The URL can be used to link to this page

Home My WebLink AboutCOM 0923.008 2014-2016 Margaret Wille --M11.c.'f 4 Phone No.Hilo: (808)961-8027 . M •'.� , Phone No. Waimea: (808)887-2043 Council Member .• - Lac District 9-North and South Kohala " ,�� Fax No.: (808)887-2072 ;(•i I.t E-Mail: mwille@co.hawaii.hi.us ,t• - OF..N►••!� HAWAII COUNTY COUNCIL County of Hawai`i Hawai'i County Building Holomua Center West Hawai'i Civic Center Bldg.A 25 Aupuni Street 64-1067 Mamalahoa Highway,Suite C-5 74-5044 Ane Keohokalole Hwy. Hilo, Hawai'i 96720 Waimea, Hawai'i 96743 Kailua-Kona, Hawai'i,96740 TO: Dru Mamo Kanuha, Chair Re: Comm. 9?3 _ and Members of the Hawai`i County Council ,--.) FROM: II rrgaret Wille, Council Member -.-' s 47 Date: September 8, 2016 _ Subject: Finance Committee Workshop on Real Property Tax Agricultural `' Dedication Program, pertaining to Bill 218 ` ' Attached please find pages of the International Association of Assessing Officers' audit of Hawai`i County's property tax policies dated March 5, 2016. Please provide copies to the Council Members and public participating in the workshop. Thank you. MW/dh att COMM. No. q 2. • �S' Ref. To: ______ Ref. Date a Pts Serving the Interests of the People of Our Island Hawaii County Is An Equal Opportunity Provider And Employer 'Pit ^^ ] Aed r�ng1 ki ➢"�/"�+. °� •� r1 =��i RESEARCH ANO TECHNICAL ASSISTANCE A TECHNICAL ASSISTANCE REPORT EVALUATING PROPERTY TAX POLICIES AND ADMINISTRATIVE PRACTICES IN HAWAII COUNTY MARCH 5, 2012 314 W 10th St, Kansas City, Missouri 64105. 1616 USA ds k dF. n �`e 9 r, . �'"r." C �r '� '�:M y, IL Ginnik Min INTERNATIONAL ASSOCIATION OF ASSESSING OFFICERS (AAO y w Sr . k-NsAsCirr, .MLssorui 64105-1616 USA �� Fib;'-J1'91J0 . Fno1eu X226 . PAs 916/[01-91.19 o'er m.iA np.on, '11,1111111110, ( .AP. • AAS . ( MS . RIiS . PPS P1<oi rssIONAL. DI SIC.NAr1ONS March 5, 2012 Colleen Schrandt, Legislative Auditor Office of the Legislative Auditor County of Hawaii 1266 Kamehameha Avenue Ironworks Building, Suite A-1 Hilo, Hawaii 96720 Re: Evaluation of Property Tax Policies and Administrative Practices Dear Ms Schrandt: As you requested through the contract between the County of Hawaii and the International Association of Assessing Officers (MAO) we have completed our study of certain policies and administrative practices of the County of Hawaii. The study was performed between November. 2011, and December. 2011. Our findings, conclusions and recommenda- tions can be found in the attached report. During the study we reviewed documents, manuals, records, elec- tronic files, procedures, and studies. Statistical and other analyses were performed on data gathered electronically and in person. We greatly ap- preciate the assistance provided to us by the County, especially the Fi- nance Department, the Real Property Tax Division, and your office. This report includes recommendations for consideration by the County in improving its property tax policies and in improving the opera- tion of its real property tax system. Alan Dornfest, AAS, and Richard Almy were our consultants on this assignment. If you have any questions about this report please feel free to contact Mr. Dornfest or Mr. Almy directly or call me. We appreciate the opportunity to work with you and look forward to assisting you in the future. Please let us know if we can be of any addi- tional assistance. Sincerely, await / Lisa Daniels Executive Director / Recommendation 30 Recommendation: The Council should consider Code changes to institute a review cycle or requiring re-application for exempt property. 8.2.1 Agricultural Use Value tionally, agricultural partial exemptions or"use value"systems that lower assessed • value of agricultural land below market value are extremely common. It is difficult to find a state where such favored tax treatment is not granted for this type of property. The underlying policy is that agricultural use, while desirable in certain areas, is not economi- cally sustainable without some sort of assistance. In addition, politically, it is often con- sidered unpalatable for large tracts of land to pay what might be high overall tax amounts, when, arguably, the land uses few of the services normally provided with the property tax. Regardless of the commonness of favored tax treatment, the County should under- , 77 Domfest,Alan S.,Steve Van Sant,Rick Anderson,and Ronald Brown. Slate and Provincial Property Tar Policies and Adminislralive Practices(P TAPP): Compilation and Report Journal of Property Tax Assessment&Administration. Volume 7, Number 4. 2010. 57 take to review the underlying policies and make sure that land currently enrolled for such favored treatment is land for which the policies were designed. In Hawaii County, there are various provisions under which agricultural land may be valued at less than market value, under what is commonly termed "use value." Dedicat- ed agricultural land generally is committed to commercial agricultural use for 10 years. S2,000 annual gross income per farm operation is required and there is a rollback tax i penalty imposed if use changes during the dedicated period. Non-dedicated land is as- / 1 sessed at a higher value, but does not have the multi-year use requirement Non-dedicated " v0 land continues in agricultural use (at this higher value)until the owner notifies the Coun- ty of changes that presumably would preclude such use. There are no income require- I/4� meats to be met for non-dedicated land. — The inclusion of income requirements is important in reducing improper claims of agri- cultural use. Unfortunately, no proof is required to accompany applications. Similarly inspection of dedicated agricultural land occurs during the first year of such dedication, but not subsequently during the dedication period. The rollback (recapture) provision is a very good provision, recommended in the IAAO Standard on Property Tax Policy.rs Ten states have similar provisions.J9 Many states incorporate size restrictions,with the presumption that small tracts are less likely to be agricultural and more likely to be speculative in purpose. We explored this issue with many interviewees, but, as there was no consensus, and states have mixed re- sponses, it would be necessary for stakeholders and County policy makers to consider whether size plays a part in agricultural use being supported by lower assessments. In general we are concerned with the number and complexity of options available under the agricultural use value provisions. We would ask the County to examine whether tax- payers clearly understand the nuances between the different options and are therefore rea- sonably able to make the best decisions about what is most applicable to them.Although some complaints were related to possible ineligible properties (see discussion below), some appeared related to the complexity and number of choices. As part of our recom- mendation to do tax expenditure analysis, the County should consider whether and how much tax shifting would occur given a smaller number of agricultural use value options. (/ There were many complaints suggesting abuses of the agricultural use value provisions. y More frequent inspections and inclusion of income information as part of the application process would be beneficial. Eligibility criteria should be reviewed to ensure that loop- holes don't allow extension of benefits beyond what is contemplated by policy makers. A stakeholder committee could be formed to review the policy and specific instances of al- rh 2010.Standard on property tax policy. Section 5.3.1.1.Kansas City, MO: IAAO. J9 Domfest,Alan S.,Steve Van Sant,Rick Anderson,and Ronald Brown. State and Provincial Property Tax Policies and Administrative Practices(PTAPP):Compilation and Report_ Journal of Property Tax Assessment&Administration. Volume 7,Number 4 2010. 58 leged abuse. This should lead to improved policy that strengthens the use value provision as it applies to its original purpose. Recommendation 31 Recommendation: The Council should require the Division to conduct more fre- quent inspections and inclusion of proof of eligibility and income information as part of the application processor agricu�Itura use value assessment. A stakeholder committee should be established o review the intent of underlying policies and allegations of abushis committee should also look into the possibility of consolidatin agricultural use_eligibility options, weighing the benefits of a sim- pler, more transparent system against specific tax shifts. 8.2.2 Homeowner's Exemption Properties used as the primary residence of the owner are eligible for a basic exemption of$40,000, with additional exemptions for older homeowners. Although amounts vary widely, similar partial exemptions are found in at least 30 states.R° This number would be larger if states with favorable fractional assessment of such residential property were included. Nominally, the laws and application process appear in line with similar processes around the nation. There is a provision that the assessor must be notified within thirty days after the claimant ceases to qualify for the exemption. If this notice is late or if the assessor determines the claimant does not qualify any longer, two years back taxes can be recap- tured_This is similar to the agricultural exemption rollback provision and strengthens the program. In a state like Hawai'i, with significant recreational property, there are always questions about whether a property truly is the"primary residence"of an owner. One way some states, such as Idaho,have of helping assessors make this determination is by providing residency information from income tax returns. Although such returns arc confidential, the state legislature in Idaho was able to pass legislation permitting the limited release of information indicating whether a tax filer was also filing a resident or non-resident in- come tax return. 'this information is released to the assessor on request to the state. A similar provision could be considered in Hawai`i. Similarly, death certificates are filed with the Stale of Hawaii and not released to the as- sessor. Death certificates should result in new applications for homeowner's exemptions, unless (perhaps even if) there is a surviving spouse.This information would be useful in preventing inheritors from receiving benefits for properties they do not occupy as princi- pal residences. It may be worth considering legislation to obtain this information as well. Even if such information cannot be obtained, periodic, ongoing reviews of drivers' li- censes and voter registration records can be useful in helping to establish the likelihood "ibid. 59