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HomeMy WebLinkAboutCOM 0118.032 2002-2004 ~r or M_ FRED G HOLSCHUH. M.D. ~ ~~;e. Phone: 961-8264 cTmm~Gnrinhrr FAX: 961-8912 OFFICE OF THE COUNTY COUNC/L C'nan[y o/Hawiiii /lauaii Cnunh~ Building 5 : l upuni .tiur~~i Milo. //a~r~u~ 9G71o September 20. 2004 TO: Aaron S.Y. Chum., Chair _ and Members of the Finance Committee -_i to FROM: Fred C. Ilolschuh, M.D., Councilmember SUBJ: Rill 49, Draft 3, Agricultural Land Taxation Community Meeting in Pepe'ekeo On September 16, ?004, 1 held a meeting regarding Bill 49, Draft 3, at the Hilo Coast Processing Company Office, at the request of the farm community in Pepe`ekeo. It proved to he a rewarding experience for myself, the community and County representatives. [would like to share the proceedings with the Councilmembers and the public; therefore, t have attached a copy of the summary minutes of the meeting and request they be made a part of the official record. Thank you for your attention to this matter. FCH/ja Attachment Comm. No. •3Z Ref. To: Ref. Date COMMUNITY MEETING ON BILL 49, DR. 3 AGRICULTURAL LAND TAXATION Hilo Coast Processing Company Office Building Pepe`ekeo, Hawaii Thursday, September 16, 2004 The following is a summary of the proceedings of a community meeting held by Councilmember Fred C. Holschuh, M.D., at the Hilo Coast Processing Company Office, Pepe`ekeo, Hawaii, on Bill 49, Draft 3, which amends Chapter l9, Articles 1, 7 and 8 of the Hawaii County Code 1983 (1995 Edition), relating to Real Property Tax Definitions; Non-Dedicated Agricultural Use Assessment and Agricultural Use Dedication. The meeting convened at approximately ] ] :10 a.m. The attendance was as follows: Members of the Public: Richard Anderson, Hakalau Virginia Anderson, Hakalau Tom Burton, Hakalau Dan White, Pepe`ekeo Taiwan Gu, Pepe`ekeo Ed Johnston, Alia Point Nursery/Farm, Pepe`ekeo Richard ,lohnson, Onomea Orchards and Hawaiian Rainbows, Pepe'ekeo John Smith, Hakalau Mike Miyahira, Hawaiian Rainbow Business Development, Pepe`ekeo Roy Skogstrom, Pepe`ekeo ,ieri Ooka, Plant Pathologist, U.H. Coll. of Tropical Agriculture; Kauai Agricultural Research Center, Kapa`a, Kauai County Representatives: Fred C. Holschuh, M.D., Councilmember Mike Tulang, Councilmember William Takaba, Finance Director Nancy Crawford, Deputy Finance Director Wes Takai, Real Property Tax Administrator Gary Takamura, Budget Administrator Constance R. Kiriu, Legislative Auditor Rodney Oshiro, Legislative Analyst Susan Caseria, Legislative Auditor Assistant Earlanne Shintani, Council Aide Jeanette Aiello, Council Services Supervisor After the introductions, Dr. Holschuh opened the meeting with a brief history of the process the County and the public has been going through with Bill 49. He mentioned the previous workshop held by the Finance Committee in Waimea on the subject, and stated he wanted the same opportunity to hear what the farmers in this area were thinking regarding the property tax. He stated it was mentioned in Waimea that the farmers should be involved in this process to improve the taxation and make it more fair. There should be a working group or a task force of local farmers around the island to bring forth recommendations to the County. Page 1 Pepe'ekco Community Meeting September 16, 2004 Bill 49, Dr. 3, Agricultural Land'faxation At this point, Ur. Holschuh turned the proceedings over to Mr. Takaba, who stated concern that the public attendees at the meeting in Waimea were not aware of the changes in the law, and he would like to take the opportunity to explain them. He referred to Comm. 1 18.23, a document prepared by the Legislative Auditor's Office, which contains on page two, as Exhibit A, the Agricultural Use Codes and Kates. Mr. Takaba stated that the Agricultural community as a group had not had an opportunity to give their input to the process. He said there is a lot of misinformation out there; that it is okay if the community does not like the bill, but they are mistakenly judging something that is not in existence. At this time Mr. Takaba brought forth a handout of the major proposals in Bill 49, containing nine points for discussion (see Comm. 118.24). He went over these nine points and answered various questions from the attendees. He pointed out that the definition for commercial Ag usc, which is not currently in the Chapter, has been added, and that the land must be in commercial Ag activity to quality for the 10-year dedication benefits. Mr. Johnston expressed concern for those farmers and Native I lawaiians who barter their crops or who grow their crops for sustenance. Mr. Takaba replied the bill states the required annual amount to claim Agricultural use can he in dollars or worth and that a County representative will go out to inspect the operation to ensure there is truly a farm operation. He stated if the farm is just starting or if it can be proven that the land is required to he fallow, as long as standard farm practices are being followed, it would be acceptable. The Schedule F will not be required in these instances. Ms. Anderson asked similar questions regarding the $2,000 annual income requirement. What would Ure County ask for prool? Mr. Takai stated the County would use its judgement when it reviews farm plans. Anew submittal will not be required every year. Only if challenged or complaints by neighbors. He stated the Tax Office will require a representative with agricultural expertise to help them determine proper usc. Dr. I~olschuh asked if the certification could be considered a farm plan. Mr. 'Cakaba explained that the certification might be an initial step in this direction. The County would have a certification by a farmer that they will be doing these activities. If there is a question about the use, a Schedule F may be required. Dr. Holschuh stated that the overwhelming majority of people are honest and they would be able to write down what they're going to do and the County could take their word. Mc Takai clarified there is a form each for non-dedicated and dedicated Ag use. If the farmer is asking for Ag benefits for the first time, a form would have to be filled out, and an assessor would he sent out to determine if the land is in the proper use. The form is the trigger to the Tax Office that they need to go and verify the use. There was discussion on dedicating Ag use on Residential zoned properties. Mr. 'Takaba stated that now you can dedicate Residential property to Ag, with no parcel size specification, but that the new proposal would require the land to be zoned Agricultural to qualify for Ag dedication, or be reviewed and approved by the Planning Department. Mr. l~akamura stated that in numbers one, two and three in the handout, you have to dedicate to get the rate. and you must be in commercial use activity to qualify as well. Yage 2 Pepe`ekeo Community Meeting September 16, 2004 Bill 49, llr. 3. Agricultural Land Taxation Regarding the shorter dedication period for certain circumstances, the Finance Department representatives explained that for leasehold properties where the leases are less than 10 years, or where the lease has less than 10 years left on it, there will be consideration for a shorter dedication period. In the current law. if you are dedicated for 10 or 20 years and there is a disability or disaster, the rollback would apply. "Chat provision is being changed to cancel the penalty in the case of disaster or disability of the primary farmer. It was stated that in the case of disability a document from a medical professional would be required. Currently if you breach a dedication, the rollback taxes plus a 10 percent penalty would apply. The example of Hamakua Sugar Company was used. In that case, the land was dedicated to Ag for 20 years. On the 19'x' year the company fell. The rollback taxes and penalty amounted to approximately $18 million in that case. As a result, the County acquired 4.500 acres of Hamakua land. For farmers who do not wish to dedicate or who are not in commercial activity., the land values for non-dedicated Ag use would be twice as much as the dedicated Ag values, which would still result in low taxes. Mr. Johnson asked if this would apply to someone who wanted to lease their property for five years. Mr. 'Takaba replied in the aftirmative. Mr. Johnston asked how he could set aside aone-half acre portion of his 2 'h acre property from the dedication, which would contain two acres of vegetable crops. He said that one-half acre portion had shot up to $400. Mr. Takai stated he should fill out the Ag use form. Bill 49 removes the 20-year Ag dedication from the program. The 20-year dedication program enabled the property owners to qualify for their land to be assessed at one-half the 10-year Ag use dedication value. History has found that 20 years is too long-term for most people. Mr. Johnson asked what would happen to the land owners who were currently in the middle of a 10-year dedication with the new proposal, if the dedication would start again. Mr. Takai replied that the dedication would continue. Mr. Takaba replied that rollback taxes for a breach would be less severe if changes occurred during this transition. Mr. Johnson requested a provision in the bill for this situation. that people with land already enrolled in the program should be grandfathered, and it should be stated in the bill. Mr. Takaba stated the department would look at language for that. At this time, questions ensued regarding the second page of the handout, which shows three examples of 20-acre parcels with different types of situations. Mr. "Cakaba explained that in the previous law if a person is living on Agriculturally zoned land the homesite is considered a farm dwelling and the Ag use rate applies. The second home built is still considered a farm dwelling. If homes continue to be built, restrictions may be incorporated. Ur. Itolschuh asked if there was a restriction on the number of farm dwellings, to which Mr. Takaba replied there could be any number of farm dwellings. Mr. Anderson asked how the Tax Uftice would appraise a homesite on Ag dedicated land. Mr. 'Cakai stated they would look for a comparable homesite and appraise it accordingly, the homeowners rate would apply to this portion. The remainder of the parcel would qualify for the Ag use rate. Yage 3 Pepe'ekeo Community Meeting September 16, 2004 Bill 49, Ur. 3, Agricultural Land'faxation Mr. Takamura pointed out that if a person is applying for an Ag dedication for their parcel but plans to build someday, they should ask for that homesite portion to be taken out of the Ag use rate application from the start of the dedication. Mr. Takai stated that if they were applying for that homesite portion to be set aside, but still plan to use it for their Ag purposes until construction begins, they can ask for the non-dedicated Ag rate for that portion. Mr. Takai stated that there have been instances when a landowner has dedicated a parcel for Ag use and then built their home on a portion of that land, and were then subject to back-taxes once the home was identified by the Tax Office. Mr. Burton stated that he found he had a choice of the homeowners rate or the Ag use rate. but couldn't claim for both. He said he was told that if he had a home on the property that he could only get the homeowners rate. Mr. Takaba and Mr. Takai stated that was recently changed, and that the homesite can be set aside from the Ag portion and the two portions can now be taxed separately. Mr. Bunton further asked if the landowner would have to identity the homesite at the time they applied for the dedication. stating that they might not know yet where the home would be built Mr. Takai replied they could submit a drawing if they knew Che area, but the Tax Office would be flexible on the location of the site. But the land area needs to be accurate. Mr. Burton asked what happens if the dedication period is not complete and the property is sold. Mr. "Takaba stated the new owner would have to agree in writing to keep the property in Ag use for the remainder of the dedication period to continue with the Ag dedicated use rate and not be subject to rollback taxes and penalties. At this time, Mr. Takaba proceeded to the third page of the handout, and explained that properties in the non-dedicated Ag use program would be valued at twice of that in the 10-year dedication program. The property in the 10-year program must be in County zoned Agriculture land and the farm operation must be commercial operation grossing $2,000 income a year. fhe group fell into discussion regarding different types of Ag zoning, and the repercussions of rezoning a larger Ag parcel down to lots less than tive acres. Mr. "hulang stated that for lots such as in many subdivisions on the island which are one to three acre Ag lots with no Ag use, but only used for residential, they should be taken out of the Agricultural zone and placed in a new zone called Rural. Mr. "Takaba stated that if a Rural zone is established, it would he correct to place these subdivisions in that category. I lowever, a new tax classification would need to be established. General questions ensued at this time. Mr. Johnston asked what would happen to a lessee on dedicated land if the property owner were disabled. Mr. Takaba stated if the owner is paying the taxes, he should apply for the dedication. Mr. Takai stated that both parties would have to sign the application for dedication. This way if the lessee somehow breaches his lease agreement, it is agreed the owner is responsible for any penalties if the dedication was also breached. Dr. hlolschuh asked what happens if the owner cannot trod a new lessee. Mr. Takai responded that they would he flexible to allow the owner time to recover the situation (new proposal states the breach does nol occur unless the property is out of Ag use for 12 consecutive months). Page 4 Pepdekeo Community Meeting September 16. 2004 Bill 49, Dr. 3, Agricultural Land Taxation A question was asked on the repercussions of a property owner in the case of a dedication breach by a lessee. Mr. Takaba replied that the primary farmer is identified in the dedication and farm plan and he would be subject to the provisions of the dedication. The dedication pertains to the property, not the person. Further, it was asked if the owner could continue with the dedication if they lose the primary farmer. Mr. "i akai and Mr. Takaba stated the dedication would continue, as long as the proper use continued. Dr. Holschuh asked what would happen if a farmer was inflicted with an intermittent disability; he could farm for a length of time, then he couldn't for a length of time, and so-on. Mr. Takai stated they would have to have a physician's statement, and this would be handled on a case-by-case basis. Mr. Anderson asked who would be responsible for the dedication on larger parcels with many lessees who hold leases of different lengths. He wondered who would apply for the dedication. "1'he farmer- lessees live on the land, and at the end of the lease, the owner sometimes has difficulty finding a new lessee. Ile stated the dedication program becomes contusing in this situation. Mr. Takai stated that in this situation, the landowner would he ultimately responsible for the dedication, as he is the manager of the situation on the property. A question was asked if the owner could prove the operation was making the required $2,000 per year, would it matter if a portion of the property goes out of use. Mr. Tulang expressed the importance of providing for fallow land. He stated to maintain a viable agricultural operation, there must always be a portion tallow. At this time, Mr. Johnson stated that the revisions in the bill were good; they have no impact on his situation, and he had to leave. He suggested that the annual income requirement for a commercial operation of $2,000 is too lenient. It takes from the intent to put more land into agriculture. I Ie stated further that farm dwellings need to be inspected. If the buildings are being rented or leased to the farmers working on the leased land which they're living on, then the Ag use rate should apply; if they are working a neighboring land or elsewhere, they are just renters, and this is not Ag use. Mr. Oshiro asked if the Ag use rate would apply if the dwelling is rented to a farm hand, rather than the lessee living in a dwelling. Mr. 'Takaba stated that providing for renting to farm hands is not a part of the current proposal, but there has been discussion on the subject. Mr. Johnson asked if there had ever been discussion on a 5-year Ag dedication. The answer was no. Mr. Smith expressed concern with page 18 ofthe bill, subsection (f)(1)(B). He felt that the need for the farmer to "petition" for a change in use is too severe. "fhe disposition of the entire subsection seems insensitive to farmers. If the farmer wants to change the type of crop on his land, he should be able to just nobly the Tax Oftice of the change in use, not to ask permission through a petition for change of use. He feels the language in this subsection should be changed to reflect more cooperation with the agricultural community. Mr. Takai responded that this subsection pertained to a time when there was a long list of Ag uses. He feels it is appropriate now to change the language in this subsection. However_ he stated the 'l'ax C)ttice must know, because some crop changes require a conversion period to be included in the dedication. He stated some use changes require a 2-year conversion period. Page 5 Pepe'ekeo Community Meeting September 16, 2004 Bill 49, Dr. 3, Agricultural Land Taxation Mr. Smith suggested that the language should state that only if the change in use affects the value of the dedication should the farmer have to notify the Tax Office. Mr. Takai stated they have not been too technical in the past in reviewing changes in the use of the land. Mr. Smith asked if there were inspections to ensure proper use on dedicated lands. Mc Takai expressed concern with the amount of lots to be inspected and appraised on the island. Mr. Burton stated that there could be people building homes without a permit to escape the homeowners late. He stated the County needs to be careful in how the laws are written pertaining to what is allowable on Ag land, as they may be encouraging dishonesty. Mr. Takai stated that when the annual appraisals are done, if there is a house placed on a property, they will note that down and check if it is allowable. At this time, Mr. Takaba announced a shift in the discussion to the new assessments which resulted in many increases in the citizen's tax bills. He stated the property values went up because of the new rule to set aside the portion of the property with the homesite on it and place that portion in the homeowners class. He said those most adversely affected by this would be persons who own a home on Agriculturally zoned land but do not live on it, and are renting the home. 'T'hey would not qualify for the homeowners class or the exemption as the home is not their primary residence. He stated that many people on the island thought Bill 49 was the reason for this change in their assessments. when actually, the assessment change is a separate issue unrelated to these proposed revisions. Questions ensued regarding using a room or a portion of a primary residence for a business, how it would effect the rate class and the homeowners exemption. Dr. Holschuh expressed concern about a constituent who found and extreme increase in her tax bill because it was discovered by the Tax Office that there was a computer in one of her rooms that was being used to perform minor business functions. Mr. Takaba stated that as long as the home is the primary residence, you would qualify for the exemption: however, the use of a portion of the home for business is an issue that is currently outstanding. Mr. Takaba stated there are several bills pending at the County Council regarding the homeowners exemptions, and more will he ibrthcoming. Mr. White expressed concern that the bill does not seem to protect the Ag land. He stated the bill is only addressing the issue of how Ag land is governed and taxed. He expressed that private developments should be focused on and taxed higher. He feels that tax revenues are not being used to protect farmers and keep the Ag land in Ag. Mr. Takaba expressed that the current proposal reflects many hours of discussion and many revisions to protect Ag. He listed the benefits added to provide for farmers and land owners who dedicate to Ag. He stated the gated communities were looked at as well as the "gentlemen farmers," and it was found that you cannot discriminate against properties with higher market value. One person asked why there are so many subdivisions being allowed. Mr. Burton expressed that the farmers have to do their share in helping themselves by committing to work with the "fax Ofice, they should do the paperwork. He felt that those people who were dedicating their property to Ag should be recorded with the Tax Office. As it is now, the feeling is that most people arc honest, and the use is not being checked because it's too much trouble. Mr. White stated there should be more evaluations to ensure proper use of the dedicated land. Page 6 Pepe'ekeo Community Meeting September 16, 2004 Bill 49, Dr. 3, Agricultural band Taxation Mr. Smith asked what would constitute Mixed Use. He stated that his home has attached to it a large warehouse in which he stores and parks his farm equipment. Mr. Takaba stated this is a gray area as yet. Mr. Takai stated everything should be made clear on the farm plan. At this time. Ur. Flolschuh requested that the community put their feelings and specitic revisions to the bill down on paper and send it to him tither through the mail or through email to his Council Aide, and he would see that the changes are proposed to the Council He clarified the current status of the bill, which is deferred in the Finance Committee pending completion of workshops in Hawaiian Ocean Vicw Estates nn September 21, 2004, at Konawaena Elementary School Cafeteria on September 30. 2004, and one will he scheduled in October in Kea`au at a location to be announced. 'I~he bill will then go back on the Finance Committee agenda for further deliberation. Mr. Oshiro asked the attendees if the Council should pass Bill 49. Dr. 3. The general reply was positive, with the comment that they feel much more comfortable now that the revisions were made clear to them. The meeting dispersed at 2:00 p.m. la Page 7