EDITORIAL
City's farm taxation: a matter of principle
Politicizing the farmland tax issue over at City Hall has generated way too much heat and way too little clarity.
What O'ahu residents should try to focus on amid this unnecessarily chaotic debate is that actively farmed land receives — deservedly — a substantial property tax break. In the interest of fairness to the rest of the taxpaying public, it's essential that only active, productive farmers receive this tax break.
Toward this end, in 2002 the city (with the council's blessing) replaced an archaic and clumsy system based on estimated crop yields with one based on the assessed market value of the farmland.
It's alarming to hear distressed farmers complaining that Bill 10, as this reform is called, has increased their property taxes so steeply that they're in danger of being put out of business.
That would be exactly opposite of the intended effect of Bill 10.
The key to Bill 10 is that it honors the farmer's willingness to dedicate his land to farming. It appears that most of those yelling the loudest about Bill 10 are landowners who are unwilling to dedicate their land, or who are farmers leasing land from these landowners.
Some owners — including really big ones like Kamehameha Schools, Castle & Cooke and Campbell Estate — are landbanking some of their ag land in hopes of profitably converting it into subdivisions sometime in the future.
A landowner who dedicates his land to active farming for 10 years is taxed on only 1 percent of the assessed valuation of that land. But if the owner breaks that dedication, he is subject to "rollback" — payment of tax on 100 percent of the valuation.
That, understandably, is why many landowners have declined to dedicate their land to agriculture, even if it's currently being farmed.
Many productive farmers lease their land from owners who are unwilling to dedicate their land to ag and who pass through their tax increase to the farmer in the form of a rent increase.
We'd argue that landowners who are cutting the cost of landbanking for eventual development by leasing land to farmers are defeating their purpose if they force them off it with sharp rent increases.
Other aspects of Bill 10 clearly need tweaking. We've heard of tax bills rising on active, legitimate farms because of faulty assessments in which unfarmable gulches and gullies are valued as highly as prime cropland. The city promises to straighten such cases out, either through appeal or compromise.
But adding to the distress of those involved, this issue has become a political football, first through rivalry between the mayor and the council, and now counter-accusations between mayoral candidates Duke Bainum and Mufi Hannemann.
Our take is that the council, with Hannemann's backing, is mistaken in trying to excuse taxpayers from Bill 10 for a year. Mayor Harris' veto of this vehicle, Bill 35, has now been overridden by the council. That little tempest is likely to end up in court.
But we believe in the central philosophy of Bill 10 — that a landowner unwilling to dedicate his land to farming shouldn't receive an ag tax break. The unfortunate effect of Bill 35 is that it lets landowners unwilling to dedicate their land to farming continue to collect that break.
That, we believe, is manifestly unfair to the rest of the taxpaying public — owners of homes and businesses who are not getting big tax breaks.
