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Home My WebLink AboutCOM 0118.023 2002-2004 FOUNDATION FOR REAL PROPERTY TAXES IN HAWAII COUNTY Real Property Taxes are tied to County zoning using the premise that it is fair to tax a person's use of property and associated material assets and to apply the funds to new and improved local services generated by the impact of the property's use. With the exception of Agricultural-zoned lands that may apply for the ag use productivity tax rate, assessed values are based on highest and best use. FACTS AGRICULTURAL ZONED LANDS ? Of its total 2,577,800 acres of land area, the island of Hawaii has almost 1,220,000 acres zoned Agriculture. ? Ag zoned lands may be taxed in 4 ways: 1. Highest & best use or fair market value at $9.85/$1,000 valuation 2. 10 year dedication at Ag Use Rate (see attachment A) at $9.85/$1,000 valuation 3. 20-year dedication at Ag Use Rate (see attachment A) at $9.85/$1,000 valuation 4. Ag Use Rate (see attachment A) at $9.85/$1,000 valuation Note: Ag-zoned lands may qualify for the Homeowner Class upon application by the owner ($5.55/$1,000). ? In 2002, 10,873 properties received some form of agricultural benefit: 917 properties were in Ag Dedication (#2 8e #3) and 9,956 were in the Ag Use Program (#4). ? The assessed value of these properties based on highest and best use was estimated to be $2,636,070,000; however, the productivity value was $277,822,000 when the ag use rate was applied. ? There is presently little difference in the dedication program and the ag use program in terms of the standard used to determine agriculture productivity. ? A 20-year Ag Dedication allows property to be taxed at 50% of its assessed value after 10 years. ? Dedication programs (#2 & #3) require longer commitment than year-to-year Ag Use Orogram (#4). HOMESITE VALUES ON AGRICULTURAL ZONED LANDS ? Ag zoned land under a home is now valued at a comparable residential value. Recent amendments to the Hawaii County Code allow this portion of the property to be taxed at the lower Homeowner Class rate ($5.55/$1,000 valuation). p Comm. No. I I p • Z~' Ref. 70: ~-re-sea~~-~~~C~R Ref. Cute s~~a7 LW4 8/24/2004 EXHIBIT A Adopted by Department of Finance AGRICULTURAL USE CODES & RATES CODE DESCRIPTION DEDICATED VALUE Intensive Agriculture 5A .........Truck Crops, Ag Use ..............................$2,000 56 .........Truck Crops, 10 Yr. Ded ........................$2,000 5C .........Truck Crops, 20 Yr. Ded $1,000 5P .........Confined Animals, Ag Use .....................$2,000 SQ.........ConfinedAnimals, lOYr. Ded ...............$2,000 SR .........Confined Animals, 20 Yr. Ded ...............$1,000 SZ.......... State Diversified Ag Lease $2,000 Orchards & Multi-Year Crops 6A.........Ag Use ...................................................$1,500 6B .........10 Yr. Ded .............................................$1,500 6C 20 Yr. Ded $ 750 Biomass & Agronomic Crops 7A .........Forage & Biomass, Ag Use 500 7B Forage & Biomass, 10 Yr. Ded $ 500 7C .........Forage & Biomass, 20 Yr. Ded $ 250 7P Fast Rotation Forestry, Ag Use $ 500 7Q Fast Rotation Forestry, 10 Yr. Ded $ 500 7R Fast Rotation Forestry, 20 Yr. Ded $ 250 Extensive Agriculture & Forestry 8A .........Good Pasture, Ag Use $ 210 8B .........Good Pasture, 10 Yr. Ded 210 8C .........Good Pasture, 20 Yr. Ded $ 105 8D .........Native Forest (good past.), 20 Yr. Ded. $ 105 8E.......... Slow Rotation Forestry, Ag Use............ $ 210 8F.......... Slow Rotation Forestry, 10 Yr. Ded $ 210 8G .........Slow Rotation Forestry, 20 Yr. Ded $ 105 8H.........AveragePasture,AgUse 60 SI..........Average Pasture, 10 Yr. Ded 60 8J ..........Average Pasture, 20 Yr. Ded 30 8K .........Native Forest (avg. past.) 20 Yr. Ded $ 30 SP .........Poor Pasture, Ag Use $ 14 8Q Poor Pasture, 10 Yr. Ded $ 14 8R Poor Pasture, 20 Yr. Ded $ 7 85.......... Native Forest (poor past.) 20 Yr. Ded $ 7 SZ.......... State Pasture Lease, Restricted $ 210 BILL N0.49, DRAFT 3 (ADMINISTRATION PROPOSAL) PURPOSE 1. Not to increase tax revenues for the County. 2. To make County's real property tax system fairer. 3. To support agriculture industry through property tax incentives. 4. To close loopholes that enable some non-farmers to take advantage of tax provisions intended to help the agriculture industry. 5. Not to inadvertently have a negative impact on those who should benefit from them. GUIDING PRINCIPLES OR GOALS FOR AGRICULTURAL TAXATION 1. Keep prime agricultural land in agricultural use. 2. Encourage new agricultural uses. 3. Return agricultural lands to agricultural use. 4. Promote agriculture industry/employment. 5. Promote equitable taxation. 6. Promote General Plan goals/policies: • Encourage efforts to solve problems of the ag industry in the County. • Ensure that development of important ag lands be primarily for ag use. • Support efforts to provide tax/other incentives to enhance competitive capabilities of commercial farms/ranches. • Discourage speculative residential development on ag lands. DESIRED OUTCOMES Establish sound definition; Simplify ag program and improve rules; Prevent obvious abuse; Simplify enforcement. PROPOSED CHANGES IN AGRICULTURAL TAX PROGRAM VIA BILL NO. 49, DRAFT 3 AGRICULTURAL USE PROGRAM. Revises the Non-dedicatedAgricu/taro/ Use Program by establishing a definition for non-dedicated agricultural use assessment that allows commercial or non-commercial ag activities to apply and qualify. Preferentia/ taxing would be at twice the Ag Use Rate Values (Exhibit A). Remains ayear-to year program and breach occurs with a subdivision of less than 5 acres or a rezoning to a non-ag zoning. An exception to breach would be when rezoning is requested by someone other than the owner. Ro//back would be for 2 years plus the current year instead of a 10-year lookback. AG DEDICATION PROGRAM. E/iminates the 20-yearAg Dedication Program and revises the 14 yearAg Dedication Program by establishing a definition for commercial agricultural use dedication that allows commercial ag activities to apply and qualify. Commercial agricultural use means the use of property on a continuous and regular basis that demonstrates the owner is engaged in commercial activities that generate income, monetary gain or economic benefit worth a minimum $2,000 gross income per year. Preferential taxing would be at the existing Ag Use Rate Values (Exhibit A). Breach would occur if there is no ag use for 6 consecutive months unless part of an approved farm plan instead of the existing 12 consecutive months. While the existing dedication program has no exceptions, Bill 49 includes exceptions to allow land impacted by natural disaster, land that can no longer be used for dedication, death or disability of the primary farmer. Ro//backwould be according to the number of years in the program rather than for the total dedication. (5 years =all; 6 years = 4 years rollback; 7 years = 3 years rollback; 8, 9 years = 2 years rollback) 8/24/2004 QUESTIONS TAX POLICY GOALS & VALUES 1. Do we concur with the Administration's goals for the Ag Tax Program? What should be the goals of the County's Agricultural Real Property Tax Program? 2. Do all agricultural-zoned lands have an intrinsic public value that should be given preferential tax treatment and, therefore, subsidized by other tax brackets? 3. What are those intrinsic public values? 4. Should property taxes attempt to distinguish between the intrinsic public values? AGRICULTURAL PRODUCTIVITY 5. For taxing purposes, should the County distinguish between lands that are agriculturally- productive and those that are not productive? 6. How "productive" do agricultural-zoned lands have to be to be given preferential tax treatment? a. Does "commercial" agriculture provide a public value that should be given preferential treatment in properly taxes? What is "commercial" agriculture? b. Does "hobby/backyard (gentlemen)" gardening have an intrinsic public value that should be given preferential treatment in properly taxes? What is "hobby/backyard (gentlemen)" gardening or farming? c. Does "subsistence" agriculture provide an intrinsic public value that should be given preferential treatment in property taxes? What is "subsistence" agriculture? d. Does non-productive, vacant, or open space agricultural-zoned land provide an intrinsic public value that should be given preferential treatment in property taxes? METHOD OF TAXATION & IMPACT 7. What form of preferential properly tax treatment should be applied, if any, to the agricultural-zoned land? Incentives, disincentives, lower properly tax rate, lower assessments, exemptions, dedications, penalties, other? 8. What is the impact of adopting these taxing policies on other classes of properly? 9. What is the impact of adopting these taxing policies on agriculture-zoned lands? HOMESITE VALUE 10. Should land under a home on agricultural-zoned land be considered dissimilar from lands under a home on residential-zoned lands? Why or why not? How should taxing policies apply? 8/24/2004