HILO — Property tax breaks for farmers and ranchers will cost Hawaii County $39.6 million in lost revenue this year, slightly less than 10 percent of the county’s $463 million annual operating budget.
The County Council Finance Committee on Monday dug into the issue of the county’s agricultural programs, trying to balance a desire to encourage agriculture with the need for more tax revenue. The committee postponed two bills for further discussion.
“It shouldn’t be just what your zoning is, it’s if you’re using it,” said Kohala Councilwoman Margaret Wille, sponsor of one of the bills under consideration. “If you give an exemption for one group, then everyone else is paying for it.”
Wille’s Bill 218 seeks to phase out one of the agricultural programs — the so-called “nondedicated” program — in an effort to reduce loopholes that allow some to claim the deduction without doing any actual farming. She wants to replace the one-year nondedicated program with a longer term dedication.
With 10,765 parcels in the program, there simply isn’t enough staff to inspect the properties annually, said Real Property Tax Administrator Stan Sitko.
“They’re inspected when somebody applies for the program, and then when somebody complains,” Sitko said.
Puna Councilman Greggor Ilagan has sponsored a competing measure, Bill 219, that would leave the nondedicated program in place, but create stronger enforcement to reduce abuse.
Farmers just starting out, Ilagan said, may need that first year to decide how to pursue farming, what crop to plant and other factors.
“I think there should be flexibility,” Ilagan said. “We don’t want to price our farmers out of farming.”
Bills have been bandied about for several years, following a recommendation first by external auditors and then by a 2014 task force.
But Wesley Takai, a former Real Property Tax Division administrator who started with the department in 1969 and has since retired, urged the committee to not do away with the nondedicated program.
“The dedicated and nondedicated programs are both good agricultural programs and can co-exist as they have for 40-plus years,” Takai said.
Several council members have asked for more input from those directly affected, the farmers. While council members, the Finance Department and task force members have talked with farmers, very few farmers have come out to testify on the bills.
“Only a handful of people have come in to testify,” said Finance Director Lisa Miura. “I think the real farmers are busy out there farming.”
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 to grow 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.
