Farmers will have to dedicate their property to agricultural use a minimum of three years to get tax breaks, under a bill to be considered today by the County Council Finance Committee.
Bill 317, a product of a task force that met over the summer, would do away with the so-called “nondedicated” agricultural exemption, and require commitment to a three-year period to qualify for the reduced property values. The current 10-year dedication program, which has more generous tax breaks, will continue as before.
The Real Property Tax Stakeholders Task Force has been concerned that too many property owners are taking advantage of the agricultural exemption without growing crops.
The proposed bill would phase out the nondedicated program and phase in the new program over three years. As the bill currently stands, nondedicated property values would remain the current value of two times that of dedicated in 2015, three times that of dedicated in 2016, four times that of dedicated the in 2017 and five times that of dedicated in 2018.
While the administration and task force Co-chairman Dennis “Fresh” Onishi had favored a minimum five-year dedication, Co-chairwoman Margaret Wille, who sponsored the bill, pushed for three. Those who commit to dedicate the property and then change their mind are subject to rollback taxes on the difference of the property value compared to market rates.
“My objective is not to knock people out of the program, but to make it as fair as possible,” Wille said Monday. “It’s not just that they’re on ag land, but doing agriculture.”
She added that encouraging agriculture is important to making the island more self-sustainable.
Currently, property owners taking the agricultural exemption pay taxes based on a set property valuation countywide, regardless of the market value of the land. For example, land used growing feed crops is valued for tax purposes at $1,000 an acre, while pastureland is valued from $28 to $420 an acre, depending on whether it’s poor, average or good pasture. Land growing truck crops is valued at $4,000 an acre.
Property owners who commit to keeping the land in agriculture at least 10 years — the so-called “dedicated exemption ” — pay taxes based on half those values. There are an estimated 10,000 farmers in the nondedicated part of the program, compared to only 500 in the dedicated.
The acreage requirements could knock out 400 to 500 parcels, said task force member Bob Price. The dedicated program requires pastureland to be a minimum 10 acres, feed crops 5 acres, orchards 1 acre and intensive agriculture one-quarter acre.
Wille said the bill doesn’t change the acreage requirements, but the administration can change those through administrative rules.
The task force is trying to strike a balance between ensuring the county has enough revenues and making it fair for all property owners, without unduly discouraging people who want to make a living farming. Wille noted the nondedicated exemptions account for $28 million annually in lost property tax revenues.
The Finance Committee meets at 10:45 a.m. today.
The committee meets at the West Hawaii Civic Center. The public can also participate by videoconference from Hilo council chambers, the Waimea council office, the county facility in Kohala, the Hawaiian Ocean View Estates Community Center or the Pahoa neighborhood facility.