BUDGET & FINANCE TEMPORARY INVESTIGATIVE GROUP REPORT PRESENTED - PowerPoint PPT Presentation

BUDGET & FINANCE TEMPORARY INVESTIGATIVE GROUP REPORT PRESENTED BY: C O UNC ILM EM BER M IKE W HITE ina nc e Co mmitte e • No ve mb e r 15, 2011 Budg e t & F

PURPOSE The TIG was formed to make findings and recommendations on policies relating to the apparent disparity of real property assessments for agricultural use versus non-agricultural use.

OVERVIEW • E sta b lishe d o n Oc to b e r 4, 2011 b y the Budg e t & F ina nc e Co mmitte e pursua nt to 92-2.5, Ha wa ii Re vise d Sta tue s • He ld 9 me e ting s b e twe e n Oc to b e r 8 to No ve mb e r 1. Re po rt to c o mmitte e sub mitte d No ve mb e r 4, 2011. • Gro up inc lude d me mb e rs White (Cha ir), Ho ka ma (Vic e -Cha ir), Ba isa a nd Vic to rino • L imite d to inve stig a ting histo ric a l a nd c urre nt pra c tic e s in a dditio n to c o nduc ting inte rvie ws re la ting to re a l pro pe rty ta xe s.

RESOURCES • The TIG spoke to representatives from: • De pa rtme nt o f F ina nc e – Dire c to r & Re a l Pro pe rty T a x Divisio n • Re a l Pro pe rty T a x Administra to rs fro m City & Co unty o f Ho no lulu a nd Co unty o f Ha wa ii • Ma ui Co unty F a rm Bure a u • Ma ui Ca ttle me n ’ s Asso c ia tio n • Unite d Sta te s De pa rtme nt o f Ag ric ulture

FINDINGS AND RECOMMENDATIONS • Se c tio n One - Va lua tio n o f ho me site s o n pa rc e ls with Ag ric ultura l Use Asse ssme nts • Se c tio n T wo – E nc o ura g ing a g ric ulture a nd pre se rving o pe n spa c e thro ug h a g ric ultura l de dic a tio ns a nd ro llb a c k pe na ltie s

SECTION ONE FINDINGS: VALUATION OF HOMESITES • Co nfirme d sig nific a nt ine q uitie s b e twe e n ho me site va lue s in re side ntia l distric ts v. ho me site va lue s fo r pa rc e ls re c e iving a g ric ultura l use a sse ssme nts. • Ho me site s o n a g ric ultura l pro pe rtie s sho uld b e va lue d c o mpa ra b ly to simila r pa rc e ls b e ing put to simila ruse s e lse whe re a s re fle c te d in the ma rke t.

FINDINGS: VALUATION OF HOMESITES ON PARCELS WITH AGRICULTURAL USE • Curre ntly, if a pa rc e l in the a g ric ultura l distric t ha s b o th a n a c tive a g ric ultura l use a nd a ho me site o n it, the entire parcel re c e ive s disc o unte d ta x tre a tme nt. • T I G fo und a g ric ultura l ta x b e ne fits sho uld b e limite d to the portion of a parcel in active agricultural use . • T he ta x de pa rtme nt ne e ds to ha ve a c c e ss to upda te d pic to me try a nd GI S a sse ts fo r pre limina ry lo t e va lua tio n.

FINDINGS: VALUATION OF HOMESITES ON PARCELS AGRICULTURAL USE • Me tho do lo g y in e sta b lishing ho me site la nd va lue s sho uld b e a pplie d e q ua lly re g a rdle ss o f a g ric ultura l use o n a pa rc e l. • Pra c tic e s ne e d to b e re fine d b y e sta b lishing a me a ns o f va luing the ho me site inde pe nde ntly fro m the po rtio n tha t is in a c tive a g ric ultura l use .

GOAL OF RECOMMENDATIONS • E sta b lish a mo re e q uita b le ho me site va lua tio n o n pa rc e ls with Ag ric ultura l Use . • F a irne ss b e twe e n the va lue s o f simila r la nds b e ing put to simila r use s.

VALUING HOMESITE • Ho me site sha ll b e a sse sse d inde pe nde ntly fro m the po rtio n o f the pa rc e l in a g ric ultura l use , a s de te rmine d b y the Dire c to r b a se d o n fa ir ma rke t va lue . • T he a pplic a tio n o f the ho me e xe mptio n a nd ho me o wne r ta x ra te sho uld no t b e a ffe c te d.

VALUING HOMESITE • “ Ho me site ” me a ns tho se po rtio ns o f the pa rc e l e xc luding : (a ) the po rtio n in a g ric ultura l use , a nd (b ) the po rtio n tha t c o nsists o f unusa b le o r unsuita b le la nd fo r a g ric ultura l use .

Example One 2 acre parcel with a 1.3 acre homesite Current method Proposed method Net Taxable Net Taxable Value $163,537 Value $473,455 Taxes Due $409 Taxes Due $1,184

Example Two 2.9-acre Ag parcel with homesite vs Makawao Residence 2.9-Acre Parcel in Kula 2.647 Ac re s o f a g ric ulture .25 Ac re ho me site (in ye llo w)

.25-ACRE HOMESITES 2.9-a c re pa rc e l in K ula with Ma ka wa o Re side ntia l Ho me site s sho wn in YELLOW 2.65 a c re s o f Ag ric ulture

Example Two Comparison Makawao 2.9-acre Kula Farm Residence Current Proposed Building Value $153,100 $153,100 $153,100 Land Value Homesite $56,256 $241,700 $241,700 Agricultural Use $887 $887 Total Assessed Value $210,243 $395,687 $394,800 Home Exemption ($200,000) ($200,000) ($200,000) Net Taxable Value $10,243 $195,687 $194,800 Taxes Due $25.61 $489 $487 Taxes Paid Minimum Tax $150 $489 $487

SECTION TWO FINDINGS: AGRICULTURAL DEDICATIONS • T a x inc e ntive s c a n a nd sho uld b e use d to e nc o ura g e a g ric ultura l use . • Curre nt pra c tic e s a re a we a k to o l fo r pre se rving a g ric ultura l la nd a nd o pe n spa c e . • A syste m to re q uire pro pe rty o wne rs to de dic a te the ir la nd fo r a g ric ultura l use to re c e ive a sig nific a nt ta x b e ne fit is a ppro pria te . • E sta b lishing a pe na lty suc h a s a pro pe rty ta x ‘ ro llb a c k’ is a c o mmo n pra c tic e to disc o ura g e the c ha ng ing o f la nd use .

FINDINGS: AGRICULTURAL DEDICATIONS • Ma ui Co unty c urre ntly o ffe rs 10- o r 20-ye a r a g ric ultura l de dic a tio ns, ho we ve r o nly a sma ll pe rc e nta g e ha ve de dic a te d. • All de dic a tio ns sho uld re c e ive ta x inc e ntive s, ho we ve r, the pub lic sub sidy a ime d a t e nc o ura g ing a g ric ulture a nd pro te c ting o pe n spa c e sho uld pro vide a mo re sig nific a nt disc o unt fo r lo ng e r te rm de dic a tio ns tha n fo r sho rte r o ne s.

FINDINGS: AGRICULTURAL DEDICATIONS • Curre nt a g ric ultura l use a sse ssme nt syste m is b a se d o n a g ric ultura l va lue s o ve r 40 ye a rs o ld. • T he syste m ha s no t b e e n upda te d to a c c o mmo da te mo re c urre nt va lue s o r ne w te c hno lo g ie s a nd c ro ps, suc h a s hydro po nic s a nd se e d c ro ps. • A ne w a g ric ultura l a sse ssme nt me tho do lo g y ma y b e wa rra nte d, b ut re q uire s mo re study tha n pe rmitte d b y the T I G time fra me .

FINDINGS: AGRICULTURAL DEDICATIONS • Ag ric ultura l use va lua tio ns ha ve re ma ine d the sa me fo r the pa st te n ye a rs a nd pro b a b ly sinc e 1967. • I n the pa st 10 ye a rs, ma rke t va lue s a nd ta xe s pa id b y pro pe rty o wne rs in a ll o the r c a te g o rie s ha ve inc re a se d b y a ppro xima te ly 90% while Ag use va lue s a nd ta xe s ha ve re ma ine d fla t. • Sinc e 2001, o ve r 16,000 a c re s o f o f la nd ha ve b e e n ta ke n o ut o f a c tive a g ric ultura l use .

CHANGES IN AG VALUES AND TAXES FROM 2001 TO 2011 ASSESSMENT YEARS Total Acres Market Value Current Use Value % of Market Value 2001 292,501 2,672,230,100 35,840,053 1.34% 2011 275,957 5,410,978,800 35,846,666 0.66% - 16,544 Cha ng e 2,738,748,700 6,613 -0.68% - 5.7% % Cha ng e 102.5% 0.02% -50.6% (Cont…) Ag tax Paid Approx. Acres w/ Percent w/ min min tax tax 2001 207,872 63,061 21.6% 2011 207,911 78,058 28.3% Cha ng e 38 14,998 6.7%

INCREASES IN VALUATIONS AND TAXES OF AG ASSESSED LANDS COMPARED TO OTHER CATEGORIES 2001 Taxable Value Tax Paid Total Other Lands $7,558,892,000 $40,143,000 Ag L a nds with Ag $35,840,000 $207,872 Asse sse d Va lue s 2011 Taxable Value % Change Tax Paid % Change Total Other Lands $14,372,103,000 90.1% $76,047,000 89.4% Ag L a nds with Ag $35,847,000 .02% $207,911 0.0% Asse sse d Va lue s

GOAL OF RECOMMENDATIONS • Re fine a nd e xpa nd the Ag ric ultura l De dic a tio n pro g ra m • Pro vide g re a te r inc e ntive s fo r pre se rva tio n a nd mo re o f a pe na lty fo r c ha ng ing the use o f the la nd.

AGRICULTURAL DEDICATIONS • T o re c e ive a g ric ultura l ta x b e ne fits, la nd sha ll b e de dic a te d. • A pe titio n to de dic a te la nd must b e a ppro ve d b y the Dire c to r fo r a spe c ific a g ric ultura l use fo r a pe rio d o f 5, 10 o r 20 ye a rs. • T he pe titio n must e sta b lish sub sta ntia l a nd c o ntinuo us a g ric ultura l use .

AGRICULTURAL DEDICATIONS • “ Agricultural Use ” me a ns the a c tive , c o mme rc ia l a nd prima ry use o f la nd fo r a q ua c ulture ; c ro p pro duc tio n; g ra zing o f a nima ls use d in live sto c k pro duc tio n; a nd pro duc tio n o f live sto c k b ypro duc ts a nd pla nts fo r fo o d, fib e r, o r e ne rg y; flo we rs a nd fo lia g e ; tre e fa rms; a q ua tic a nima ls a nd pla nts; b e e s a nd re la te d na tura l b ypro duc ts; b io ma ss; nuts a nd se e ds. Ag ric ultura l use do e s no t inc lude the use o f a re a s prima rily a s ya rd spa c e ; se tb a c ks; o r la ndsc a ping ; o r the pla nting o f fruit o r o rna me nta l tre e s, flo we rs, a nd ve g e ta b le s prima rily fo r ho me use .

AGRICULTURAL DEDICATIONS • Who ma y pe titio n: • Owne rs re pre se nting a t le a st a 50 percent inte re st in la nd. • Pa rc e l must b e a t le a st two acres in size . • I f le ss tha n two a c re s a nd no t within a Co unty a g ric ultura l distric t, la nd sha ll ha ve b e e n in c o ntinuo us a g ric ultura l use fo r the past five years a nd the a nnua l g ro ss inc o me de rive d fro m the a g ric ultura l use sha ll no t b e le ss tha n $ 5,000 per acre.