The URL can be used to link to this page

Home My WebLink AboutCOM 0118.010 2002-2004 B- 3-04; 9: 2BAM;~8085283483 ~g0852B3463 a q . . ~ ~ ~ 1604 (.UG ~i A(r! ° 1 ~ i LAND USE RESEARCH j FOUNDATTON OF HAWAII 70o Bishop Street. Ste. fgz8 Honolulu, Hawaii 96813 Phone $2f-g7t7 Fax ba6rofaz t August 3, 2004 The Honorable Aaron S.Y. Chung, Chair, and Members , Committee on Finance Hawaii County Council County of Hawaii 25 Aupuni Street Hilo, Hawaii 96720 BY FACSIMILE: (8081961-8912 i Dear Chair Chung and Committee Members: ~ RE: TfII.L 49 FOR AN ORDINANCE AMENDING CHAPTER 19, ARTICLES 1.7 r~ND 8 OF THE HAWAII COUNTY CODE 1983 (1995), RELATING TO REAL PROPERTY TAX DEFINITIONS; NON-DEDICATED AGRICULTURAL USE ASSESSMENT AND AGRICULTURAL USE DEDICATION i My name is Dean Uchida, Executive Director of the Land Use Research Foundation of Hawaii (LURE) testifying in regard to Bi1149, Relating to Real Property Tax Definitions; Non- ! Dedicat~d Agricultural Use Assessment and Agricultural Use Dedication. i The ma' provisions of Bi1149 [drafts 1 and 2] aze as follows: W li~efines and distinguishes Non-Dedicated Agricultural Use Assessment and Commercial Agricultural Use Dedication [gross revenues of $2,000/year]. • Limits agricultural use assessments and dedications to azeas zoned by the County for ~ agricultural, residential and agricultural, family agricultural, intensive agricultural, and agricultural project districts. • Provides for assessment ofnon-dedicated lands in continuous and regulaz agricultural use at a percentage of mazket value, where assessment is currently based on assigned agricultural productivity values. The percentage of mazket value would rise from 25 percent in 2004 to 75 percent in 2006. Homesites, setbacks, and open landscape would ` >~e excluded from the agricultural area for assessment purposes. • )f rovides for confinued assessment of dedicated lands at their productivity value in agricultural use. Homesites and other non-dedicated portions [setbacks and open i landscape] would be assessed at mazket value. The minimum lot size for feed crops, I I I ~ Comm. No. i Ref. To: Preree ~ j Ref. Date B- 3-U4; 2BAM; 18085283463 ,8085283463 n 2i q 1 i A Honorable Aaron S.Y. Chung, Chair, and Members Finance Committee ~ August 3, 2004 Page 2 p lure, and fast and slow rotation forestry would be 10 acres, as currently provided by le. • iminates the 20-yeaz dedication period with assessment at 50 percent of productivity v ue, although the ] 0-year dedication period remains. • educes the rollback tax look-back period for breach of agricultural use to 2 years plus c ent year, scaled up to 5 years for dedicated lands, depending on how long the d 'cation has been in effect [if less than 8 years]. The period of breach reduced from 12 t 6 consecutive months, unless non-use is part of an approved farm plan. • lows breach exceptions for natural disasters, land no longer usable, and death or d sability. • Pfovides for breach of dedication upon sale of the property, unless the buyer expressly assumes the dedication; assumption will no longer be automatic. Draft 2 differs from Draft 1 in that: • Lands under 20-year dedication would automatically become subject to the conditions and provisions of commercial agricultural use dedication, rather than upon petition to continue the dedication. • T~e homesite portion of dedicated lands would be assessed at the mazket value of c mpazable homesites, rather than at the value of acomparably-sized homesite. We s':az I the cencems of others that Bi1149 will be anti-agricultural in effect and will amount to ' a propert tax increase for small farmers. This effect will make itself felt primarily through the ~ change assessment basis from productivity value to mazket value. New or developing farms ~ would qualify for dedication until they meet the $2,000 commercial threshold for produces 'ty assessment, and until then they will be taxed at mazket value. Farm lessees would also be sensed and taxed at market value if they aze unable to dedicate their land. We aze concern that there may be few if any mazket value comparables for small farm lots. Finally, homesit on agricultural lots would apparently be taxed on market value at the $9.85 agricul al rate rather than at the $5.55 residential rate. ~ We resp tfully suggest that the Hawaii County Council review and consider the implementation of Ordinance 02-39 in the City and County of Honolulu before acting on Bill 49. Ordinance 02-39 has created serious problems for farmers and agricultural landowners because the assessed value of agricultural lands on Oahu is now detemuned at "fair market value," generally, based on conveyances of properties zoned for agriculture which reflect not actual agricultu>al use, but rather other restricted and atypical uses (e.g., antenna or utility sites and ~ "gentlemptr farmer estates") permitted under the AG-1 and AG-2 zoning districts. This flaw has i enoneou~ly inflated the value of agricultural lands on Oahu to approximately $40,000 per acre. I i i i 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 8- 3-04: 9:28AM:+8085283483 ;18086293463 n ai a i Honorabl ~ Aaron S.Y. Chung, Chair, and Members Finance mmittee August 3, 2004 Page 4 I 3. scant or fallowed lands should be assessed at what the lands could realistically be used under the limitafions of the zoning districts, or based on prior historic use. The 1 downer pays the tax on any vacant lands. The tenant pays the tax when the sands aze not vacant. That, combined with the high agricultural tax rate of $9.85/$1,000, should be more than enough incentive for a landowner to put someone on the property and not keep it vacant. Vacant land requires the landowner to have insurance, pay taxes, and provide ~ some on-site property management. A higher assessed valuation for vacant lands is unnecessary to compel a landowner to put a tenant on the property. We appreciate the opportunity to express our views on this matter, and look forward to further discussidns with the Council to address the issue of long-term agricultural real property tax reform f~r the County of Hawaii. i I I