON,
Appellants-Appellants
(CASE NOS. 1TX161000015 & 1TX161000016)

AND

IN THE MATTER OF THE TAX APPEAL OF
MICHAEL DAVID HONG and GERIANN YUN LIN HONG,
Appellants-Appellants
(CASE NO. 1TX161000268)

AND

IN THE MATTER OF THE TAX APPEAL OF
MICHAEL DAVID HONG, Trustee of the Michael David
Hong Revocable Living Trust dated April 27, 2011, and
GERIANN YUN LIN HONG, Trustee of the Geriann Yun Lin
Hong Revocable Living Trust dated April 27, 2011,
Appellants-Appellants
(CASE NO. 1TX161000269)

AND

IN THE MATTER OF THE TAX APPEAL OF
RAYMOND J. SUPPA, Trustee under that certain
unrecorded Trust Agreement dated October 18, 2004,
Designated as the Raymond J. Suppa 2004 Trust,
Appellant-Appellant
(CASE NO. 1TX161000024)

APPEALS FROM THE TAX APPEAL COURT
OF THE STATE OF HAWAI#I

NOVEMBER 15, 2024

HIRAOKA, PRESIDING JUDGE, AND WADSWORTH AND McCULLEN, JJ.

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OPINION OF THE COURT BY WADSWORTH, J.

In 2014, Appellee-Appellee City and County of Honolulu
(City) created a new property tax classification under which
residential properties that are valued over $1 million and do not
have a home exemption (because they are used for purposes other
than an owner's primary residence) are classified as "Residential
A" and can be taxed at a higher rate than other residential
properties that do not qualify for the new classification.
Appellants-Appellants Schuyler E. Cole and Marilyn J. Cole
(together, the Coles), as well as other taxpayers, contested the
City's classification of properties they owned as Residential A
and appealed their property tax assessments to the Tax Appeal
Court. The cases were consolidated, and following briefing and a
series of hearings, the Tax Appeal Court entered summary judgment
in favor of the City.
The Coles, joined by thirteen self-represented taxpayer
appellants1/ (collectively, Appellants), now appeal from the Tax
Court's July 17, 2017 dispositive order and judgment, namely:
(1) the "Order: (1) Vacating Order Granting Motions
for Summary Judgment Filed December 6, 2016; (2)
Denying Taxpayer-Appellants' Motions for Summary
Judgment; and (3) Granting Summary Judgment To
[the City] Against Taxpayer-Appellants in

1/
We refer to these thirteen appellants collectively as the "Self-
represented Appellants." They are: (1) Thomas J. O'Keefe, as Trustee of the
Thomas J. O'Keefe Trust created under the Helen Geymann O'Keefe Revocable
Trust established under Declaration of Trust dated May 12, 1996; (2) Thomas J.
O'Keefe, as Trustee of the Thomas J. O'Keefe Family Trust established under
the Declaration of Trust dated February 10, 1981, as amended; (3) Dean L.
Cash, as Co-Trustee of the Kalakane Trust dated September 3, 2011; (4) Eliza
L. Cash, as Co-Trustee of the Kalakane Trust dated September 3, 2011; (5)
Randolph G. Moore, as Trustee under that certain unrecorded Revocable Living
Trust Agreement dated June 4, 1981; (6) Norman Marck, as Trustee of the
Lichter Marck Family Trust under unrecorded Declaration of Trust dated
March 15, 1997; (7) Linda B. Lichter, as Trustee of the Lichter Marck Family
Trust under unrecorded Declaration of Trust dated March 15, 1997; (8) Henry
Joseph Matson; (9) Paulette Barrett-Matson; (10) Geriann Yun Lin Hong; (11)
Geriann Yun Lin Hong, as Trustee of the Michael David Hong Revocable Living
Trust dated April 27, 2011; (12) Geriann Yun Lin Hong, as Trustee of the
Geriann Yun Lin Hong Revocable Living Trust dated April 27, 2011; and (13)
Raymond J. Suppa, as Trustee under that certain unrecorded Trust Agreement
dated October 18, 2004, Designated as the Raymond J. Suppa 2004 Trust.

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Consolidated Cases, in Case No. 1TX 16-1-0012"
(Order); and
(2) the Final Judgment (Judgment).
On appeal, the Coles contend2/ that the creation of the
Residential A property tax classification based on factors other
than "use," and the assignment of residentially zoned properties
to that classification, resulted in assessments that violate the
City's own code, specifically, Revised Ordinances of Honolulu
(ROH) § 8-7.1. The Coles also contend that the Residential A
property tax classification violates the Equal Protection Clauses
of the Hawai#i and U.S. Constitutions.
We hold that the Tax Appeal Court did not err in
granting summary judgment in favor of the City on Appellants'
claim that the Residential A real property tax classification
violates ROH § 8-7.1 (1990).3/ ROH § 8-7.1(c)(1) does not require
the City to create real property classifications based solely on
use. Similarly, ROH § 8-7.1(c)(2) does not require the City to
assign real property parcels to a particular tax classification
based solely on use and, in any event, ROH § 8-7.1(c)(1)
expressly excepts parcels that qualify as Residential A from
being considered based solely on use. There is no conflict
between the Residential A classification and the other

2/
The Coles' opening brief was filed on behalf of themselves. We
therefore refer to the points of error and arguments presented in that brief
as those of the Coles'.
We recognize that the Self-represented Appellants joined the
Coles' notice of appeal, which included a stipulated "request" for an order:
(i) consolidating Appellants' cases for purposes of appeal; and (ii)
"designating Case No[]. 1TX 15-1-0243 as the lead case on appeal, and holding
that all motions, briefs, and other documents filed in this appeal by the
Coles, shall thereupon be deemed filed in each and all of the Consolidated
Appellate Cases, and any settlement entered by the Coles, or order,
disposition, or judgment entered by this Court, shall be binding upon all the
Consolidated Appellate Cases." No separate motion was filed pursuant to
Hawai#i Rules of Appellate Procedure (HRAP) Rules 3(b) and 37. In any event,
no order of consolidation is necessary in this appeal, where Appellants filed
a joint notice of appeal, creating a single, joint appeal. See HRAP Rule
3(b). This disposition will bind all parties to this appeal.
3/
On November 18, 2022, the Revised Ordinances of Honolulu 2021 took
effect. Ordinance 22-21; see https://www8.honolulu.gov/ocs/revised-ordinances
-of-honolulu. Unless otherwise noted, the ROH sections quoted and cited in
this opinion are from the Revised Ordinances of Honolulu 1990, as amended,
which were in effect at the time of the tax assessments that were appealed to
the Tax Appeal Court.

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subsections of ROH § 8-7.1.
We further hold that the Tax Appeal Court did not err
in granting summary judgment in favor of the City on Appellants'
claim that the Residential A real property tax classification
violates the Equal Protection Clauses of the Hawai#i and U.S.
Constitutions. The challenged classification involves neither a
fundamental right nor a "suspect" classification. Appellants
have not shown they are the object of invidious discrimination.
Their equal protection challenge is thus subject to rational
basis review. On this record, we conclude that the City had
legitimate policy purposes rationally related to the creation of
the Residential A classification, including encouraging local
neighborhood preservation, continuity and stability.
We therefore affirm the Tax Appeal Court's summary
judgment for the City in the consolidated cases.

I. Background

ROH § 8-7.1. sets forth the real property
classifications in the City and County of Honolulu and how real
property is classified and valued for real property tax purposes.
Effective July 1st of the 2014 tax year, ROH § 8-7.1 was amended
to include a Residential A tax class. Specifically, ROH § 8-
7.1(c)(1) was amended as follows (deleted material is bracketed;
new material is underscored):

[Land] Real property shall be classified, upon consideration
of its highest and best use, into the following general
classes, unless it qualifies for a different class as
defined in this section.

(A) Residential;
(B) Hotel and resort;
(C) Commercial;

(D) Industrial;
(E) Agricultural;

(F) Preservation;
(G) Public service; [and]

(H) Vacant agricultural[.]; and
(I) Residential A.

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City & Cnty. of Honolulu, Haw., Ordinance No. 13-33 (Sept. 26,
2013).
A new subsection (i) was also added to ROH § 8-7.1. It
stated:

"Residential A" shall mean a parcel, or portion thereof,
which:
(1) Is improved with no more than two single family
dwelling units; and

(A) Has an assessed value of $1,000,000 or more;
(B) Does not have a home exemption; and
(C) Is zoned R-3.5, R-5, R-7.5, R-10, or R-20 or
is dedicated for residential use;
(2) Is vacant land zoned R-3.5, R-5, R-7.5, R-10, or R-20
and has an assessed value of $1,000,000 or more; or

(3) Is a condominium unit with an assessed valuation of
$1,000,000 or more and does not have a home exemption.
Residential A excludes any parcel, or portion thereof,
improved with military housing located on or outside of a
military base.

City & Cnty. of Honolulu, Haw., Ordinance Nos. 13-33 and 13-41
(Dec. 20, 2013).
On May 8, 2015, the Coles appealed to the Tax Appeal
Court pursuant to Hawaii Revised Statutes (HRS) § 232-17 (Supp.
2014). Their appeal challenged the Residential A classification
in the 2015 real property tax assessment of certain real property
they owned.
In 2016, the Coles, along with Self-represented
Appellant Thomas J. O'Keefe (O'Keefe4/) and other taxpayers, filed
a total of forty tax appeals to challenge the Residential A
classification of their properties in the 2016 notices of
assessment. Thereafter, the Coles and O'Keefe filed motions for
summary judgment (MSJs) in their tax appeal case numbers
1TX161000012 and 1TX161000011, respectively. On July 15, 2016,
the Tax Appeal Court issued an order (1) consolidating the Coles'
2015 appeal with the forty 2016 appeals that similarly challenged

4/
O'Keefe, who was represented by counsel in the Tax Appeal Court,
filed his appeal in two capacities. See supra note 1.

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the legality and constitutionality of the Residential A
classification, and (2) designating the Coles' 2015 appeal as the
lead case. On July 29 and October 3, 2016, respectively, all of
the taxpayers in the consolidated cases filed substantive
joinders to the MSJs filed in case numbers 1TX161000012 and
1TX161000011.
In their MSJs, the Coles and O'Keefe did not dispute
that their respective properties were zoned residential, had an
assessed value of $1,000,000 or more, did not have a home
exemption, and were classified as Residential A. They contended
that the City's classification of their properties as Residential
A violated: (1) the ROH, by "classif[ying] real property based
on value as opposed to use"; (2) the Commerce Clause of the U.S.
Constitution; (3) the Equal Protection Clauses of the Hawai#i and
U.S. Constitutions; and (4) the Privileges and Immunities Clause
of the U.S. Constitution.
The City opposed the MSJs, arguing that the Residential
A classification was neither illegal nor unconstitutional.
Following a hearing on October 17, 2016, the Tax Appeal
Court orally granted the MSJs. On October 28, 2016, the City
filed a motion for a continued hearing to present additional
arguments regarding the MSJs. On November 21, 2016, the Tax
Appeal Court heard and granted the City's motion and continued
the hearing to December 22, 2016. Nevertheless, on December 6,
2016, the Tax Appeal Court entered a written order granting the
MSJs and the substantive joinders.
On December 22 and 23, 2016, the Tax Appeal Court heard
additional arguments regarding the MSJs. Following the arguments
of counsel at the December 23, 2016 hearing, the court vacated
its earlier order granting the MSJs. Although the City had not
filed its own motion for summary judgment, the court indicated
that it could grant summary judgment to the City without further
motions or briefing pursuant to Hawai#i Rules of Civil Procedure
Rule 56. Counsel for the Coles and O'Keefe agreed to this
procedure, and the court orally entered summary judgment in favor
of the City and against the taxpayers.

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On July 17, 2017, the Tax Appeal Court entered separate
written orders on each of the MSJs, resolving all claims in favor
of the City. The Judgment was also entered on July 17, 2017.
Thereafter, the Coles filed a timely motion for reconsideration,5/
the City opposed the motion, and the Coles replied.
On December 9, 2022, the Tax Appeal Court issued an
order denying the motion for reconsideration, and Appellants
filed this appeal. The Hawai#i Supreme Court granted the City's
application for transfer to determine jurisdiction to hear the
appeal. On February 12, 2024, the supreme court ruled that this
court has jurisdiction over the appeal and remanded it to us for
further proceedings. See In re Cole v. City & Cnty. of Honolulu,
154 Hawai#i 28, 32, 543 P.3d 460, 464 (2024).

II. Points of Error

The Coles raise four points of error on appeal. In
their first three points, they contend that the Tax Appeal Court
erred in granting the City summary judgment, "as to the legality
of the City's assignment of the subject real properties to the
Residential A general class, because": (1) "general classes of
real property must be classified pursuant to use-based factors to
ensure uniformity and equalization of assessments, and the
Residential A general class is defined by non-use-based factors,
in violation of ROH § 8-7.1(a)"; (2) "assignment of residentially
zoned property to the Residential A general class results in
assessments that are not uniform or equalized, in violation of
ROH § 8-7.1(a)"; and (3) "the non-use-base[d] factors under the
definition of Residential A in ROH § 8[-7.1](i) should not be
considered in determining the highest and best use of real
property for purposes of assigning the same to a general class of
real property; to wit, that the value of the real property and
the absence of a home exemption thereon are not proper factors
for considerations under ROH § 8-7.1(c)(2) in determining the

5/
It appears that counsel for the Coles filed the motion for
reconsideration on behalf of the Coles and all of "the taxpayer-appellants
remaining in the consolidated Tax Appeal . . . ."

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highest and best use of such real property."
In their fourth point of error, the Coles contend that
the Tax Appeal Court "erred in granting the City summary
judgment, as to the constitutionality of the Residential A
general class, on the premise that the City had a rational basis
for such classification . . . , rendering the class
unconstitutional under the Equal Protection clause of the Hawaii
and federal Constitutions."

III. Standards of Review

A. Summary Judgment

"This court reviews the grant or denial of summary
judgment de novo." Priceline.com, Inc. v. Dir. of Taxation, 144
Hawai#i 72, 80, 436 P.3d 1155, 1163 (2019) (citing
Travelocity.com, L.P. v. Dir. of Taxation, 135 Hawai#i 88, 96–97,
346 P.3d 157, 165–66 (2015)).
"Moreover, it is well settled that, in reviewing the
decision and findings of the Tax Appeal Court, a presumption
arises favoring its actions which should not be overturned
without good and sufficient reason. The appellant has the burden
of showing that the decision of the Tax Appeal Court was clearly
erroneous. Inasmuch as the facts here are undisputed and the
sole question is one of law, we review the decision of the Tax
Appeal Court under the right/wrong standard." West Maui Resort
Partners LP v. Cnty. of Maui, 154 Hawai#i 121, 131, 547 P.3d 454,
464 (2024) (ellipsis omitted) (quoting Kamikawa v. Lynden Air
Freight, Inc., 89 Hawai#i 51, 54, 968 P.2d 653, 656 (1998)).

B. Ordinance Interpretation

"When interpreting a municipal ordinance, we apply the
same rules of construction that we apply to statutes." Id.
(quoting Ocean Resort Villas Vacation Owners Ass'n v. Cnty. of
Maui, 147 Hawai#i 544, 553, 465 P.3d 991, 1000 (2020)).

Statutory interpretation is a question of law reviewable de
novo. This court's statutory construction is guided by
established rules:

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First, the fundamental starting point for statutory
interpretation is the language of the statute itself.
Second, where the statutory language is plain and
unambiguous, our sole duty is to give effect to its
plain and obvious meaning. Third, implicit in the
task of statutory construction is our foremost
obligation to ascertain and give effect to the
intention of the legislature, which is to be obtained
primarily from the language contained in the statute
itself. Fourth, when there is doubt, doubleness of
meaning, or indistinctiveness or uncertainty of an
expression used in a statute, an ambiguity exists.

Id. (quoting Ocean Resort Villas, 147 Hawai#i at 552-53, 465 P.3d
at 999-1000).

C. Constitutional Law

"We answer questions of constitutional law by
exercising our own independent constitutional judgment based on
the facts of the case. Thus, we review questions of
constitutional law under the right/wrong standard." Id. (quoting
Gardens at W. Maui Vacation Club v. Cnty. of Maui, 90 Hawai#i
334, 339, 978 P.2d 772, 777 (1999)).

IV. Discussion

A. The Residential A Classification Does Not Violate ROH § 8-7.1

The Coles' first three points of error overlap. All
are based on the contention that for ad valorem tax6/ purposes,
real property must be "classified" and "assigned" under ROH § 8-
7.1(c)(1) and (2), respectively, according to its "highest and
best use." This use-based requirement, according to the Coles,
ensures that real property within the county is assessed
"uniformly and equally," pursuant to the language of ROH § 8-
7.1(a). The Coles argue in their first two points of error that
the creation of the Residential A general class based on "non-
use-based factors," and the assignment of residentially zoned
properties to that class, result in assessments that are not
"uniform and equalized." Relatedly, the Coles argue in their
third point of error that the "non-use-based factors" that define

6/
An ad valorem real property tax is a tax based on the value of the
property.

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the Residential A general class, i.e., the value of the property
and the absence of a home exemption on the property, are not
proper considerations for determining a property's highest and
best use for purposes of assigning the property to a general
class under ROH § 8-7.1(c)(2).
The City rejects the Coles' contention that real
property must be classified pursuant to "use-based factors,"
describing it as "vastly different from the actual language in
ROH § 8-7.1(c)(1) and (2)." The City argues that these ROH
subsections "do not mandate 'use-based factors' in classifying
real property[.]"
ROH § 8-7.1 sets forth the manner by which real
property must be valued and classified for real property tax
purposes. Specifically, ROH § 8-7.1(a) identifies the appraisal
methods by which real property is valued by the City:

(a) The director of budget and fiscal services 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 real
property for ad valorem taxation purposes, so selected
and applied to obtain, as far as possible, uniform and
equalized assessments throughout the county.

In construing the operative language of ROH § 8-7.1, the Hawai#i
Supreme Court has stated: "ROH § 8-7.1(a) is clear and
unambiguous regarding the approaches to valuation that the City
must follow to accomplish its mission of assessing real property
on a 'mass valuation' basis." Weinberg v. City & Cnty. of
Honolulu, 82 Hawai#i 317, 322, 922 P.2d 371, 376 (1996).
ROH § 8-7.1(c) sets forth the manner by which real
property is classified into, or assigned to, one of the nine
general classes identified in subsection 8-7.1(c)(1). ROH
§ 8-7.1(c)(1) states in relevant part: "Real property shall be
classified, upon consideration of its highest and best use, into
the following general classes, unless it qualifies for a
different class as defined in this section[.]" (Emphasis added.)
Contrary to the Coles' argument, the plain language of
ROH § 8-7.1(c)(1) does not require the City to create real

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property classifications based solely on highest and best use –
or "use-based factors" more generally. ROH § 8-7.1(c)(1)
requires only that the City consider real property use when
classifying real property parcels into a particular general class
(or classification), and even that requirement is subject to
exception where the parcel "qualifies for a different class" as
defined in section 8-7.1.7/ See West Maui Resort Partners, 154
Hawai#i at 136, 547 P.3d at 469 (2024) (concluding that Maui
County Code § 3.48.305, which states, "real property must be
classified, upon consideration of its highest and best use, into
the following general classes[,]" did not require the County to
consider highest and best use when creating classifications);
Webster's Encyclopedic Unabridged Dictionary 2080 (1996 ed.)
(defining "unless" to mean "except under the circumstances
that").
"Residential A," which is defined in ROH § 8-7.1(i), is
a "different class" from "Residential." As relevant here, ROH §
8-7.1(i) defines "Residential A" as a parcel that "[i]s improved
with no more than two single family dwelling units; and (A) [h]as
an assessed value of $1,000,000 or more; (B) [d]oes not have a
home exemption; and (C) [i]s zoned R-3.5, R-5, R-7.5, R-10, or R-
20 or is dedicated for residential use[.]" (Formatting altered.)
Accordingly, ROH § 8-7.1(c)(1) expressly excepts parcels that
qualify as Residential A from being considered based solely on
highest and best use. Parcels that meet the Residential A
definition in ROH § 8-7.1(i) are classified into the Residential
A classification.8/

7/
In other words, ROH § 8-7.1(c)(1) says nothing about whether the
City must consider use when creating general classes of real property in the
first instance. Here, the City properly considered several factors in
creating the Residential A general class. See infra section IV.B.
8/
Similarly, ROH 8-7.1(c)(5) states a definition of "Vacant
agricultural" that differentiates it from the "Agricultural" classification.
A parcel "which would otherwise be classified [A]gricultural by the director
upon major consideration of the districting established by the city in its
general plan and zoning ordinance and of such other factors which influence
highest and best use," is classified as "Vacant agricultural" pursuant to ROH
8-7.1(c)(1) and (5) if the parcel has no residential buildings and is not
dedicated for agricultural purposes.

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The Coles argue that ROH § 8-7.1(c)(2) "requires the
City to specify what general class a specific parcel of real
property belongs, based on the highest and best use of such
property." We disagree.
ROH § 8-7.1(c)(2) states:

In assigning real property to one of the general classes,
the director shall give major consideration to the
districting established by the city in its general plan and
zoning ordinance, and such other factors which influence
highest and best use.

Notwithstanding the city's zoning district classification,
the director shall assign to the agricultural class any real
property classified as tree farm property under HRS Chapter
186.

(Emphases added.) Like ROH § 8-7.1(c)(1), the plain language of
ROH § 8-7.1(c)(2) does not require the City to assign real
property parcels to a particular tax classification based solely
on use-based factors. In any event, ROH § 8-7.1(c)(1) expressly
excepts parcels that qualify as Residential A from being
considered based solely on such factors. See supra. When read
in pari materia with ROH § 8-7.1(c)(1), subsection (c)(2) does
not change our analysis.9/
Accordingly, we reject the Coles' contention that the
creation of the Residential A general class based on "non-use-
based factors," and the assignment of residentially zoned
properties to that class, result in assessments that violate ROH
§ 8-7.1. We similarly reject the Coles' contention that the
factors set forth in ROH § 8-7.1(i) for assigning properties to
the Residential A general class violate ROH § 8-7.1(c).
We thus conclude that the Tax Appeal Court did not err
in granting summary judgment in favor of the City on Appellants'

9/
Equally unpersuasive is the Coles' effort to distinguish the
meaning of the words "classified" and "assigned" as used in ROH § 8-7.1(c)(1)
and (2), respectively. ROH § 8-7.1(c)(1) states that real property must be
"classified . . . into the following general classes . . . ." (Emphasis
added.) ROH § 8-7.1(c)(3) similarly states that condominium units must be
"classified . . . into one of the general classes . . . ." (Emphasis added.)
ROH § 8-7.1(c)(2) refers to "assigning real property to one of the general
classes[.]" Any difference in meaning of the phrases "classified into" and
"assigned to" as used in this context is immaterial for purposes of
determining whether the City was required to perform a use-based analysis
under ROH § 8-7.1(c)(1) or (2).

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claim that the Residential A real property tax classification
violates ROH § 8-7.1.

B. The Residential A Classification Does Not Violate the Equal
Protection Clauses of the Hawai#i and U.S. Constitutions

In their fourth point of error, the Coles contend that
the Tax Appeal Court erred in granting summary judgment in favor
of the City on their claim that the Residential A real property
tax classification violates the Equal Protection Clauses of the
Hawai#i and U.S. Constitutions. The Coles argue that "The
Residential A general class violates the equal protection clauses
. . . because it is palpably arbitrary, on the premise that the
differences relied upon to establish the class bear no relation
to the purpose of the Residential A tax, which is to benefit all
at the expense of a few."
The City argues in response that the Coles' equal
protection argument fails because "there is a rational basis for
the Residential A tax class under the U.S. and Hawai#i
Constitutions[,]" namely that of local neighborhood preservation,
continuity, and stability.
Addressing a similar argument in West Maui Resort
Partners, the supreme court reiterated the applicable
constitutional standard:

"In analyzing alleged equal protection violations,
classifications that are neither suspect nor quasi-suspect
are subject to the rational basis test." Del Rio v. Crake,
87 Hawai#i 297, 304, 955 P.2d 90, 97 (1998) (internal
quotations omitted).

In analyzing tax classifications under the equal
protection clause, this court has stated that "where
discrimination is of a 'non-suspect' or 'non-
invidious' variety, such discrimination is not
unconstitutional if there is any rational basis for
such classification. Such discrimination is only a
violation of equal protection if it is totally
arbitrary or capricious." In re Pacific Marine &
Supply Co., Ltd., 55 Haw. 572, 581, 524 P.2d 890, 896
(1974). Under this "rational basis test," it is the
court's function "only to seek to adduce any state of
facts that can reasonably sustain the classification
statute challenged." Id. at 582, 524 P.2d at 896.
"If the classification statute is arguably tailored to
serve the state policy, it is not arbitrary or
capricious, and hence is constitutional under the
equal protection clauses."

Gardens, 90 Hawai#i at 342, 978 P.2d at 780 . . . .

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154 Hawai#i at 139, 547 P.3d at 472 (original ellipses omitted).
This case, like West Maui Resort Partners, involves
neither a fundamental constitutional right nor a "suspect"
classification. See id. at 140, 547 P.3d at 473. Appellants
have not shown that they are the object of invidious
discrimination. See id. ("Appellants offer no evidence of the
County's animus or invidious intent to discriminate against
either time share owners or nonresidents."); see also Nachtwey v.
Doi, 59 Haw. 430, 434, 583 P.2d 955, 958 (1978) ("a state law
invidiously discriminates when it creates a suspect
classification or infringes upon a fundamental constitutional
right and the state fails to show that the law is necessary to
promote a compelling state interest" (footnotes omitted)). We
therefore review the challenged tax classification under the
rational basis standard. See West Maui Resort Partners, 154
Hawai#i at 139-40, 547 P.3d at 472-73 (citing Gardens, 90 Hawai#i
at 342, 978 P.2d at 780; Pac. Marine, 55 Haw. at 580-81, 524 P.2d
at 896).
In West Maui Resort Partners, the supreme court
emphasized the deferential nature of rational basis review in
analyzing tax classifications. See 154 Hawai#i at 140-41, 547
P.3d at 473-74. Here, the City considered several legitimate
policy purposes that were reasonably related to the creation of
the Residential A tax classification. The rationale for the
creation of the classification is stated in the September 10,
2013 written testimony by the Department of Budget and Fiscal
Services (DBFS), the author of the bill, before Ordinance 13-33
was enacted:

The City has a legitimate interest in local
neighborhood preservation, continuity and stability.
Creating this new residential A class will inhibit
displacement of lower income families or aging-in-place
families or established, older neighborhoods by the forces
of gentrification, such as by proliferation of expensive
vacation homes for the use by our visitor population or by
others who are not owner-occupants. The creation of the
residential A class is financially helpful to owners who
have a long-term commitment to live in their communities and
provides an incentive for them to stay.

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Long-time owner occupants have certain expectations
warranting protection against higher taxes, which owners of
second homes or vacation homes do not have. A family that
buys a residence and intends to occupy it for a length of
time, does so based on certain expectations related to that
family's income and lifestyle. Over time, as the
neighborhood values increase as a result of the purchase of
neighboring properties by new owners who often tear down and
rebuild million dollar second homes or vacation homes, the
established family is unable to pay for the increased
financial responsibilities of property ownership, including
increased real property taxes resulting from the increase in
property values. The owners of high-end homes, who have
purchased or built properties based on their own income
expectations and lifestyle, have financial expectations that
have accounted for the higher property values, as reflected
by their purchase price. After the initial passage of Bill
42, all taxpayers will be able to make more certain and
accurate predictions of their future tax liability.

In addition to preserving older neighborhoods and
protecting homeowners who have made a long-term commitment
to the neighborhood, the residential A class is also
designed to not harm the typical renter. Often, tax schemes
that pit homeowners with home exemptions against homeowners
without home exemptions end up hurting renters economically.
Setting the threshold for residential A properties at
$1,000,000 allows the owners of typical rental properties
without a home exemption to keep the rent at affordable
levels instead of passing tax increases on to their tenants.
Renters of homes valued at $1,000,000 or greater would
appear to have the financial wherewithal to absorb any tax
increase applied to their rental payments.

DBFS's testimony plainly states a legitimate policy
purpose in local neighborhood preservation, continuity and
stability, and ties that purpose to the creation of the
Residential A tax classification. The City further argues that
the classification is reasonably related to the City's policy
purpose, as follows:

The Residential A definition in ROH § 8-7.1(i) clearly
expresses the City's interest in keeping families in their
homes by favoring owner-occupied properties over investment
properties. The home exemption criteria delineates between
owner-occupied and non-owner-occupied residential for
Residential and Residential A classifications, respectively,
to further the City's interest of inhibiting the
displacement of families from their homes. Assigning
residential properties without a home exemption but valued
less than $1 million to the Residential general tax class
aligns with the City's interest in keeping rentals
affordable at the lower Residential tax rate, which reduces
the risk of increased rents to lower income and aging
families from pass-through taxes at the Residential A tax
rate by their landlords.

The Coles respond that the City's Residential A
classification is arbitrary – that "[i]ncreasing the tax charged

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to owners of non-owner occupied properties does nothing to assist
owners of owner-occupied properties in preserving their homes and
thereby the continuity and stability of the community." The
Coles essentially challenge the closeness of the fit between the
City's legitimate interests and its chosen means of achieving
them. "Under rational basis review, it is our duty 'only to seek
to adduce any state of facts that can reasonably sustain the
classification statute . . . challenged.'" West Maui Resort
Partners, 154 Hawai#i at 142, 547 P.3d at 475; see Tax Found. of
Hawai#i v. State, 144 Hawai#i 175, 205, 439 P.3d 127, 157 (2019)
("[T]he rational basis standard 'is especially deferential in the
context of classifications made by complex tax laws. In
structuring internal taxation schemes the States have large
leeway in making classifications and drawing lines which in their
judgment produce reasonable systems of taxation.'" (original
brackets omitted) (quoting Nordlinger v. Hahn, 505 U.S. 1, 11
(1992))).10/ On this record, we cannot say that the City's
legitimate policy purposes bear no reasonable relation to its
creation of the Residential A tax classification.
Accordingly, we conclude that the Tax Appeal Court did
not err in granting summary judgment in favor of the City on
Appellants' claim that the Residential A real property tax
classification violates the Equal Protection Clauses of the
Hawai#i and U.S. Constitutions.

V. Conclusion

For the reasons discussed above, we affirm the
following, entered by the Tax Appeal Court on July 17, 2017:
(1) the "Order: (1) Vacating Order Granting Motions
for Summary Judgment Filed December 6, 2016; (2)
Denying Taxpayer-Appellants' Motions for Summary
Judgment; and (3) Granting Summary Judgment To

10/
Contrary to these authorities, the Coles also argue that the City
must explain what it plans to do with "the additional tax revenue generated by
the Residential A general class increased tax rate over the Residential
general class tax rate[,]" citing Hasegawa v. Maui Pineapple Co., 52 Haw. 327,
475 P.2d 679 (1970). Hasegawa, which did not involve a tax classification or
complex tax scheme, does not support the Coles' argument.

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[the City] Against Taxpayer-Appellants in
Consolidated Cases, in Case No. 1TX 16-1-0012";
and
(2) the Final Judgment.

On the briefs:

Scott W. Settle and /s/ Keith K. Hiraoka
Ian P. Luthringer Presiding Judge
(Settle Meyer Law, LLLC)
for Appellants-Appellants
Schuyler W. Cole and /s/ Clyde J. Wadsworth
Marilyn J. Cole Associate Judge

Daniel M. Gluck, /s/ Sonja M.P. McCullen
Robert M. Kohn, Associate Judge
Lee M. Agsalud, and
Karen K. Lee,
Deputies Corporation Counsel
for Appellee-Appellee

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