Agricultural tax-break bill alarms some

By Gordon Y.K. Pang
Advertiser Capitol Bureau

A bill aimed at providing a tax break for owners of agricultural-zoned land could cost the city millions in lost revenue and throw the city's $1.2 billion operating budget out of balance, some officials say.

The Council Budget Committee advanced Bill 35 yesterday, 4-0, despite concerns voiced by Budget Director Ivan Lui-Kwan and some council members.

"There will be a fiscal impact," Lui-Kwan told members of the Budget Committee, adding that budget officials are trying to determine how large the effect would be.

Based on calculations using the city's certified tax rolls, which show the assessed value of all properties on the island by category, the measure could end up costing the city as much as $12 million, an estimate confirmed by several sources.

Drafted in large part by the landowner-financed Land Use Research Foundation and introduced by Budget Chairwoman Ann Kobayashi, the bill allows agricultural landowners a one-time assessed valuation of 5 percent of fair market value, in essence a 95 percent tax break.

The bill is designed to offset the sudden impact of the council's 2002 decision to switch to a fair market value system for determining property taxes on agricultural properties. Historically, agricultural landowners paid taxes based on the value of crop yield.

Opponents of the new system say many farmers and other agricultural landowners are seeing their property taxes shoot up by 100 percent or more. They want the council to develop a different system and, in the meantime, provide the one-year break for all agricultural properties.

Representatives from Campbell Estate, Kamehameha Schools, Castle & Cooke, and Gentry Pacific joined the Land Use Research Foundation and the Hawai'i Farm Bureau Federation in supporting the bill. A Kamehameha Schools official testified that the assessed value of its Kawailoa Plantation jumped from $48 million to $445 million, resulting in an increase in its tax bill from $514,500 to $4.27 million.

Kobayashi said the new system was not intended to raise the taxes of farmers and that the bill would help rectify that wrong.

Councilman Charles Djou, a member of the committee, voted for the bill despite misgivings. "The fact that we cannot gauge how much this is going to cost, that is a little bit of a concern to me," Djou said after the meeting. "It could throw the budget out of balance."

"It's a bad bill. It's a grab for money," said Councilman Gary Okino, who is not on the committee. "The big landowners are looking at this as a big, one-time windfall."

The tax break bill, as will the city operating budget, will be up for a final council vote June 4.

Reach Gordon Y.K. Pang at gpang@honoluluadvertiser.com or at 525-8070.