Wednesday | March 22, 2017
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Ag tax bill postponed in the face of opposition

Ka‘u rancher Kyle Soares spread his tax bills out before the County Council Finance Committee on Tuesday, driving home his contention that farmers and ranchers need more of a tax break, not less of one.

At issue for Soares and several other testifiers was Bill 317, which would tighten requirements to qualify for special tax breaks for agriculture.

The bill, a product of a task force that met last summer, would do away with the so-called “nondedicated” agricultural exemption and require commitment to a three-year period to qualify for reduced property values. The current 10-year dedication program, which has more generous tax breaks, will continue as before.

But the measure is just one more nail in the coffin for Soares, who said he plans to shut down his ranch in January and tell the world how unfriendly Hawaii County is to farmers and ranchers, if the bill passes.

“You need to take this really seriously,” Soares said. “We’re watching really closely. This is never going to fly. … We’re headed toward disaster.”

Council members took Soares’ words, and comments from others, to heart, postponing the bill until the Finance Department could come up with alternative ways to close loopholes.

“I am not sure in my mind that we’re helping the farmer or deterring them with all the paperwork,” said South Kona/Ka‘u Councilwoman Maile David.

David said coffee farms, for example, don’t turn a profit right away. The smallest farmers will be the hardest hurt by the bill, David said.

Puna Councilman Greggor Ilagan said he has his own plans for bills to address two areas he thinks are left out of the current measure: gentleman farms and property owners wanting to keep open space.

“We want to promote open space, but we want to tax them on a fair rate,” Ilagan said, suggesting a tax rate in between farming and residential.

Jeff Melrose, a Hilo planner who created an agriculture baseline study for the county several years ago, suggested creating a tax category of local food production could help farmers and encourage food self-sufficiency for the island as well.

He also suggested the council spend more time determining the purpose of the program before making changes.

Kohala Councilwoman Margaret Wille, chairwoman of the task force that recommended tightening the requirements, said there would be plenty of time for people to adjust to the changes under the current bill.

“This doesn’t even kick in until 2018,” she said. “You’re giving people plenty of time; meanwhile, someone else is paying to make up those dollars.”

Currently, 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 used to grow 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 taxes based on half those values. There are an estimated 10,000 farmers in the nondedicated part of the program, compared to only 500 in the dedicated.

The nondedicated program cost Hawaii County government about $28 million a year, while the 10-year dedicated program accounts for approximately $2 million more in lost revenue.

Email Nancy Cook Lauer at ncook-lauer@westhawaiitoday.com.

 

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