Flat tax rate of $40,000 a year for Ni‘ihau proposed

LIHU‘E — The island of Ni‘ihau presents a unique challenge for those tasked with setting its property tax rates.

County Council Members Billy DeCosta and Luke Evslin made an effort to address the Forbidden Island’s taxes on Wednesday, proposing a bill which would charge the island’s owners a flat tax of $40,000 per year.

“Given the uniqueness of Ni‘ihau, the fact they don’t use county services, they do provide housing and that they are doing ag to the greatest extent possible, the minimum tax was the simplest route,” said Evslin.

The plan arose from discussions about the new agricultural dedication bill passed last month, which sets stricter eligibility requirements for the massive tax break granted to the owners of agricultural land.

Ni‘ihau doesn’t have enough water to meet the requirements for agricultural dedication.

Previous changes to the dedication bumped the owner Robinson family’s tax bill from $32,000 in 2020 to $222,000 in 2021, which dropped to $130,000 this year.

The new $40,000 tax rate would therefore be a significant discount off their recent bill, but an increase over the rate they paid in 2020.

It is difficult to tell what the Forbidden Island is worth.

“There’s no way to assess the value because there are no island sales for comparable values,” said Evslin.

The 47,605-acre island was purchased in 1864 by Elizabeth Sinclair from the kingdom of Hawai‘i for $10,000, equal to about $170,000 in 2021.

It has remained in family hands for the last century and a half, and has since been passed on to Sinclair’s descendants, Keith and Bruce Robinson. It is currently valued at $67 million, according to county property tax records.

One comparable area might be the island of Lana‘i, largely owned by Oracle billionaire Larry Ellison.

Ellison purchased 98 percent of the island’s 90,000 acres (about double the size of Ni‘ihau) for $300 million in 2012. He paid more than $270,000 in property taxes on the island in 2021.

Another wrinkle to taxing Ni‘ihau is that the island does not use county services the same way Kaua‘i properties do.

The Kaua‘i Police Department and Kaua‘i Fire Department have never responded there. KPD would require permission from the landowners before conducting an investigation on the island.

The island is off limits to all outsiders except the Robinson family and their invited guests, U.S. Navy personnel (the Pacific Missile Range Facility keeps a small installation there) and government officials. Descendants of the Native Hawaiians who lived on the island before it was purchased are allowed to live on the land rent-free.

DeCosta reported the Robinsons were “very thoroughly” involved in the process of crafting the flat-tax bill, No. 2889

The flat tax would not be set in stone, and could be amended or abolished if the use of the island is altered. This could mean a sale of the property, an addition of tourism-centered activities, or changes to the involvement of lineal descendants.

“If things change, the number can always change,” said council Chair Arryl Kaneshiro, voting in favor to move the measure forward.

The bill unanimously passed first reading on Wednesday.

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Guthrie Scrimgeour, reporter, can be reached at 808-647-0329 or gscrimgeour@thegardenisland.com.