Farmers cry foul
They say a Honolulu tax law
designed to protect them
will wind up boosting bills
A Honolulu City and County tax measure intended to make sure agricultural land is used for farming has many of the people it was supposed to help howling in protest.
The ordinance, passed by the City Council in 2002, was supposed to make sure agricultural lands were being used for their intended purpose by imposing a higher tax rate on agricultural lands not actively used for farming.
Under the new rules, the county will now appraise agricultural lands at fair market value and assess a certain percentage of their value depending on the length of time the land is dedicated to agriculture.
Critics of the measure say while the original intent may have been honorable, the unintended consequences are potentially huge.
"There was an effort to make sure people didn't take advantage of being on agricultural lands and instead use them as so-called gentleman farms," said Donavan Dela Cruz, Council chairman.
Farmers say they were caught by surprise. Many had no idea of the law's existence, much less its ramifications, said Alan Takemoto, government affairs representative from the Hawaii Farm Bureau Federation.
"Some farmers are going to be heavily impacted. I'm hearing anywhere from six to even ten times the amount they are paying from last year to this year," he said.
Last week about 50 farmers, representatives from the Oahu Farm Bureau and some City Council members got an informational briefing of how the new ordinance would work from a representative from the City and County's Real Property Tax division.
They didn't like what they heard.
Under the old land valuation system, ag lands had a set value of $2,500 per acre regardless of location, said Myron Murakami, who farms in Kahaluu. Taxes paid have been based on that amount. But under the new ordinance, ag land is valued on so called "highest and best use."
"What they did was change it from a fixed amount to highest use so your location becomes critical. My farm is next to a residential area so our acreage valuation would be much higher than someone out in the country or next to abandoned cane fields," he said.
With property tax bills due out next month, farmers had until Sept. 2 to notify the tax division of how much of their land is dedicated to farming. Many, unaware of the law and the September deadline, did not do so. Those who did not identify the portion of their land dedicated to agriculture by that date will be taxed at the higher rate, Takemoto said.
The process required preparing a plot plan showing fields under cultivation, identifying roadways and other features; providing a copy of a general excise tax license and any lease; calculating crop production values; and obtaining a letter from the land owner, if the land is leased, indicating how long the land would be dedicated to agricultural use, Murakami said. Most agricultural lessees are responsible for property taxes, he said.
Some farmers, especially those on leased land, would have had difficulty coming up with all the paperwork required in time, he said.
Another complication is presented by the fact that many farmers operate on short-term, even month-to-month, lease agreements.
"For many farmers, the landlord won't sign off for a long period -- maybe only for a year," said Scott Chun who farms a 10-acre apple banana farm in Waimanalo and ended up missing the deadline.
Instead of property taxes of about $350 per year, Chun said his tax bill could now jump as high as $6,000.
For David Chinen, who grows papayas in the state-owned Waiahole Valley agricultural park, much of the new process is redundant.
"The state has inspectors who come out and verify ag use so why are we going through this process?" he said.
Moreover, Chinen, who has a 55-year lease that began in 1998, said he never received the exemption notice from the City and County. He, like others who missed the deadline, must now appeal the new rate.
For long-time farmer Larry Jefts of Kunia, a recently leased piece of farm land could be in jeopardy.
Jefts recently leased the plot from the Navy for 10 years. He had intended moving his tomato-growing operation there after completing some infrastructure improvements.
"We just got it a few months ago and had spent a lot of money on infrastructure. The Navy was not willing to sign the county's documents. We don't know where that leaves us," he said.
Jefts believes if the city's intent was to identify real farmers, they should have just asked.
"I think the county could have enlisted the farmers in some kind of partnership to find out. We all know who isn't a real farmer," he said.
Chinen agreed.
"If the intent was to identify real farmers, it was a poorly written ordinance," he said.
The ordinance was passed last year, but it's up to the current City Council to decide what to do about it.
City Council member Ann Kobayashi said she and other council members are sympathetic to the farmer's plight.
"We will definitely change it. We should be encouraging people to farm, not making it difficult," she said.
Likewise Chairman Dela Cruz wants to come up with an equitable solution.
"We're researching the options now," he said.
But he warned the problem won't be fixed overnight.
"Once we come up with a draft then we'll follow up on dialogue with the Farm Bureau until we get something we can all live with," he said.
Any changes are unlikely to take place before the first round of tax bills calculated under the new ordinance are sent out next month.
