COM 0118.029 2002-2004 - Laserfiche WebLink

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Honorable Aaron S.Y. Chung, Chair, and Members Finance Committee September 3Q 2004 Page 3 year dedication at one percent of fair market value; (2) "Circuit Breakers" not to exceed agricultural production value for five-year dedicated ]ands, and nat to exceed five times that value for one-year dedicated lands; (3) Assessment of vacant lands dedicated for ten years at 50 percent of fair market value; (4) A schedule of declining rollback tax periods depending on the year the dedication is cancelled; and (5) Anew Section 8-10 providing an exemption for the value of qualifying agricultural irrigation and drainage systems and land improvements on dedicated vacant lands. What we learned through this process was that the Counties all start from a basis of using "fair market value," determined either through fee simple sales or replacement costs, as a means of determining the tax assessed value of property in all land use categories. While appraisal methodology recognizes the income approach as a means to determine fair market value, the Counties are hesitant to use the income approach for agricultural assessments. We could find no provision in the County Charter that prohibits the use of the income approach; however, it appears that the Real Property Tax Office wanted to create a "uniform" assessment methodology for assessment purposes. This created a problem because agricultural yield or productivity is viewed as an "income approach" in determining the land values. Using comparable sales data to determine the fair market value for agricultural lands on Oahu resulted in significantly higher values for agricultural lands on Oahu from previous years. Ironically, although the changes to the real property tax system were initially intended to close the "loop hole" that allowed for "`gentlemen estates" to pay the agricultural rate, the fee simple sales of "gentlemen estates" are being used as comparable sales to determine the tax assessed values for agricultural lands on Oahu. For example, on lots less than 20 acres in size, the fair market value for Waimanalo was $310,000 per acre; for Kahuku it was $250,000 per acre. Based on lots being advertised for sale now, Mokuleia could be in the range of $1,000,000 per acre. From the discussions at the Task Force, the City Administration's position, supported by Corporation Counsel and the Real Property Assessment Division staff, was that the Administration must use comparable sales or replacement cost to determine the fair market assessed values. The only flexibility or discretion the Administration has is based on having