COM 0118.029 2002-2004 - Laserfiche WebLink

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Honorable Aaron S.Y. Chung, Chair, and Members Finance Committee September 30, 2004 Page 4 lands dedicated. When lands are dedicated, the Administration has some flexibility to adjust the fair market values. Also, and just as significant, is the fact that the Council is solely responsible for setting the "tax rates" for the different categories of land on Oahu for tax purposes. In cooperation with the City Administration, the Task Force allowed for the fair market values to be determined by using fee simple sales. Based on dedication periods, the assessed values were adjusted by 95 percent, 97 percent, or 99 percent; however, the bill provides fora "cap" on the assessed values by comparing the adjusted assessed values based on fee simple sales against the agricultural yields for the property. If the fee simple sales-adjusted assessments exceed the value of the agricultural yields, the bill provides for automatic lowering of the percentage adjustment such that the tax assessed values do not exceed the agricultural yields. (See attached Spreadsheet.) The County of Hawaii's Bill No. 49 provides for agricultural real property tax assessments to be determined by the agricultural productivity values for dedicated and non-dedicated lands. We understand this to mean that for lands in active agricultural use, whether the lands are dedicated or not, the maximum tax liability will be twice the agricultural productivity value for the property. Similar to the City and County of Honolulu, this provides fora "cap" on the assessed values for agricultural lands and provides for some stability for farmers from the fluctuations in the real estate market. We believe that using agricultural productivity values or agricultural yields provides a fair basis to assess agricultural lands. With respect to vacant and unusable/waste lands, in both Che City and County of Honolulu and the County of Hawaii, the fair market value based on comparable sales will be used to determine the tax assessed values for vacant and unusable/waste lands. Recognizing the tact that this "surplus" of agricultural lands may be attributed to the limited amount of qualified farmers in Hawaii, the City and County of Honolulu allows for property owners who dedicate "vacant" lands for 10 years a 50 percent reduction in their assessed valuations. This would allow owners to invest in infrastructure or improvements to the lands and keep the lands available for qualified farmers in the future. It also attempts to address the situation where owners of agricultural lands that are vacant because of market conditions (i.e. limited amount of farmers) are provided with some tax relief as long as the property remains zoned for agriculture. Throughout the discussions on agricultural real property taxes, it is important to understand that real property taxes are intended to pay for municipal services, These services include police, fire, sewer, water, etc., that are provided by the County. There needs to be a nexus between the taxes being 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 ]ands, it is difficult to find that rational nexus to