Kailua-Kona Councilman Holeka Inaba introduced Bill 28 at the council’s Finance Committee on Tuesday. The measure would modify the county’s tax code to allow agricultural properties with residences built on them to qualify for the county’s homeowner tax exemption.
The bill also would allow rental properties used for agricultural purposes to qualify for the affordable rental housing tax exemption, which is equivalent to the homeowner exemption.
Under the current tax code, properties in the homeowner class are exempted from 20% of their assessed value to reduce their net taxable value. That property class also has the lowest tax rates in the county, which cannot increase by more than 3% per year.
Agricultural properties, Inaba said Tuesday, do not have the same benefits, which has made life harder for farmers who live on their agricultural land.
Jonathan Helton, research associate at the Grassroots Institute of Hawaii — a nonprofit think tank — testified at the meeting, saying that property tax rates for agricultural properties increased by 20% last year.
“I don’t see how we’re supporting our ag folks like this,” Inaba said.
Keita Jo, assistant administrator for the county’s Real Property Tax Office, explained tha, through Bill 28, those with residences on agricultural land would have access to the homeowner class’ 3% rate increase cap and the reduced tax rate, as well as the benefits of the county’s agricultural dedication programs.
Through those programs, property owners can choose to have land dedicated to agricultural use for 10-year periods, during which time the land is assessed based on its commercial agricultural use instead of its market value. Or, owners can benefit from the nondedicated agricultural use program, wherein ag land is assessed at twice its commercial agricultural value instead of market value.
Jo said that the bill will still allow owners to choose between the dedication and nondedication programs.
Other council members voiced some concerns about the measure. Hamakua Councilwoman Heather Kimball worried that the concept may allow for “double-dipping” — providing some property owners with a tax break on top of other tax breaks already available to them.
Inaba conceded that the dedication and nondedication programs may need reevaluation in the future — to which Kimball responded by teasing a future bill regarding those programs, which she said should make it to committee hearings on April 4.
Hilo Councilwoman Jenn Kagiwada said that the tax break also would benefit so-called “gentleman farmers” — wealthy landowners with sizable lands ostensibly used for agriculture, but for whom farming is not their primary source of income. She added that the county will likely have to take steps to ensure that beneficiaries are actually doing agricultural work on their lands.
Despite those misgivings, the council voted unanimously to recommend passage of the bill. Kimball, however, asked that the bill be postponed until April so that it and her agricultural dedication measure can be discussed in tandem, but Inaba advised against it.
“They are really separate issues,” Inaba said. “I’m scared to yes to that, because it’s already a complicated issue.”
However, Inaba agreed to postpone the bill at first reading during the next meeting of the full council in two weeks, so that his and Kimball’s bills can be discussed around the same time.
Email Michael Brestovansky at mbrestovansky@hawaiitribune-herald.com.
