The city has failed for at least five years to assess or collect property taxes on a new home built in Kailua by Anthony "Tony" Rutledge Sr., officials acknowledged this week.

"Somehow we missed it," said Robert Magota, assistant administrator of the city's Real Property Tax Division after The Advertiser questioned the discrepancy.

"We'll be going out there and assessing the property and collecting back taxes," Magota said.

PERMIT OBTAINED IN '97

Rutledge tore down an old house on the property in 1996 and obtained a building permit in 1997 to build a new home, according to city records. The value of the new construction was placed at $460,000, according to permit records. It's not clear from city records when the new construction was completed, but the last inspection of the structure by city permitting personnel was completed in 2001, according to city records.

Rutledge obtained three more building permits to install solar heating, fences and walls at the site, valued at around $10,000, according to permit records.

But the city listed the site as unimproved land since 1997, collecting taxes only on the land and not on the new house or other improvements, Magota said.

"It slipped through the cracks," he said. "The new home should have been entered into our (computer) system in 1998 or 1999, but it wasn't."

Tony Rutledge did not respond to several attempts to reach him at his home and to messages relayed to him through his son, Aaron.

"I told him what you were calling about," Aaron Rutledge said. "He said he paid whatever was on the tax bill."

According to property tax records, the appraised value of the 8,799-square-foot corner lot is now $554,000. This year Rutledge was assessed and paid $2,078 in property tax for the land and nothing for the house, tax records show.

At the city's current rate, the tax on the house this year would be $1,725 if the home was still valued at $460,000.

The total amount of unassessed and unpaid taxes on the house since 2001 would be $8,533 if the building was valued at $460,000 throughout that period. Rutledge could have filed for a homeowner's property tax exemption of at least $40,000 on the house, but he did not, Magota said. If Rutledge had applied for the exemption, "that would have raised a red flag with us" and alerted city tax collectors that there was a house on the property, Magota said.

FEDERAL CASE PENDING

Rutledge can't apply retroactively for the exemption, said Magota. "Property tax exemption applications have to be filed by Sept. 30 of the preceding year," he said.

Tax bills for the home are sent to Rutledge's former office at Unity House Inc. Unity House was seized by Internal Revenue Service agents in December after Rutledge and his son, Aaron, were charged by a federal grand jury with misusing assets of the $40 million nonprofit labor benefits organization.

Tony Rutledge's home is also the business address of Star-Beachboys Inc., a company accused with the Rutledges in the same federal criminal case of skimming $350,000 in cash from a city beach concession contract during the 1990s. The defendants agreed to plead guilty to reduced charges in the case, including one felony count of filing a false tax return for Star-Beachboys in 1997.

Reach Jim Dooley at jdooley@honoluluadvertiser.com.