Posted on: Friday, September 24, 2004

EDITORIAL
Ag law compromise begins to make sense

A compromise, reached with the help of farmers and others in the industry, has apparently resolved a divisive and unnecessary Honolulu City Council controversy over agricultural land taxes.

While the compromise appears reasonable, one wonders why there had to be so much political drama and trauma to get to this point.

The dispute over how agricultural land should be taxed became an important wedge issue in the mayoral campaign between Duke Bainum and Mufi Hannemann.

Bainum was a supporter of a measure that would have substantially rolled back taxes for those who dedicate their land to farmers. This had the unintended side effect of boosting taxes for farmers who leased land from owners who did not wish to dedicate.

Hannemann supported another measure that would have effectively placed a moratorium on the bill endorsed by Bainum. That approach was criticized by those who said it added up to a big tax giveaway to large landowners.

The compromise measure recognizes the realities of agriculture in several important ways.

For starters, it puts a cap on the amount of per-acre taxes based on agricultural production values. This means a farmer would not be excessively taxed if he happened to be producing high-value products.

The new law also recognizes that not all agricultural land is created equal. Farmers complained they were being taxed on land that was in gulches or other inaccessible areas unsuited for crops.

There is even an incentive in the law to get landowners to prepare their property for farming, a longstanding concern of the agricultural industry. The law would grant a seven-year tax exemption for vacant land based on the value of improvements that promote agriculture.

One puzzling aspect of the law has to do with dedication. It increases the value of short-term dedication, which might encourage more owners to set aside their property for agriculture at least for a few years.

But it eliminates the "rollback" or recapture of full taxes if land is kept in production for as little as half of the dedication term.

Thus, an owner could qualify for the most generous reduction in property taxes (1 percent of market value) by offering a 10-year dedication but then take the land out of agriculture and develop it after just five years.

Because the goal is to keep land in agriculture for the longest term possible, this does not seem to make sense.

Overall, however, the law is an improvement on those that came before and — if enforced properly and fairly — should help keep substantial portions of O'ahu green and growing.