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HomeMy WebLinkAboutCOM 0280.008 2014-2016 -1 cl cOl,Th (,QW `. Jeffrey Melrose Zfll b iy` —5 Ptd 1 Island Planning 1405 Waianuenue Ave. Hilo,HI 96720 January 5,2016 Councilperson Karen Eoff Finance Committee Chair Hawaii County Council Subject: Bill 317 Draft 2 and Bill 126 Regarding Agricultural Land Taxation Reform Aloha Chair Eoff and Members of the Finance Committee Today's agenda includes Bill 317 Draft 2 which has been circulation for more than a year, and a new Bill 126. My presumption is that Bill 317 is on the agenda to be abandoned and replaced by Bill 126. It is with that unconfirmed understanding that I submit this testimony. My comments will focus primarily on Bill 126. Among other things,Bill 126 proposes to: • Phase out the current Non-dedicated Agricultural Use Assessment program • Create a new short term 3-5 year Agricultural Use Dedication program and • Create a new Agriculturally Zoned Vacant Land Dedication program with a 10 year and 3 ac minimum My comments are as follows: 1. There are problems with the current non-dedicated assessment program that can and should be addressed. For instance,the current assessment guidance in the ordinance sets the land assessed value for non- dedicated lands at just 2x the already much reduced dedicated ag rate leaving little incentive for a farmer or rancher to make an agricultural commitment to sustained operation when the valuations are so similar. This is why 90%of tax payers in the ag tax program chose the non-dedicated route. The current program does however acknowledge the importance of managing or stewarding agricultural land as a"public good" as opposed to leaving lands vacant and unmanaged. This part of the program should not be abandoned but rather its assessment rate increased significantly to encourage land owners to dedicate lands to get the best tax treatment. 2. The proposed 3 year commercial ag dedication program is a reasonable amendment and offers farmers and ranchers another alternative to the 10 year dedication program. As a practical matter however,I would suggest that the term be a minimum of 5 years to get the 2x dedicated assessment rate. Most of Hawaii Island's agriculture is orchard or green house based and ranchers fence and manage for terms much longer than 3 years.I would defer to the Tax Office for their thoughts but my sense is that a 5 year :term would be helpful to the ag community and easier to administrate than a 3 year program. 3. Bill 126's introduction of a 10 year vacant agricultural land dedication program for any property>3 acres will do little for the farm community. It will also and open up a whole new can of worms for thousands of land owners who do not actively manage their lands and reward them from their non-management. It also leaves it up to the Tax Director to determine if a particular property is even agriculturally useable at some future date but provides no guidance as to how to make that determination.This kind of public ..0. 0l Ref. To: 1" Qef. Dote AN 0 5, 4 revenue give away does not belong in Chapter 19,Article 8 which is intended to promote agricultural land use and active land stewardship in the agricultural district. I see this as a simple tax giveaway with no practical up side. In addition to these three thoughts here are several general questions to consider: • What is the purpose of including residential zoned property in any of the ag tax assessment programs, particularly the vacant agricultural lands program in Bill 216?I realize this is in the original ordinance but think we should revisit that allowance. • Why do house sites on a dedicated or non-dedicated property get assessed at an agricultural rate? There are many fine homes in the ag district and if they are part of the ag assessment programs their 1/4 ac house site is valued at less than$500. All other house sites in other land categories pay a market rate for their house site so why would we grant additional tax breaks for the fine people who live in nice houses in the ag district? Fair is fair and a house site is a house site whether you live in the agricultural or the urban district. • When considering and application for commercial ag dedication,Bill 126 sets a minimum commercial farm income at$2,000 as shown on an IRS Schedule F. That makes sense. So why, in the event the farm does not produce income does the draft also accept a Schedule F for$2000 of expense as a successful commercial ag criteria? More guidance in this area is needed to avoid rewarding a would-be farmer from expensing his new sit down mower as justification for a significant agricultural tax break. I believe we still have some distance to go to accomplish useful reform to the County's ag tax program. It is a complex issue and deserves time from all council members to try and understand the issues and options that should shape constructive legislation. I appreciate Councilperson Wile's effort on this issue but continue to believe that there has not been enough discussion with the agricultural community that should have been the first step in reforming this important legislation. Thank you for the opportunity to comment.