Council amends tax laws for ag lands

LIHUE — Land values and real property taxes for some agricultural properties on Kauai may be going up next year.

The Kauai County Council, by a 4-2 vote, passed a measure on Wednesday that will separate agricultural lands on Kauai into three categories — pasture, diversified agriculture and biotech research — when county officials are calculating real property tax assessments.

Those properties in the biotech research category, as a part of the approved law, would be assessed based on the amounts paid in lease rents instead of fair market values. All properties, however, would be subject to the county’s agricultural real property tax class rate of $6.75 per $1,000 in assessed valuation.

“What this means is that there will be no selecting out of biotech agriculture for a special tax rate — it will remain the agricultural tax rate but the valuation will change, and it will be based on conventional systems of valuation and on actual lease rents,” Councilwoman JoAnn Yukimura said.

Councilmen Mel Rapozo and Ross Kagawa voted against the measure and said they were worried that the new tax laws will unfairly target the seed companies on Kauai.

“We tried to break ground with 2491 and we lost, and I’m fearful of potential problems that occur when you break new ground such as this,” Kagawa said before casting his vote. “It troubles me that we have to rush tonight and not do further research on whether it is bulletproof, as I would say.”

Under the approved law, properties within the biotech research category are defined as those “greater than one acre, any part of which is used within a calendar year for biotech crop research or biotech crop cultivation.”

“Biotech crop research and biotech crop cultivation invokes crops regulated by the federal government and whose deoxyribonucleic acid (DNA) has been manipulated through genetic engineering techniques, resulting in the introduction of new traits that do not occur naturally in the species,” the approved law reads.

Tying the assessed values of these properties to lease rents, rather than fair market values, is important since companies engaged in biotech crop research pay higher rents than other agricultural land users, making it more difficult for them to compete, Yukimura said.

“I think this is worth a try and I think it’s based on a well-supported process, so I’m hopeful that it will make our laws better and not really hurt our biotech ag,” Yukimura said. “I’m not saying at all this won’t increase taxes — this will increase taxes, but I think it will be at a very small level. All it will be is to reflect the actual ag value of the land.”

Though county tax officials are not using lease rents to calculate the assessed values of properties, some county officials say the practice is common.

“I think it is appraisal practice that is used frequently, so it’s not an unusual technique,” Deputy County Attorney Mona Clark said. “It’s not something that the county has previously used, but in evaluating property values, I think it has been used.”

As it stands, qualified lands dedicated to agriculture on Kauai for 20 years are assessed at half of its highest and best use value.

“We’re definitely somewhat on new grounds, but the fact that we’re using pasture land and diversified land values that are based on a similar approach, we’d essentially be analyzing the leases to see how far they relate to the same approach,” County Finance Director Steve Hunt said.

Grove Farm Company Senior Vice President Michael Tresler said he is worried about the unintended consequences that the new law might have on regular farmers who grow genetically modified crops.

He also echoed previous concerns that the new tax laws will single out the seed companies on Kauai.

“Just so we generally understand, again, we’re trying to single out the seed corn companies, and I think the public has spoken on that issue pretty clearly,” Tresler said. “I understand we’re in a fiscal pinch coming up in this next budget — we’re always in a fiscal pinch — but what concerns me is that we’re trying to tap the same taxpayers for more revenues. I think this body, going forward, including the administration, needs to consider growing and expanding the tax base rather than constantly killing development and so forth to look for new revenues.”

Alexander and Baldwin, Inc. Planning Vice President Tom Shigemoto questioned why land users who fall under the county’s biotech research category would be required to submit “all executed leases which include information concerning the term or period of the lease, location and size of agricultural land being assessed, the dollar amount of the lease rent, a legible map, plot plan or site plan that specifically describes the land area which is in agricultural use, and a description of the agricultural use that is occurring on the land.”

“I don’t think that requiring owners to disclose the lease rents and the terms are necessary,” Shigemoto told the County Council. “Why do you need that kind of information? It’s proprietary. It’s like disclosing your financial situation when you’re appointed to the (University of Hawaii) Board of Regents — it’s not necessary. It’s none of anybody’s business.”

Councilman Tim Bynum, however, disagreed.

“What lease payments made are proprietary until you ask the County of Kauai to give you a favorable tax status, then it’s germane,” Bynum said. “You don’t have to share that information until you ask the other taxpayers to give you a break, and that’s what this is. Other taxpayers pay more taxes in order to give this tax break to keep ag going.”

Council Chair Jay Furfaro was absent and did not vote on the measure.

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Darin Moriki, county government reporter, can be reached at 245-0428 or dmoriki@thegardenisland.com.

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