The proposed package to reform the real property tax system on Kaua‘i includes provisions to help farmers keep their land in true agricultural production, but some tweaks to the 147-page bill must be made before it will pass, county officials said.
The late Mayor Bryan Baptiste’s administration has recommended that the Kaua‘i County Council approve rates that would cut the taxes on ag land in half, officials said.
The proposal is to change the existing $6.90 per $1,000 of valuation for land and $4.25 for buildings to $3.50 for land and $10.50 for buildings, county documents show.
This follows the administration’s recommendation for a three-to-one ratio of taxing buildings versus land — an aspect of the legislation that council members are grappling with.
“It helps support food production on-island for Kauaians,” said Eric Knutzen, who facilitated the county’s eight-member Real Property Tax Committee.
Councilwoman JoAnn Yukimura said currently agricultural lands are taxed at the same rate as general and commercial lands and much higher than residential.
“It doesn’t make sense if you want to keep the lands open space,” she said.
The proposed legislation would mash the current eight tax rate categories into four: residential, resource lands, general and resort.
The resource lands category would include farmsteads and conservation-zoned properties with no density.
A farmstead — defined in a presentation by the administration as a property which is principally used for food, fuel and/or fiber production — would be valued at $5,000 per acre outside of homesite values, which would be market-based, for all lands agriculturally engaged.
But Councilman Daryl Kaneshiro has submitted two amendments that would impact the classification. The Committee of the Whole is expected to weigh them at its next meeting, Sept. 17.
One of his amendments would divide the proposed resource lands category into two separate classifications — production agriculture and resource land.
The resource land tax rate, under his amendment, would be applied to conservation land with no density and property and which constitutes all or part of a facility used to generate renewable energy or is used to support or maintain a renewable energy facility.
The production agriculture tax rate would be applied to farmsteads, according to the amendment. The director would promulgate rules and regulations for determining real property parcels eligible to be taxed at farmstead rate.
The reason for adding a fifth category is to help residents avoid confusion, Kaneshiro said yesterday, noting the input he received on the amendment from the county Farm Bureau and members of the agriculture community.
The proposed change would not impact how much the county collects, he said. The production agriculture and resource land rates would be the same.
Kaneshiro’s other amendment would change the base value for agricultural or farm use land on the assessment date immediately following enactment of the provision. He proposed changing the amount from $5,000 per acre across the board to $5,000 per acre for up to 100 acres and $2,000 per acre for more than 100 acres.
The rate would then increase in subsequent years in accordance with the percentage change in the federal Consumer Price Index, according to the proposed legislation.
Kaneshiro described this provision as a “protection” for farmers.
The validity of a farmstead, under the administration’s proposal, would be determined by evidence of farming, such as grazing livestock, irrigation systems or crops.
Validity is also determined by proof that 75 percent of the land is in production.
The agricultural inspector’s review weighs heavily in determining a farmstead, according to the tax committee.
Kaneshiro said the bill, as it stands, would give small-time farmers a break and encourage them to stay in agriculture. And it would give a bigger break to those who can prove they are legitimate large-scale farmers with a Schedule F, tax return or other specified document.
“A lot of it is the farmer’s choice,” he said.
Councilman Tim Bynum said the goal is for the county to do whatever it can to support land in agricultural production.
“This is consistent with our General Plan vision of having a rural character, small towns with open view planes,” he said. “Keeping those lands in production realizes that goal and diversifies our economy. It allows us to hold on to the kind of Kaua‘i we want to have.”
The proposed rate reduction relieves the pressure on residents to put their agricultural lands to other uses, Bynum said.
Councilman Ron Kouchi, who chairs the Committee of the Whole, said he is optimistic that the Farm Bureau will soon send a letter supporting the package.
Under the proposal, the 1,077 resource lands parcels would see a tax cut amounting to a combined $739,984, or 65 percent. The category represents 1.4 percent of the total revenue the county collects from property taxes. It would fall to 0.5 percent under the proposal.
The council last Wednesday circulated amendments to Bill 2274, but deferred action after scheduling a workshop for 9 a.m., Sept. 16, at the Historic County Building.
Kaneshiro said the council may have to spend more time working on the bill.
The administration had set Aug. 27 as the deadline for the council to approve the proposal in order to apply the new rates to next year’s tax bills. This date has been extended until at least Sept. 24.
Much depends on how the council handles the recommended homeowner exemptions and the proposed elimination of some tax relief measures, Kaneshiro said.
“There’s going to be some discussion on the 2 percent cap,” he said. “People need to know that the cap works when assessed values are rising. But what happens when assessed values start dropping?
“Because of the way the economy is going, the trend is things have slowed down on the island,” Kaneshiro said. “Assessed values may drop for a couple years. It’s going to be a contentious issue.”
• Nathan Eagle, staff writer, can be reached at 245-3681 (ext. 224) or email@example.com