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8- 3-04: ~~:28AM: ~BOB62A30.83 i8D85203463 # 3/ 4 Honorablq' Aaron S.Y. Chung, Chair, and Members i Finance Committee August 3, 2004 Page 3 This flawed "mazket value" assessment has resulted in tax revenues from agricultural lands going from approximately $4 million in 2003-2004 to approximately $14 million in 2004-2005. While the remedy for this inequitable tax increase of approximately 250 percent has been charactekized by some as a "windfall" to landowners, it is the City and County which in fact stands to reap the benefit from the "windfall" created by Ordinance 02-39 on lands which receive few if 'y municipal services. Meanwhile, farmers who cannot afford the increased taxes will ~ probabl abandon their agricultural operations, to the great detriment of the economy and enviro ent of the people of Oahu. Further; these flawed assessed valuations may not be sustain on appeal (and most have been appealed). Unfortunately, many farmers cannot wait for the o tcome of the protracted appeals process. We may be on track for a major "lose-lose" situatio on Oahu, in which the City and County will put many farmers out of business and ultimate y have to refund much of the taxes collected on overstated values. It is imp t, in considering an appropriate tax structure for agricultural lands, to understand that real roperty taxes are intended to pay for municipal services. These services include police, fire, s ,water, etc., that are provided by the County. There needs to be a nexus between the taxes be g paid and the services being received for the property being taxed. For example, residential properties should be taxed at a level proportionate to the demands they place on the municipal services. In the case of agricultural lands, it is difficult to find that rational nexus to justify a large tax base, as agricultural users usually have little or no impact on municipal services. Also, the tax system should not be used as an enforcement tool for land use. If the land is zoned for agriculture but is not being used for agriculture, then the remedy is to pursue the matter as a zoning violation, not through some type of punitive taxation policy. Allowing agricultural land to lie fal ow, particulazly after scores of years of intensive plantation cultivation, is not necessa~y a bad thing. The federal government pays farmers across the Midwest and elsewhere under m lti-yeaz contracts not to grow crops. We.beli've that the County of Hawaii should consider the following: 1. axes on all agricultural ]ands, both dedicated and non-dedicated, should be based on j gricultural activity, not on "market value" deternrined from sales transactions of lands ~ hick may not have been in agricultural use. There should be a fixed assessed valuation ~ f land based on its agricultural crop type or use. In this regard, the County's ~ roductivity assessment system is exemplary and should be retained for all agricultural 7 ds. j 2. a tax assessment system needs to allow for multiple uses on a single parcel. The taxes j ould reflect the actual use of lands on the parcel, not generalize or blend the assessment. In particular, waste or unusable lands should not be taxed as if they aze ~ usable. i i i i i