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HomeMy WebLinkAboutCOM 0938.000 2004-2006 x~r w FRED HOLSCHUH, M.D, Phone: 961-8264 Councilmember Fax: 961-8912 .••R os x~,M rye COUNTYCOUNCIL County ofHawai'i C- r- C . 25 Aupuni Street Hilo, Hawaii 96720 - r n June 1, 2006 Co w u-i TO: Mr. Stacy K. Higa, Council Chairman FROM: Fred C. Holschuh, M.D., Councilmember Chair, Human Services and Economic Development Committee RE: Summary minutes of Community Meeting regarding Bill 49, Draft 3, relating to Agricultural Land Taxation held on October 28, 2004 Attached is a copy of the summary minutes of a community meeting held at the Honoka`a Gym on October 28, 2004. I would like to request that the document be made a part of the official public record regarding the Bill. Thank you. FCH/ja Attachment Comm. No.- q log Ref. To: Ref. Date^ i_ IF~ COMMUNITY MEETING ON BILL 49, DRAFT 3 AGRICULTURAL LAND TAXATION Honoka`a Gym Honoka`a, Hawaii Thursday, October 28, 2004 The following is a summary of the proceedings of a community meeting held by Acting Chair Fred Holschuh at the Honoka`a Gym, 45-541 Akia Street in Honoka`a, Hawaii, on Bill 49, Draft 3, which amends Chapter 19, 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 was convened at 6:45 p.m. at the Honoka`a Gym by Dr. Holschuh, Acting Chair. The attendance was as follows: Members of the Public: Bob Shioji Lori Beach Karen Clarkson Bill Beach County Representatives: Fred C. Holschuh, M.D., Acting Chair Leningrad Elarionoff, Councilmember J. Curtis Tyler, III, Councilmember William Takaba, Finance Director Rodney Oshiro, Fiscal/Program Review Auditor Susan Caseria, Legislative Auditor Assistant Laura Trotter, Council Services Assistant 11 Jeanette Aiello, Council Services Assistant Supervisor Acting Chair Holschuh thanked everyone for attending the meeting in Honoka`a regarding the agricultural tax issue (Bill 49). He thanked the Council staff for their wonderful work in addition to setting up the equipment at all of the meetings. Dr. Holschuh introduced the Council staff in attendance. Dr. Holschuh asked those in attendance if they would mind if Finance Director William Takaba gave introductory remarks after the speakers had a chance to speak. Having no objection, he proceeded to call on the individuals who signed up to make comments on Bill 49. The first speaker, Bob Shioji, representing the Hamakua County Farm Bureau (HCFB) testified that their organization along with others are actively involved in the development of an agricultural plan for the Hamakua area, and this bill regarding tax on agricultural land is a very important part of that plan, in addition to agricultural land use. The organization's concern is the proliferation of "gentlemen estates" popping up on Page 1 Community Meeting October 28, 2004 Agricultural Land Taxation prime agricultural land like what is currently happening along the Hilo Coast, however they do realize it may not become that bad in Hamakua because most of the lands are owned by Bishop Estates, and they have committed to keep the land for agricultural use. Instances continue to occur whereby close to $1 million homes are being built on these five acre parcels by outsiders; not that they mind these homes being built, but these individuals need to farm the land, too, if they wish to benefit from the agricultural tax rates, because currently all they're doing is erecting a fence around their property, placing a couple of goats or horses on their property, and by doing this, qualify for agricultural tax rates; and the HCFB feels this is wrong. Mr. Shioji further stated that he was recently in a meeting with Bill Takaba and one of the Farm Bureau members from Kona where Bill explained Draft 3; the HCFB has no objection to it, but had heard that there was a Draft 4 and wanted an update. Mr. Shioji explained that the Farm Bureau member present at this meeting was very critical of the County Council and the Administration because of the way he was being taxed. This farmer thought it was unfair that in addition to his home, he was also being taxed inappropriately for homes he makes available for his workers. Mr. Shioji said, however, Draft 3 addresses this issue, and this same farmer now feels that the County Administration has bent over backwards to try and help the farmers. Dr. Holschuh asked Mr. Shioji to explain briefly about the agricultural plan, however, Mr. Shioji thought Ms. Lori Beach would be better equipped to do so because she had all the notes from their meetings. Mr. Tyler thanked Mr. Shioji for always standing up for the farmers' concerns and feels that the farmers, who are closest to the lepo (dirt), are the people with the common sense because they are common people. Mr. Tyler shared the HCFB's concern about the "gentleman farmer" and feels strongly that farmers should be afforded special consideration because of the community's agrarian background. Mr. Tyler also stated the County Administration is aware and agrees that the legitimate farmer is currently being penalized, and these same farmers are shouldering the subsidizing of people who are not legitimate farmers. He asked Mr. Shinji if he had any thoughts on how those individuals administering the law for the County can prevent the gentleman "borderline" farmer from receiving this tax break. Mr. Shioji replied he believes the County has taken a step in the right direction because under this proposed bill, each farmer needs to justify that they are commercial farmers, by submitting a Schedule F in addition to proving that their production of products is worth $2,000. Mr. Tyler interjected that another option would also be for them to show that they were following their individual agricultural plans. Mr. Shinji explained that he was in favor of this, except for the section in Draft 3 where it describes the ability of the Planning Director to cancel a dedication without roll back taxes or penalties in the event of a recognized natural disaster. He felt this needed to be clarified because the natural disaster should be defined as being out of the farmer's control. He cited the example of Page 2 Community Meeting October 28, 2004 Agricultural Land Taxation his farm, where the lower Hamakua Ditch, which is his lifeline, has been down the last two and a half years. Because he has no water, he is unable to farm. This kind of situation, in his view, is an exemption and should not affect his agricultural tax break. Mr. Shinji also expressed that the small ranchers with 10 or 15 acres depend quite a bit on the market price, so reaching the $2,000 product production would be something beyond their control as well. Mr. Tyler explained that Draft 4 does take all these things into account, and that he, Mr. Chung, Mr. Takai, Mr. Takaba and Legislative Auditor Connie Kiriu have been working to improve the bill, and they hope to have it ready no later than noon tomorrow. Mr. Tyler is also working on a proposal to Draft 4 which would address the farmers' concern about the way the current ordinance reads. It states that the farmers who live on their agricultural land are being penalized even if they are doing bonafide farming. The new proposal states that if you are doing bonafide occupation under the law, you will not be penalized for doing something that is legally allowed on agricultural land. But, if the individual lives on agricultural land and you do not comply with both the State and County law, then you will be penalized. Mr. Tyler expressed that he and Aaron (Chung) desire to get things done during this Council term because if the makeup of the Council changes because of an election, that may hinder any progress, including not being able to have this in time to affect the next tax year. Mr. Shioji echoed Mr. Tyler's comment. Mr. Elarinoff questioned Mr. Shioji as to whether his goal was to prevent abuse or prevent development. Mr. Shioji replied that he did not want to prevent development but more to prevent the proliferation of gentlemen estates on prime agricultural lands. Mr. Elarinoff asked Mr. Shinji what was wrong with a these types of "farmers." Mr. Shioji replied that an individual who fenced in their property and added a few animals here and there would claim their property to be Agricultural. They are seeking agricultural tax breaks for an illegitimate farm. This is not fair to the legitimate farmers. The conflict mentioned by Mr. Shioji is a mixed message from the people doing gentleman farming. As an example, he mentioned crop spraying. Because he is surrounded by non-agricultural developments, and these individuals complain about farming activities. Mr. Elarinoff said that the farmers he spoke with plow during the night because the dust is not visible at night, hence the neighbors don't complain. He pointed out that the non-farmed lot is still Open land. Mr. Shinji did not disagree, saying that we all want open space, but the difference is that he would pay for it, even in a residential area, and if these illegitimate farmers want to keep the Open space, they should pay their fair share and not receive an agricultural tax rate. What Mr. Elarinoff was trying to point out and get Mr. Shioji to say is that it doesn't impact the legitimate farmer per se, but that it is basically unfair. Page 3 Community Meeting October 28, 2004 Agricultural Land Taxation Mr. Shioji agreed, and also emphasized that some of the best irrigated lands are being bought out by these so-called millionaires. He agreed that if these individuals are willing to pay the fair market value, then it is fine; but reiterated they should not be receiving an agricultural tax rate. Mr. Tyler pointed out that the State law requires that if you live on a State Land Use Agricultural property, there are certain restrictions, such as you cannot have a residence there; you can only have a farm dwelling. If you don't comply, there's something like a $5,000 fine per violation. Mr. Tyler instructed everyone that anyone who comes in for a rezoning must comply with Chapter 205 of the HRS. Mr. Takai stated that there are 70,000 parcels that are zoned Agriculture by the Land Use Commission. Parcels in Lakeland, Pleasant Acres, Kamuela Meadows, all those 8,000 to 10,000 square foot lots were grandfathered in as Agriculturally zoned lots. All these requirements, as far as the Real Property Tax Division (RPTD) is concerned, are very difficult to appraise. He pointed out that the lands in Puna, Ainaloa, and the Kalapana Black Sand Subdivisions are all 7,500 square foot lots and are all zoned Agriculture, and there is no criteria of prime Agricultural versus all that other land filled with lava, like Hawaiian Ocean View Estates. So what the Real Property Tax Office does is declare it with an Agricultural assessment if they see an orchard, animals, et cetera, on the property. Mr. Takai also explained that this issue came up about the gentlemen farmers with the Kohala ranchers about nine years ago; and because there were a number of agreements between the ranchers to run their cattle through the properties, it was hard to discriminate against those lots in the Kohala ranches. Tightening that up might hurt the small Kona farmers because the RPTD is not able to discriminate, although they are attempting to give the breaks to genuine farmers. But, in the meantime, these millionaire estates might be running cattle or they have the $2,000 income being proposed. So ultimately then, these individuals must receive the same benefit. Dr. Holschuh asked when these lands were grandfathered in. Mr. Takai was not sure, but thought these subdivisions were built before 1967; that's when the County zoning came into effect, so if you were zoned an A-1 a, you couldn't have a lot smaller than one acre. But, all of the lands at that time, which were smaller, were grandfathered in. Mr. Takai did say that the lands could be rezoned, but that would be a Planning issue. Land Use (State) would have to rezone it to Urban first, so the RPTD is caught in between. Dr. Holschuh was concerned, because he couldn't see how the County could tell anyone that they were not allowed to buy a piece of property and build a home on it. But, Dr. Holschuh did agree that they shouldn't get a agricultural tax rate. However, the problem occurs because they may have as an activity such as running cattle through it, so they are allowed the Agricultural tax rate. Page 4 Community Meeting October 28, 2004 Agricultural Land Taxation Mr. Tyler pointed out the reason these lands were grandfathered in was because HRS 205 didn't go into effect until the late '60's, and explained that you can't go back, according to the U.S. Constitution, and penalize people under the law. He also wanted to make clear that it wasn't the RPTD's kuleana, but it was more a Zoning and Planning issue. Dr. Holschuh asked Mr. Bill Beach to come forward. Mr. Beach understood that as far as he knew of the Kohala Ranch, a rancher runs the cattle in all the common areas, and then they fence him out of their three acre lots, although he isn't sure what the implications of that are. He wanted clarification regarding Mr. Takai's statement regarding the farmer being able to show $2,000 of gross income on their Schedule "F". Mr. Takai explained the example of the Kahua Ranch; as the owner of the property does not have to show their Schedule F if a farmer is using the lands or if a ranch is the one running the cattle throughout the whole subdivision. Mr. Beach wondered if the lots not in the common area for running the cattle were taxed at a different rate. Mr. Takai replied that the because of the cattle running through it, the other fenced-off acreage would be minimal in value also. He further explained that if their land is enjoying an Agricultural value, and the homesite that is on that property is declared a homesite. That portion will be assessed at the homesite and will be assessed like all other non-farm properties. Mr. Tyler asked Mr. Beach if what he was trying to say about the common areas owned by the Association is that dues are paid for common area maintenance, and the Association will be taxed on that land at Agricultural rates, but these individual owners are taxed at fair market value if they are not doing bonafide farming. Mr. Beach confirmed this was what he was trying to ask. Mr. Tyler further stated how this has caused a huge fear on the Hokulia project, whereby there would be common area farming, but no one would be allowed to farm on the one-acre lots. Mr. Tyler pointed out to Mr. Takai that this issue needs to be looked at real carefully. Mr. Beach inquired if somebody has a five acre parcel and they just fence in three acres, can they dedicate the other two acres to Agriculture? Mr. Takai's response was in the affirmative, and he said that once you dedicate a portion of your five acres, then you qualify for whatever benefits you can receive from the Agricultural program. If you don't have any portion of your property dedicated, the whole five acres are treated at market value. Mr. Tyler asked Mr. Beach if he knew whether the homesite, in all cases, should not be unlimited? Mr. Beach thought that a 20-acre homesite should not get the benefit, that there should be some maximum. Mr. Takai, however, said it wasn't the case and added that if an individual had five acres and had three acres landscaped and fenced off, there is nothing in the current law to say that we can't declare that. He felt that the County needed to have a maximum declared homesite, so that we can say the maximum homesite you can declare is one acre, or half an acre or a quarter acre, et cetera. Page 5 Community Meeting October 28, 2004 Agricultural Land Taxation Mr. Beach felt that whatever is decided with the tax law, people will figure out what the best thing is for them to do, and this would ultimately drive what happens in agriculture. He further stated that if he had come to the Council with a plan of a similar scope, the Council would tell him to go get an EIS (Environmental Impact Statement) and a whole bunch of other planning studies to make sure that the impact isn't going to be a detrimental one. Mr. Beach understands the intent but asked the Council to consider carefully whatever decision it makes, because many residents value a rural lifestyle and hope that this type of lifestyle is not adversely affected by whatever property tax laws are enacted. Mr. Tyler reiterated that the thing he wants to make sure doesn't happen is that millionaires buy ag land and get the ag rate while not using it for ag purposes. In fact, there have been a number of these individuals who don't mind paying the fair market value. Mr. Takai feels the new plan is well thought out and the changes will benefit the fanners, however, the problem of eliminating the gentlemen farmers is something they cannot do, because they do not have the power to do it, and they cannot discriminate. He feels the farmers will benefit from this bill, but still the gentlemen farmers will also benefit. Mr. Elarinoff clarified Mr. Takai's statement regarding "taking care of the farmers." He wanted to make it clear that it's not because the farmers are the Council's friends, but instead the members of the Council are promoting this bill because the Council looks to have sustainable agriculture for our `aina. Dr. Holschuh called Lori Beach to the microphone. Ms. Beach expressed her feelings that she didn't feel there was anything inherently wrong the way the taxes are handled now. The problem, she feels, is that we don't enforce agricultural use on agricultural lands and feels the County has allowed misuse of agricultural lands forever, despite the County Council listing this as one of their goals. She does not see how this proposed tax bill takes care of any of the goals listed. She understands there is a problem in making the right tax assessments on non-agricultural use lands; however, there doesn't seem to be an expectation of agricultural use on agricultural lands. Instead, we're making the legitimate fanners prove that they're doing what they're supposed to have been doing all along. Ms. Beach described the Hamakua Agricultural Plan as a community effort to keep agriculture in Hamakua as agriculture. Mr. Tyler responded that he has changed his perspective on this issue due in part to all of the testimony he has heard from the public as well as from the Administration. He reminded the public that the Real Property Tax Office's main responsibility is to generate the most income, and without this agency, there would not be a dependable revenue stream. But, the enforcement of the Zoning Code is part of the Planning Department's responsibility. He suggests that Ms. Beach address this issue as part of the General Plan. Page 6 Community Meeting October 28, 2004 Agricultural Land Taxation Further, Mr. Tyler explained that the intricacies of enforcement will not be contained in the General Plan, instead the General Plan has to be implemented through the Codes. Ms. Beach asked Mr. Takai how the bill, in its current form, could help farmers. Mr. Takai explained one of the benefits would be that the homesite would be equivalent to the neighbor's residential property, and that in itself will help bring values down. Ms. Beach pointed out the current situation with their family, and that they received a lower Residential rate rather than claiming their property as Agriculture. Mr. Takai explained that each resident had the option. Ms. Beach asked how this could be encouraging agriculture if people will receive a lower tax rate for just having a residential? Mr. Takai explained that the farmers will have mainly a long-term security, because the County is tightening up some of the provisions of the agricultural laws. Mr. Takaba interjected that one of things the Administration is trying to promote is home ownership. The rates for the homeowner class are very low currently, and that is where the discrepancy may be. Because the rates are low for the homeowner, you may think you're not getting benefits from being in agricultural, and this is where some of the concerns are. The bill helps those who want to have bigger lots and want to dedicate their properties. Draft 4 of this bill will change the homesite values to a lower amount. Mr. Tyler also explained that the agricultural use rate is set by the Department; there are assessments which are set by the Division based on market value, and agricultural use, which values are very low. Then, there's the tax rate which is set by the Council. Previously, the Council had voted in favor to cut the homeowner's class rate in half approximately which resulted in a huge drop in revenue. What the bill tries to do is to insure that the farmers have a benefit from not only farming, but living on their farm. Also, the current law favors certain types of farmers at the expense of other farmers. What happens with this bill is those farmers who are committed to long-term farming will get the biggest breaks, and those that are not will not. This is just one of the improvements included in the Draft 4; and at the same time, it also addresses the penalties in a more fair manner. Mr. Takai cited some examples of the unfair rollback taxes that currently exist in the law, which is what the Administration feels needs some change. Ms. Beach questioned the $2,000 productivity requirement, whereby Mr. Takaba explained that for a 10-year dedication, this productivity level would be a requirement, because there needed to be some type of justification for the commitment toward the agricultural tax program being taxed at 90 percent of the values. It was determined that those who should be receiving the most breaks are those that are contributing to the industry and the economy of the County, but the individuals needed to be yet defined. Following the USDA definition, then, these individuals would be the individuals that generate revenue of about $2,000 from their respective operation, and this is what the County used as a base. Since then, the definition has been refined to make sure that Page 7 Community Meeting October 28, 2004 Agricultural Land Taxation people understood that it was the farm operation; it did not have to mean income from a particular tax key or property; it could be several tax keys, not contiguous. The farmer, then would need to file a Schedule F to verify the income. The Administration also wanted to make sure there were exemptions to this in case the $2,000 was not generated. So, a farm plan that shows that you are doing this operation legitimately; or you may be in a fallow period, or you have no water because of lack of rainfall or drought, which would be an acceptable exception. So, the backyard farmer will benefit, but it will not benefit a commercial farmer. Councilmember Curtis Tyler, in the absence of Acting Chair Holschuh, called Ms. Karen Clarkson to the microphone. Ms. Clarkson questioned what she thought was the intent of the bill, and that was not to increase tax revenues. Mr. Takaba explained that it may or may not increase revenues. The Administration did not want to give the impression to the public that the intent of this bill was to generate more revenue; instead the intent is to keep the ag program going, but limit the abuse or at least some of the abuse which might jeopardize or compromise the agricultural values that are being awarded. Ms. Carlson asked whether the County would be reducing the assessed value for the people who dedicate their properties by just doubling everybody else's. Mr. Takaba responded that those currently in Agriculture use would see the values twice that of somebody who dedicates. Ms. Clarkson expressed her opposition over this type of evaluation, because she cannot see that making a certain amount of income makes you somehow deserving of a tax break, more than somebody who's subsistence fanning or has land in open space. Mr. Takaba tried to explain that the tax difference is not that much even if the values are doubled, and in fact, many people will not be affected, because they will be paying the minimum tax, anyway. The larger lot owners may be affected somewhat. Ms. Clarkson said that the world is changing and you can't stop the tide with taxes, and she doesn't want to see the smaller farmer being hurt by this bill. The State Legislature, according to Mr. Takai, passed Act 175 which basically says if you're in Agriculture and in Agriculture use, you can get that benefit without dedicating. However, throughout the past 30 years, the Administration as well as members of the community questioned why the values are the same when someone commits themselves for an "x" amount of years versus someone who doesn't. Ms. Clarkson commented that she was pleased that forestry was being taken into account and recognized as a farm operation. The Administration, according to Mr. Tyler, is trying to encourage long-term farming. The issue of open space, native forest versus producing farms, be it forestry or food, is currently not being distinguished and will not be addressed in this bill at this time. Handouts were given on some examples of the tax responsibilities for property owners in different scenarios. Page 8 Community Meeting October 28, 2004 Agricultural Land Taxation Mr. Takai talked about an agricultural seminar he attended on Oahu recently where one of the sessions covered the open space issue, and he was told by an Oahu official that the County of Hawaii should look at these open spaces and give these landowners a tax break. Mr. Takai told this individual that this encouraged land banking, and this is why the County of Hawaii has chosen to recognize a farm plan as a means of giving the agriculture tax break, so that land banking is kept down at a minimum. Although he is in favor of open space, he feels any kind of tax break will undoubtedly cause this type of land banking to occur. Mr. Takai gave an example of Bishop Estate paying $21 million for 25,000 acres of Hamakua land knowing that this benefit was there, what they could do was to sit on it for years and enjoy a very low land tax. Ms. Clarkson responded to Mr. Takai, saying that what it all boils down to is what is better for the land, intensive agriculture or open space. Mr. Takaba wrapped up his presentation, confident that everyone understands Draft 3, and he thanked the Council for their work on this, especially for Dr. Holschuh's efforts at setting public meetings in the Hamakua District, and believes that Draft 4 came as a result of the many discussions that took place and feels the public will be happy with Draft 4. He thanked Councilman Tyler for his hard work on Draft 4. There have been six meetings to date and many community group meetings, and more are expected, especially in Hilo. He thanked everyone for their input. Dr. Holschuh mentioned that these type of meetings throughout the island had never really been done before, and it has been very well received and a lot of good information has come out of these types of meetings. He asked Mr. Takaba when Draft 4 would be available to the public. Mr. Takaba replied that it should be available by tomorrow and will be submitted to the Council at that time. Mr. Tyler also explained that they wanted to wait until after tonight's meeting's discussion before finalizing the draft bill. He explained that some of the Councilmembers are proposing that the homesite value, which was substantially increased previously, go back down to the maximum Agriculture use value, assuming you are doing bonafide agriculture, but subject to a maximum size as Mr. Beach had previously described. Dr. Holschuh said that although many people have encouraged the hurrying of the passage of this bill, he feels very good about the way things have evolved to the point of a Draft 4 of the bill. Mr. Takaba said that hearing the farmers like they did in Waimea, made them realize some of their issues; having to spray at night, et cetera. Dr. Holschuh asked about the Right to Farm legislation, and Mr. Tyler said that it had passed, however you can't go backwards in law, so what happened was that the Governor signed this law, and what it basically says is, if you live in State Land Use Agriculture, you cannot have recorded covenants that legally restrict the farmer on those lands from doing permitted legal permitted uses under the law. Dr. Holschuh said that the "however" in that was happening around when the bill passed, like people were saying that you couldn't put trees up because it was going to block views, et cetera. Page 9 Community Meeting October 28, 2004 Agricultural Land Taxation Mr. Takai asked the community members to not to take things out on the staff for bad legislation, like the recent implementation of the high value process, because the RPTD's job is to enforce what was passed by the Council. Dr. Holschuh also asked the community not to take it out on the Council either, but said it is good to hear what members of the community think. Mr. Takaba said that Draft 4 is supported by the Administration even if it drops the revenues, which is an indication that the Administration is serious about its intent and it was not to raise any more money; it was to make sure we come up with good legislation and a good real property tax program for agriculture. He asked anyone who had questions or concerns on the bill to call him at the Finance Department. Dr. Holschuh inquired again as to when the Draft 4 would be available to the public and Mr. Tyler suggested that Dr. Holschuh ask his staff to get copies digitally to those people interested in having a copy. Ms. Beach raised a question about who does the public contact regarding the enforcement or making changes in land use issues and planning issues. Mr. Tyler told Ms. Beach that the Planning Department handles the enforcement of the laws with regard to land use. If it is a tax use situation, the Finance Department will handle those issues. If it is a building violation, then Public Works would be the right department to handle the problem, et cetera. Dr. Holschuh asked if there was something specific, then he requested the letter be sent to him, or if it's sent to the Planning Director, send him a copy. Ms. Beach emphasized that the issue of enforcement was an issue. Acting Chair Holschuh asked Mr. Bob Ralston to come to the microphone. Mr. Ralston inquired what the County meant by making the taxation fair; he wanted to know what was unfair. Mr. Takaba described the nine different classes of properties, from Residential to Agriculture. The current distribution of taxes based on values is really in favor of the agriculture properties, so when looking at the whole Agriculture tax program, they want to be sure that they look at all the other eight classes of properties and not only Agriculture. They want to make sure if Agriculture is receiving more breaks, the other eight classes of properties who are going to bear the burden of the budget are able to pick up the burden and keep everything in balance. Mr. Tyler stated that the current law is unfair because it discriminates against people who do certain types of farming and those who don't. It also discriminates against people who live on their farms and those who live in their homes but don't farm. So, a homeowner on agricultural land gets penalized under the current law. If somebody is not properly utilizing their agricultural land for agricultural purposes, then they are potentially receiving benefits. If you are a vegetable fanner, you don't enjoy the benefits for commercial use of your property that people with coffee drying facilities and foliage and flowers do, which is unfair in his perspective. He also stated that although revenues are Page 10 Community Meeting October 28, 2004 Agricultural Land Taxation going down, those people that have been enjoying benefits without actually complying with the law will get whacked with taxes. Mr. Ralston wondered how this was going to be enforced, but Mr. Tyler explained that the Real Property Tax Office can require a Schedule F as well as a General Excise Return. There is a provision that is being proposed to give the Tax office some teeth, so they can go after this. Mr. Ralston pointed out that he didn't think there was a penalty for claiming more income than you have, even with the IRS. Bill 49, according to Mr. Takai, has a provision where the Director will need to revisit or review the productivity value at least every five years with a public hearing. Currently, there is no other county within our State with this type of provision. Mr. Ralston inquired why an intensive truck farm would be valued at $2,000 per acre. Mr. Takai explained that the values, which are the anticipated net yield, not gross, were given to the County several years ago and it was reviewed by a committee made up of agricultural specialists in the prior Administration. The figures are actually very low compared to what the State reported. A lot of agencies were tapped to help find the productivity values for the various crops. Since then, the Department has learned that there is a book that is published every four years that has the productivity values. The agricultural specialists will be compiling the expert data so that the Real Property Tax Office can use it fairly County-wide. Mr. Ralston further inquired that if he were to not harvest his orchard, and put cows on it, would it change the valuation of the property? Mr. Takai responded by saying that if he doesn't dedicate, the Real Property Tax Division is requiring all owners to turn in a signed agricultural use application letting them know the size of the respective farm, the home site area, and what the homeowner is doing physically with the property. Signing the application by the landowner indicates the understanding of what is due if the land is subdivided, which could result in back taxes. Mr. Ralston asked about wasteland, and Mr. Takai said that it depends on what is wasteland, which by definition is totally unusable. Not wanting to use it is not sufficient enough for a tax break. Mr. Ralston explained that he did not claim his property to be Agriculture use in this last tax period, because it was much cheaper for his property to be declared Residential, and he wondered how this new law would affect this. Mr. Tyler responded that a stop gap measure instituted by the Council this year to allows the housesite to be valued at the homeowner's rate. In Draft 4 the homeowner's rule will be applied only for t he "footprint" of the homesite, or an area to be approved by RPTD. Mr. Ralston felt that the zoning puts a lot of restrictions on agricultural properties and demands are being made on how an individual can use his land. By that token, the tax should be lower and he understands that this is what this proposed bill is all about. Mr. Ralston inquired into one of the examples on the handout, whereby if an individual were to say that he wasn't using the land as agriculture, and that he's using it as a Page 11 Community Meeting October 28, 2004 Agricultural Land Taxation house lot, even though it's 20 acres, then could he still be taxed at the residential rate? Mr. Takaba responded, saying that so long as he has a house on raw land, and he chooses to do nothing with the property, then if he claims it as a homeowner class, he will then be assessed at market value, both the house and the lot, and the rate would be at $5.55 per thousand a rather than the ag rate of $9.85 per thousand. Mr. Shinji returned to the microphone and expressed that on the question of the dedication versus the non dedication of land, in his case, the most that he could farm is maybe five years, but he is willing to dedicate it for 10 years, because he has no intention of selling the land. But, he will look for someone to lease it should he give up farming. The intent is to pass it on to a family member without any penalty or rollback or no conveyance tax involved. If he sells the property, then there's a five year rollback under the current law. A new owner, according to Mr. Takai, will need to sign an application to continue the dedication, but if sometime in the future, if there is a breach in the dedication, there will be back taxes. But he will know about it, unlike previously where the purchaser claimed he didn't know about the back taxes. So, this new provision will act as a disclosure. There being no further public testimony or business, at 9:00 p.m. Mr. Holschuh thanked the Council staff and Legislative Auditors and everyone for coming and the workshop was adjourned. 1 Council Services Assistant II Approved: Fred C. Hooolschuh, M.D., Acting Chair Finance Committee Page 12