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HomeMy WebLinkAboutCOM 0118.031 2002-2004 per ®s hq~ BOB JACOBSON ~~,~,;~,,K,~~~ PHONE: 961-8263 rn,n~c;l,nc~»rn~•~~ FAX: 961-8912 ip pQ~ ~ KP~P`` a.:.:: } COUNTY COUNCIL 1 ('uuntt• oJ~Natii~uii llcna~nri (~ozuilr Budding 5 ,~1:ynuvr S7reet fliln, Ha~rnir 9<72d '1; October 4. 2004 TO: Aaron S.Y. Chum, Chair Finance Committee FROM: Bob .iacobson, Councilmember G SUB.IECT: Bi1149, Draft 3 -Agricultural Land Taxation Community Meeting in Ocean View On September 21. 2004, I held a meeting at the HOVE Community Center regarding the above bill. I would like to submit the summary minutes of this meeting for the official record, so they may be available to all concerned. Thank you for your attention t smatter. ..J B.1/ja Attachment Coinrv~. No. ' ' R~;f. To: ~ lief. ~~r~ CCt 7 200 Di.ctric•I 6 - UP~~er Puna, Ka'u cYC ,South Bona COMMUNITY MEETING ON BILL 49, DR. 3 AGRICULTURAL LAND TAXATION Hawaiian Ocean View Estates Community Center Ocean View, Hawaii I~uesday, September 21.2004 fhe following is a summary of the proceedings of a community meeting held by Councilmember Bob .Iacobson at the f{awaiian Ocean View Community Center in Ocean View, Hawaii, on Bill 49, Draft 3, which amends Chapter 19, Articles 1. 7 and R of the Hawaii County Code 1983 (1995 Edition). relating to Real Property 'fax Detinitions; Non-Dedicated Agricultural Use Assessment and Agricultural Use Dedication. The meeting was convened at 5:00 p.m. The attendance was as follows: Members of the Public: Ray Metzel Tim Bates County Representatives: Bob .Iacobson, Councilmember ,I. Curtis Tyler, Ill, Councilmember William'fakaba, Finance Director Nancy Crawford, Deputy Finance Director Wes Takai, Real Property Tax Administrator Craig Masuda, Deputy Corporation Counsel Rodney Oshiro, Legislative Analyst Susan Caseria, Legislative Auditor Assistant Jeanette Aiello. Council Services Supervisor Alter a hrief opening statement, Mr..lacobson turned the proceedings over to Mr. Takaba, who passed out a handout for the participants to refer to. Mr. Takaba proceeded to go over the 9 points of the hand-out. Ile mentioned that at the Waimea Workshop on the issue, Mr. Dean Uchida was talking about yield activity as a means to verify Ag use on a parcel He also stated that in the current law, the Ag dedication program does not recognize situations in which there is a lease for less than 10 years. The new proposal allows a shorter dedication period for leasehold properties in certain circumstances. lie mentioned one of the major changes in the bill, which is the reduction of rollback penalties in the occurrence of a breach of dedication. In the new proposal, the longer the party is enrolled in the dedication, the lower the rollback taxes and penalties would be. Page three of the handout, on the bottom of the page. explains the new proposal for breach dedication penalties. I Ie stated the new proposal provides benefits for non-dedicated Ag use, using two times the dedicated Ag use valuation. Page two of the handout provides examples to explain this proposed additional benefit. Further, the rollback lax on a breach of dedication for non-dedicated Ag currently goes back 10 years. The new proposal reduces the rollback tax period to two years plus the current year. The proposal states that the property must ('ounry-zoned Agriculture and used tier agriculture to qualify for non-dedicated Ag. Page 1 Ocean View Community Meeting September 21, ?004 Bill 49. Draft 3, Agricultural Land'faxation The group fell into discussion on the rollback tax and penalties for dedicated Ag. Mr. Masuda said that if a party is currently enrolled in a 20-year dedication, the dedication will continue when the new law takes effect, despite the elimination of the 20-year Ag dedication program. Mr. Jacobson asked if a person would be able to renew a 20-year dedication. Mr. Masuda said no; however, if a disability or disaster struck a person enrolled in the 20-year program after the new law becomes effective, they would be able to take advantage of the new reduced penalties. Mr. Tyler asked about start-up farms which take years to produce an income. Mr. Takaba explained the farm plan. He said the farmer can draft a farm plan to attach to the dedication application and if it is followed, and standard agricultural practices are followed, it is allowable and they would not be considered in a breach of the program. Instances of allowable breaks in Ag use were discussed. including crops or activities requiring land to be fallow for a period of time. A participant asked if a farmer would quality if the lands he farmed were noncontiguous; that is, not bordering. The reply was that the farm plan is the key. As long as one is submitted with the dedication and followed, there will not he a breach. Mr. Tyler asked about a farmer who may not use his products for profit, but may use them as a trade, or fbr personal consumption or use. Mr. Takaba stated as long as they could show that the farm produces $2,000 per year in worth, they would not be in breach of their dedication. They can barter, or whatever. Mr. Tyler yuestioned the elimination of the 20-year dedication program. He stated that our intent is to protect Agriculture activity and land. He wondered why we would not encourage a longer dedication. Mr. Takaba replied that very few properties had utilized the 20-year program. The few that had were the sugar plantations and some large landowners such as cattle ranches. He stated to have a program that was used so little caused unnecessary confusion to applicants considering their options. He mentioned the case of Hamakua Sugar, who was enrolled in the 20-year program and the business fell in the 19`~ year of the dedication, causing a breach which resulted in approximately $2 million in rollback taxes and penalties. Mr. "fyler reiterated that if somebody comes to the Big Island and purchases a parcel, it would be to the County's benefit to encourage them to keep that property in Agricultural use as much as possible. Mr. Takaba mentioned the 10-year dedication program, which provides a 50 percent reduction in land valuation than non-dedicated Ag. Discussion ensued regarding the different types of zoning and classes of taxation. Mr. Tyler asked about land in the State Land Use Agricultural District, which is now taxed at the highest and best use if there is no bona fide Ag use. He asked how the highest and best use is calculated. Mr. Takai replied that they look for a similar property and base it on that. Mr. Tyler asked for clarification, that the property is not taxed based on the house, that it is taxed based on the underlying zoning of the property. He used an example of a property on the roadway, in agriculturally zoned land. Mc Takai stated that if the property was on the roadway, it would not be in Ag use and the entire property would be taxed based on the homeowners class. ['age 2 Ocean View Community Meeting September 21, 2004 Bill 49, Draft 3, Agriculhiral Land Taxation Mr. Tyler questioned why there would be any rollback tax penalty on non-dedicated Ag parcels. Mr. 'hakai stated there would only be a penalty if the property were subdivided into smaller parcels or if it were rezoned to anon-agricultural use, such as Residential. Discussion ensued regarding the different zoning districts and diffierent sizes of parcels and the what would be eligible and what types of changes would constitute a breach. The group discussed a situation in which grandparents or parents wished to subdivide a property to leave separate parcels to their children. It was stated that if the property was subdivided before the end of the dedication, there would be a breach. In addition. if the property were not being used for agricultural purposes for more that 12 consecutive months, a breach would occur. Mr. Tyler said if a family wanted to subdivide a property to disperse to their children, and the resulting separate lots were kept in Ag, a breach should not occur. If the property were changed to an urban-type use, then rollback penalties should be applied. He stated to force a family to keep a property in Ag use to avoid higher taxes and possible penalties is wrong. It would cause an unnecessary burden for the family to have to consider farming, coupled with the desire to pass the property to the children. Mr. Masuda suggested that Mr. "fyler propose an amendment to provide for this type of situation. He stated that if the property were subdivided, the owners would be subject to rollback penalties. He stated an example where a property of 9 acres was left in a trust to two girls. The parcel was broken and given two separate TMK's. He stated there was no provision for this type of situation in the proposal. Mr. Tyler stated he did want to make an amendment. He feels subdividing Ag parcels for family should not result in penalties. Ile stated it further complicates matters when the family's property is not in the Agriculturally zoned district. Discussion continued on the issue of subdividing Ag lots for the purpose of passing land on to children. Mr. Masuda suggested Mr. 'I~yler review HRS 247 as an example of language to amend Bill 49. Mr. 7~yler stated there should be no penalty if the properly remained in Ag use. Mr. Takai said if the property were in dedicated Ag use, there would not be a breach upon subdivision. Mr. Tyler moved into discussing "gentlemen fanners." 'these are property owners who purchase a parcel of high-value agriculturally zoned land and build amulti-million dollar house there. Mr. Tyler stated that if the portion of the property that is not the house site is in bona fide Ag use, they should be able to get the Ag rate on that portion, and the house site would be taxed separately. Mr..lacobson clarified his statement. Mr. 'fakaba stated they were not allowing that benefit in these instances as it leads to speculation. Mc 'Tyler questioned the fairness of this decision. He stated if the Ag use ceased, then they shouldn't get the Ag rate. Mr. Tyler then questioned why the Ag use was based on five acres of land. Mr. 'Takaba stated this provision is not a change from the current law. Mr. Oshiro asked him if we wanted to let people subdivide 5 acre Ag lots down to one acre lots. It defeats the purpose of protecting Ag lands. Mr. Tyler stated the County is trying to state what should be the minimum Ag lot size. He expressed confusion as to what is being taxed, the size of the lot or the use. Mr. Takaba clarified that Mr. Oshiro's statement concerned subdividing Ag parcels down to smaller lots. Mr. "Tyler stated that as Ag land value goes up, the tax office is looking at the size of die lot to qualify for Ag dedication. Mr. Takai stated that the Page 3 Ocean View Community Meeting September 21, 2004 Bill 49, Dratt 3, Agricultural Land 'I~axation program from the beginning, when it started in 1973, perceived that a minimum of 5 acres would be necessary in order to make agriculture afull-time occupation. Mr. Tyler stated for pasture and orchard uses that may be true. but with newer different types of crops in diversitied Ag, such as potted plants, grccuhouses, nutriciticals, etc., this perception may no longer apply to all situations. Mr. Oshiro reiterated that if a property owner subdivides his lot down to smaller parcels, it would mean they would receive benefits that may be unfair to others in the program, and they should be considered in breach and receive the rollback penalties. Mr. Tyler feels that only the large land owners will benefit if the County does not allow subdividing while in Ag use. Mc Takaba questioned why the property owner would not want to dedicate the property to Ag and take advantage of the benetts, and Mr. Tyler replied that not all families would want to make such a long commitment. Mr. Tim Bates, a certitied appraiser who attended the meeting, asked who was the enforcing agency that made sure the property owners claiming benefits for Agricultural use were actually performing the required functions. Mr. Takai stated they had to look at that; he said that when the application is made. a representative from the Tax Office will go to the site and verify the use. Discussion continued on the verification and enforcement of the use. Mr. Bates asked if there could be written rules regarding enforcement so it is made clear to applicants. Mr. Tyler stated that applicants sign the application under penalty of perjury. Mr. Bates stated that the way laws are written sometimes set them up for failure. Mr. Jacobson stated that people don't pay attention to the perjury clause when signing documents. The perjury clause isn't enough enforcement, as the penalty for perjury isn't enough to sway them into complying with the program. Using the Federal Schedule Fand/or the State Excise Tax forms for verification was suggested by Mc Bates and Mr. Tyler. At this time, discussion shitted to start-up farms and providing for properties unable to produce the required $2,000 per year income until they arc established. It was stated that if the farmer was functioning under standard recognized farming practices. they would be in compliance with the program. Mr. Tyler stated that large and small farmers in forestry should he treated alike. Mr. Bates suggested that a family wanting to leave parcels to children should consider leaving the parcel to one of the children rather than several. He stated that when a parcel is left to several family members. it can cause division in a family. He next mentioned the problem with land speculation. He stated that speculation is driven by a lack of supply of the lowest economic strata of real estate. He suggested increasing densities with common living spaces to eliminate land speculation. Mr. Tyler stated that people do want to come into buy land and live here, but Mr. Bates pointed out that this is driving local families off their land because the vahiations are ever increasing and they can't afford to stay there. He stated further that the County has to somehow focus on preserving Ag lands and open spaces on the island. He said that the farmers producing crops or making a living oft the land should he protected. If living on Ag land, it should be used for Agriculture. Mr..lacobson asked how a person would go about setting up housing on anon-dedicated parcel. Mr. "fakai explained that a person would need to till out the Ag program applicatiou, in which they would include a sketch of the property showing which portion would be in functioning Ag use and Page 4 Ocean View Community Meeting September 21, 2004 Bill 49, Draft 3. Agricultural band Taxation which portion was the home site or housing. If different types of crops are grown, that should be specified in the sketch as well. After reviewing the application and verifying the use, the parcel would receive the Ag rate on the farm poiKions and the home site would be assessed using market value and taxed at the homeowners rate. Mr. "fyler asked how the four categories (Intensive Ag, Orchard, Fast Rotation and Pasture) of Ag use was decided. Mr. Takai stated that in the past, there was a long list of types of Ag uses that would comply with the program, and a person would have to choose a category to be in. 'this proved to be a complication, because if a farmer wanted to switch to a different type of Ag use, they would be in breach of dedication. He stated that since the dosing of the plantations and the emergence of diversified types of Agriculture on the island. they have had to make changes to the categories, to make them more broad. Discussion continued on different types of Ag categories and what uses would fit into what category. Sugar was considered a fast rotation crop. Potted plants are considered intensive Ag. Mc "Takai pointed out that he believes the Ag rate should be lowered. He stated that Hawaii County has the highest Ag rate in the state and this does not protect Ag lands. Mr. Takaba stated that there are many parcels on Ag land that arc not in Ag use, and these parcels are in the homeowners class, receiving the homeowners rate. Mr. l~yler agreed that if the parcel is being used for Ag, it should be taxed at a lower rate. The group fell into discussion on different ways to tax properties. Lowering the Ag rate was mentioned and discussed. Basing the tax on productivity of the Ag use was mentioned. Circuit breakers were discussed, and situations in the other Counties and what the results have been after to their real property taxation programs. A former Councilmember had brought up discontinuing the homeowners class; the possible result of this was discussed. Different ways of assessing differently zoned land was discussed. F,xemptions were discussed, and it was mentioned that bills for that portion of the Administration's changes to the County's real property taxation program was separate from the Ag land portion, but that several bills were submitted to the Council and deferred. Once those are processed by the Council, the Administration has more proposals to send to them. Mr. Bates asked if the County had inquired to different jurisdictions on the mainland who may have been through taxation reform. Ms. Crawford stated that their working group had done considerable research and incorporated ideas gained from other jurisdictions. Mr. Takai stated that not only had other jurisdictions been through similar processes, but they have had similar or worse problems with their property taxation. Disneyland in California was mentioned, where they are getting the benefits of a land Bank while being a very high user of the infrastructure. Mr. Tyler asked what golf courses were under, and was told they are in the Open zone. Mr. "fyler feels it should be in the Resort class. He was told that the golf courses were a good use of the land. They preserve open space and therefore are given a special rate. Mr. 'Cyler expressed concern about the run-off from the golf courses and the effect on the environment. Mr. Takai mentioned the golf courses have a special section in the County Code. Page 5 Ocean View Community Meeting September 21, 2004 Bill 49, Draft 3. Agricultural Land Taxation Mr. Jacobson asked if there were any means to ensure that no more small parcels were developed. He wondered if there was any way to stop downsizing Ag parcels using the taxes. Mr. Masuda said that legislating land use through the taxes causes problems. ?f the County wants to get away from making smaller lots on Ag land, the subdivisions should not be approved. Land use policies should be reviewed. Mr. Bates brought up a controversial situation that occurred in Sonoma County in California. They proposed a moratorium on annexation of lands to expand the city limit. He said that in that case a city would have to expand up rather than out. Mr. Jacobson suggested lowering taxes in high density areas to encourage people to live there. Ms. Crawford stated that the Planning Department is interested in having high density in some areas as it would be easier to establish affordable housing. There was a short discussion on Hawaiian Ocean View Estates specifically. Land values in the subdivision was discussed and the current trend there. Mr. "fakai stated most of the parcels there were still paying the minimum tax. He said the parcels were being taxed at market value. The meeting dispersed at 6:45 p.m. ja Page 6