The county tax division last week sent out letters to the first crop of property owners taking the agricultural tax break with no evidence of farming going on.
The county tax division last week sent out letters to the first crop of property owners taking the agricultural tax break with no evidence of farming going on.
The letters, sent to 577 property owners, give them until Dec. 31 to submit a new application for an ag exemption or they will lose the tax break for the tax year starting July 1, 2015. The 577 properties were based on a review of aerial photography of more than 2,000 parcels, Real Property Tax Administrator Stan Sitko told the Real Property Tax Stakeholders Task Force on Monday. More letters are expected once the responses to those are processed.
Worried that too many property owners are taking advantage of the agricultural exemption without growing crops, the task force voted unanimously to recommend changing the current structure from an exemption that automatically renews every year to one that has to be reapplied for every three years. The property owner must commit to the three-year period and will also be required to present proof the land is in agriculture, under the recommended rule changes.
“You don’t just sign up and you’re good forever,” said Task Force Co-Chairwoman Margaret Wille.
The process has a long way to go before it is implemented. In addition, switching the automatic process to an entire new certification would probably take the tax office three years to implement, Sitko said.
The task force is trying to strike a balance between ensuring the county has enough revenues and making it fair for all property owners, without unduly discouraging people who want to make a living farming.
It’s important that the land is used, said Jeff Melrose, who works with the county Department of Research and Development, to keep it from being overgrown with invasive plants.
In addition, he said, the farms go a long way toward helping the county become more self-sufficient and sustainable.
Task force member Stewart Hussey agreed.
“We need to have a tax policy that ensures revenue generation for the county is productive. … We need to support economic and beneficial use of the land,” Hussey said. “There’s got to be a balance between those opposing forces.”
Property owners taking the agricultural exemption pay taxes based on a set property valuation countywide, regardless of the market value of the land. For example, land growing feed crops is valued for tax purposes at $1,000 an acre, while pastureland is valued from $28 to $420 an acre, depending on whether it’s poor, average or good pasture. Land growing truck crops is valued at $4,000 an acre.
Property owners who commit to keeping the land in agriculture at least 10 years — the so-called “dedicated exemption” — pay half that. There are an estimated 10,000 farmers in the non-dedicated part of the program, compared to only 500 in the dedicated.
Wille noted the non-dedicated exemptions account for $28 million in lost property tax revenues.
The recent batch of letters to farmers follows more than 6,800 letters sent last month to property owners where the person claiming the homeowner’s exemption has moved or died. The letters will remind the property owner about the rules, such as they must use the home as their primary residence and can’t use the property for short-term rentals or as a non-home-based business if they want the tax break.
Email Nancy Cook Lauer at ncook-lauer@westhawaiitoday.com.