Sponsored by:

Comment, blog & share photos

Log in | Become a member
The Honolulu Advertiser

Posted on: Sunday, August 1, 2004

City's farm taxation: Be patient with reform

It is wise public policy to encourage agriculture on O'ahu by giving farmers a generous break in their property taxes — it supports both self-sufficiency and sustainability.

But it is essential that the rest of the taxpaying public — owners of homes and businesses who are not getting big tax breaks — rest assured that agricultural rates are granted only to actively productive farmers.

That means the city must weed out the "gentlemen" farmers who claim ag rates on their estates by turning a horse loose in the yard, or folks who like living cheaply in the country but aren't up to the hard work of farming.

And it certainly includes landowners whose interest in their tenant farmers may last only until they can turn their acreage into profitable subdivisions.

After all, ag lands are taxed at only 1 percent to 10 percent of their assessed valuation — and the highest valued ag lands are assessed at only $50,000 an acre. (Try buying an acre of land in Hawai'i Kai for $50,000.)

A little history: In 2002, after many months of study, the city's Real Property Task Force, with the help of the Hawai'i Farm Bureau, wrote an extensive revision of the way ag lands are taxed on O'ahu. Called "Bill 10," this legislation has seen a great deal of controversy — and confusion — as it has been implemented this year.

Before Bill 10, the city's plantation-era system probably was costing the city more to administer than it was collecting in taxes. In our era of diversified agriculture, as well as rapidly changing land uses, reform was essential.

Bill 10 changed assessment from the old system based on estimated crop yields to one based on the assessed market value of the farmland. It made sense because it didn't require the frequent inspection and continually updated crop yield rate charts of the old system.

Bill 10 honored the farmer's willingness to dedicate his land to farming: He'd be taxed on 10 percent of assessed valuation for a one-year dedication, 5 percent for a five-year dedication, 1 percent for a 10-year dedication.

It's not surprising that such a sweeping reform has not been without its kinks. The most serious involves tenant farmers who rent from landowners uninterested in dedicating their acreage to agriculture or unable to do so.

Some small farmers on 55-year Waiahole Valley leases haven't been able to get the state to dedicate the land.

Even its staunchest advocates admit that Bill 10 needs serious tweaking. The Harris administration promises a full slate of adjustments by this fall.

But the current council's recent attempts at micromanagement are counterproductive. Its well-intended but inept attempt at fixing Bill 10, known as Bill 35, is an important example. Concerned that the interests of some small farmers are hurt under Bill 10, the council has engineered what amounts to a one-year across-the-board moratorium, allowing any landowner who paid ag rates in 2003 to pay the same rate — even if they've all but quit farming in the meantime — in 2004.

Mayor Jeremy Harris properly vetoed Bill 35. The council would be wise to let that veto stand.

Small farmers don't need Bill 35. They have recourse to adjustment from a fair-minded city Real Property Division. The real beneficiaries of Bill 35 are the big landowners who want farm-size tax breaks — a 90-percent to 99-percent discount — for land they're not willing to dedicate to farming.