Posted on: Monday, July 19, 2004
Farm tax defining mayor race
By Johnny Brannon
Advertiser Staff Writer
Mayor Jeremy Harris' rejection of a tax break for agricultural land means a decision on changes worth millions of dollars will rest with whomever replaces him six months from now.
The City Council approved the measure Wednesday.
The dispute over how to tax farmland has been a growing wedge factor in the race for Honolulu mayor, and the two leading candidates have positioned themselves squarely against each other.
Mufi Hannemann says O'ahu's farmers badly need tax relief the council's measure promises, and blames rival Duke Bainum for triggering higher taxes by authoring a flawed law two years ago that changed the tax structure.
Bainum calls the council's legislation a blatant giveaway to well-financed special interests — including wealthy trusts that are banking unused farmland for future development — and says his law was needed to catch tax cheats.
Caught in the middle are dozens of small farmers who lease property that doesn't qualify for a major tax discount because the owners won't restrict their land to farming for up to 10 years.
Taxes increased for about one-quarter of O'ahu's 900 farmers, officials say.
The mayoral candidates' positions mesh tightly with their campaign buzzwords and the broader themes they're promoting.
Bainum is calling for "honest change" at City Hall and an end to what he calls corruption and undue influence of special interests and campaign donations. He points out that Hannemann testified in support of the latest council measure, known as Bill 35, as soon as it was up for consideration.
"When people ask me what the difference is between Mr. Hannemann and myself, I'm going to point to Bill 35," Bainum said.
"Bill 35 is something that he supports, which is a windfall giveaway to the special interests. I'm going to be a mayor that's looking out for the people's interests."
Hannemann's "our home, our mayor" theme stresses his local roots and understanding of island issues — in this case the plight of farmers. He has been endorsed by the O'ahu Farm Bureau Federation.
Hannemann says the 2002 law Bainum sponsored while on the council, known as Bill 10, was poorly conceived and that Bainum doesn't have the strong links to farmers that would make him effective at helping them.
"What Bill 10 did is just create mass confusion and just hurt the farmers," said Hannemann, also a former councilman. "We wouldn't have needed Bill 35 if we didn't have Bill 10."
It's unclear exactly what will become of Bill 35 now, but the issues surrounding it aren't going away.
The measure would give the council the power to adjust this year's tax bills on a case-by-case basis by unspecified amounts.
Harris said that could give away more than $9 million that's been counted on in the annual budget the council approved last month, and would leave the spending plan unbalanced, a violation of the City Charter.
Harris said he would veto the measure and refuse to implement it if the council overrules him, as appears likely. That could provide a basis for legal claims from owners and lessees of farmland who file for the tax break, leaving the next administration to decide how to settle the claims.
Whether or not any money goes uncollected or is refunded because of Bill 35, new legislation to change the tax system for future years is almost certain to come before the council soon.
Harris, who called earlier this year for the repeal of Bill 10, said Wednesday he would propose amendments or a new bill before he leaves office in early January, with the goal of ensuring small farmers aren't overtaxed.
But council members hostile to Harris could block any changes until he's out of office, come up with their own proposal or wait to forge a plan with the new mayor.
Bainum said Bill 10 may need to be tweaked a little to provide some safeguards, but that it provides a solid foundation.
The measure requires those seeking a steep discount to prove that land zoned for agriculture is actually used for farming.
Those who qualify and agree to reserve their land for agriculture for 10 years pay taxes assessed at a rate of 1 percent of the land's fair-market value. Farm land that goes unused is assessed at its full value.
Bainum said the goal was to create an incentive to use land for farming, while identifying owners who exploited a loophole and paid low taxes by having claimed before that their land was being farmed.
But Hannemann said those goals can be achieved in other ways, and that it's clear to him Bill 10 has backfired. The danger is that farmers will be driven out of business by rising taxes, leading to empty farmland and more pressure to develop it, he said.
Reach Johnny Brannon at jbrannon@honoluluadvertiser.com or 525-8070.
