HomeMy WebLinkAbout10/15/2014 Finance & Economic Development Committee minutes MINUTES
FINANCE & ECONOMIC DEVELOPMENT (TOURISM /VISITOR
INDUSTRY/ SMALL BUSINESS DEVELOPMENT / SPORTS &
RECREATION DEVELOPMENT / OTHER ECONOMIC
DEVELOPMENT AREAS) COMMITTEE
October 15, 2014
A meeting of the Finance & Economic Development (Tourism / Visitor
Industry / Small Business Development / Sports & Recreation Development / Other
Economic Development Areas) Committee of the County of Kaua`i, State of Hawai`i,
was called to order by Mason K. Chock, Sr., Chair, at the Council Chambers,
4396 Rice Street, Suite 201, Lihu`e, Kaua`i, on Wednesday, October 15, 2014, at
11:04 a.m., after which the following members answered the call of the roll:
Honorable Gary L. Hooser
Honorable Ross Kagawa
Honorable Mel Rapozo
Honorable JoAnn A. Yukimura
Honorable Mason K. Chock, Sr.
Honorable Tim Bynum, Ex-Officio Member
Excused: Honorable Jay Furfaro, Ex-Officio Member
PUBLIC COMMENT.
Pursuant to Council Rule 13(e), members of the public shall be allowed a total of
eighteen (18) minutes on a first come, first served basis to speak on any agenda
item. Each speaker shall be limited to three (3) minutes at the discretion of the
Chair to discuss the agenda item and shall not be allowed additional time to speak
during the meeting. This rule is designed to accommodate those who cannot be
present throughout the meeting to speak when the agenda items are heard. After
the conclusion of the eighteen (18) minutes, other members of the public shall be
allowed to speak pursuant to Council Rule 12(e).
There being no objections, the rules were suspended to take public comment.
GARY PIERCE: Good morning, Comrades. My name is Gary
Pierce for the record. Specifically I would like to talk about Bill No. 2560, Bill
No. 2559, Bill No. 2570, basically the tax bills coming up. Bill No. 2560 is another
Bill to create two (2) new tax classifications which I am against. This is more class
warfare. It is contraindicated and it says it will provide for long term rental
classification. No homes would qualify for renting rooms without a kitchen under
the affordable long term rental classifications. Most homes are not zoned for two (2)
kitchens therefore would not qualify for the long term affordable rental under this
FED COMMITTEE MEETING 2 OCTOBER 15, 2014
Bill. This Bill has lots of loopholes, lots of exemptions. When you try to manipulate
people, that is when you get these unforeseen consequences. Please vote no and say
yes to keeping housing affordable is another lie in this Bill. Bill No. 2559 is another
new classification. Residential investor in use get ready for your proctology exam.
A full home survey for use done by a prejudicial, non-elected government
bureaucrat that has a vested interest to raise taxes and from page 2, this is
prescribed in the Bill, "shall prescribe form of application." That means he must do
it. "And may establish administrative rules." This is a bureaucrat that is not even
voted on. What about my civil liberties? My economic liberties? This Bill violates
civil rights and socialism with a peeping tom. This is without your vote. These
people are coming around currently right now. I have hang tags that they are
posting, coming onto properties. I have got E-mails. Let me read one (1) E-mail.
Some guy named Howard just snuck up on me with this clipper at my doorstep
disregarding the rope at the entrance, just marched in. I have got other E-mails.
This is just...who authorized this? What is going on? Anyway, another tax bill.
You have something here about the Transient Vacation Rental (TRV). This whole
issue is due to bad property tax law. As you have seen and heard in testimony,
most taxpayers rented a room or a piece of property just to pay the bills not to
become hotel owners. The power to tax is the power to destroy and you are going to
see this coming up. The worst bills I have seen is Bill No. 2546. This is a real
property tax, a new category of real property to tax agronomics. The definition of
agronomics is a noun, as a branch of the economy dealing with the distribution,
management, and productivity of land. This agronomics bill has no definition of
what should be taxed. Only a definition of what agriculture is not. This Bill stifles
small farmers, self sufficiency, and backyard gardens.
Lori L. Marugame, Council Services Assistant: Three (3) minutes.
Council Chair Furfaro: Excuse me, Gary, that was your three (3)
minutes. I do not have anybody else signed up but please summarize in the next
three (3) minutes.
Mr. Pierce: Can I finish on this one (1) bill and then I
will summarize?
Council Chair Furfaro: Yes.
Mr. Pierce: Thank you so much, Sir. The seed
companies...okay, let me start back. Supposed to tax large property owners and
seed companies. It does not. In my opinion it is a tax give away to large seed
companies landowners. Page 4 paragraph 3, I am going to paraphrase, less than
one hundred (100) acres. It must be entirely in cultivation. If it is more than one
hundred acres (100) it has to be one hundred (100) acres or fifty percent (50%)
whichever is more. This cripples small farmers and landowners. It is improper
management for (inaudible). Anyway I am not going to...please vote no on this Bill.
The low income tax credit, this has the wrong name. This should be weaponize the
property tax by votes through tweaking. It sounds like you guys are on drugs. Vote
no on Bill No. 2546, Bill No. 2558, Bill No. 2559, and Bill No. 2560. Please put in a
comprehensive cap for the taxpayers and a cap for government spending. If this
does not happen this is nothing more than economic terrorism. What is the
FED COMMITTEE MEETING 3 OCTOBER 15, 2014
difference between taxed out of you home in three (3) years or being bombed out?
Thank you very much for the extra time. I do really appreciate that, Jay. Can I say
one (1) other thing?
Council Chair Furfaro: Make it quickly, Gary.
Mr. Pierce: You are very soft spoken and if it was not for
some of the things that you said I would not even know about the budget. I really
appreciate what you do for the budget and what is trying to happen right now. That
is all I have to say.
The meeting was called back to order, and proceeded as follows:
Minutes of the September 17, 2014 Finance & Economic Development
(Tourism / Visitor Industry / Small Business Development / Sports &
Recreation Development / Other Economic Development Areas) Committee
Meeting.
Upon motion duly made by Councilmember Rapozo, seconded by
Councilmember Hooser, and unanimously carried, the Minutes of the
September 17, 2014 Finance & Economic Development (Tourism / Visitor
Industry / Small Business Development / Sports & Recreation Development /
Other Economic Development Areas) Committee Meeting was approved.
There being no objections, the Committee recessed at 11:04 a.m., to convene
in the Committee of the Whole.
The meeting was called back to order at 1:39 p.m., and proceeded on its
agenda item, as shown in the following Committee Report which is
incorporated herein by reference:
CR-FED 2014-35: on Bill No. 2553 A BILL FOR AN ORDINANCE AMENDING
ORDINANCE NO. B-2014-782, AS
AMENDED, RELATING TO THE CAPITAL
BUDGET OF THE COUNTY OF KAUAI,
STATE OF HAWAII, FOR THE FISCAL
YEAR JULY 1, 2014 THROUGH
JUNE 30, 2015, BY REVISING THE
AMOUNTS ESTIMATED IN THE BOND
FUND (Bond Fund — CIP, Fuel Tanks
Hanalei Baseyard - $9,755) (Approved.)
The Committee proceeded on its agenda item, as follows:
FED COMMITTEE MEETING 4 OCTOBER 15, 2014
Bill No. 2557 A BILL FOR AN ORDINANCE AMENDING
CHAPTER 5A, KAUAI COUNTY CODE
1987, AS AMENDED, RELATING TO REAL
PROPERTY TAXES (Low Income Tax
Credit) (This item was Deferred.)
Councilmember Yukimura moved for approval of Bill No. 2557, seconded by
Councilmember Kagawa.
Councilmember Kagawa: Seconded for discussion.
Committee Chair Chock: Yes, Steve, can you come up?
There being no objections, the rules were suspended.
Councilmember Yukimura: Steve, can you give us a summary of what
this Bill would do?
STEVEN A. HUNT, Director of Finance: Proposed Bill No. 2557 is a tax
credit bill for very income property owners. I view this as an additional measure to
the two (2) income based approaches that we already have which is the Home
Preservation Limit which requires homes to have a net taxable value above seven
hundred fifty thousand dollars ($750,000) and the income exemption which is a
reduction in value from the property which is a hundred twenty thousand dollars
($120,000) reduction for those that are earning eighty percent (80%) or below of the
gross median household income. What we found is there are instances where the
threshold has not been met by the seven hundred fifty thousand dollars ($750,000)
that may have, even including the income exemption net taxable in the
neighborhood of six hundred thousand dollars ($600,000) to seven hundred
thousand dollars ($700,000) and the taxes associated with that in proportion to
their income is very large. This is another measure that would target the very low
income at fifty percent (50%) of the median income and below, I believe that number
is about thirty-five thousand dollars ($35,000) and below that would provide
additional relief and not tie it to value anymore. They would pay based on a
percentage of their income.
Councilmember Yukimura: Do we know how many people are in this
category?
Mr. Hunt: We do not. I did take a sampling from our
current income exemption applications and we have as of 2014 tax year, there were
thirteen hundred and ten (1,310) property owners that qualified for the eighty
percent (80%) and below. I made an assumption that somewhere in the
neighborhood of thirty percent to forty percent (30% - 40%) of those that applied for
the eight percent (80%) and below would also qualify for the fifty percent (50%) and
FED COMMITTEE MEETING 5 OCTOBER 15, 2014
below. I took a sampling of twenty-two (22) properties that were thirty-five
thousand dollars ($35,000) gross income and below to see who would benefited from
that. Many of them who are in lower valued properties, the exemption itself
benefits, they do not need the additional but the ones that I did find, there were
eight (8) out of the twenty-two (22) that would have benefited and the average of the
benefit was over a thousand dollars ($1,000) — I think a thousand eighty dollars
($1,080). In rough magnitude, if I figure thirty percent to forty percent (30% - 40%)
of the eligible owners and at a beneficial rate of about thirty-five percent (35%) of
those qualifying and benefiting from it, results roughly in a range of about a
hundred and fifty thousand (150,000) to two hundred thousand (200,000) in tax
credits that we would be looking at for the next year.
Councilmember Yukimura: What is the number of people or households
that it represents?
Mr. Hunt: Again, from what I have, we know that one
thousand three hundred and ten (1,310) in 2014 qualified for the income exemption
but we do not have an accurate number without actually going and pulling
individually all thirteen hundred (1,300) and finding out who is below the
thirty-five thousand dollar ($35,000) threshold.
Councilmember Yukimura: Right. If they qualify, then they get a tax
credit?
Mr. Hunt: Yes their taxes will be based on three
percent (3%) of their gross income rather than the calculated market taxes.
Councilmember Yukimura: Okay. Thank you very much.
Committee Chair Chock: Councilmember Kagawa.
Councilmember Kagawa: Continuing what Councilmember Yukimura
asked, so you said you did a sampling of twenty-two (22)?
Mr. Hunt: Twenty-two (22) properties.
Councilmember Kagawa: How much of the twenty-two (22) would
qualify?
Mr. Hunt: Eight (8) of the twenty-two (22) which is
thirty-six percent (36%). I used thirty-five (35) for roughly.
Councilmember Kagawa: Thirty-six percent (36%) of the total number
of low income was how much?
FED COMMITTEE MEETING 6 OCTOBER 15, 2014
Mr. Hunt: No, thirty-six percent (36%) of the ones that
were already below fifty percent (50%). We set a dollar threshold of thirty-five
thousand dollars ($35,000), we pulled twenty-two (22) property owners that had
thirty-five thousand dollars ($35,000) and below, and eight (8) of those twenty-two
(22) would have benefited more by having a tax cap or a credit as opposed to the
income exemption itself.
Councilmember Kagawa: How much is thirty-six percent (36%) of the
total number? That would give me an estimate of how much households we are
helping.
Mr. Hunt: Yes, but what I am looking at is if we use
thirty percent (30%), we are looking at three hundred ninety-three (393) potential of
which thirty-five percent (35%) may benefit, so a hundred and thirty-eight (183) on
the low-end. If we use forty percent (40%) of those being eligible with, again,
thirty-five percent (35%) of those qualifying, it is about a hundred and eighty-three
(183).
Councilmember Kagawa: And the total savings was how much? I
mean the total lost to the County would be how much?
Mr. Hunt: The average savings for this...and they
range anywhere from...the low was a hundred and forty-one dollars ($141) to a
high of over two thousand dollars ($2,000) but the average of those eight (8) was
about a thousand and eighty dollars ($1,080). Roughly a thousand per taxpayers'
savings. Again, on a global...assuming these numbers and assumptions are correct,
we are looking at potential relief in the neighborhood of about a hundred and fifty
thousand dollars to two hundred thousand dollars ($150,000 - $200,000).
Councilmember Kagawa: My common sense question is if you have a
potential savings of two thousand dollars ($2,000), how in the world did they buy
the house in the first place?
Mr. Hunt: Yes.
Councilmember Kagawa: I prefer the answer to come from Mr. Hunt.
Mr. Hunt: It is one of those ones where value may have
been low when they owned the house and it had become a more popular area and
the values may have increased dramatically.
Councilmember Kagawa: Okay.
FED COMMITTEE MEETING 7 OCTOBER 15, 2014
Mr. Hunt: It is also a nice bridge for people who are on
the cusp of that seven fifty range that could get into the home preservation limit,
maybe one year they are in and one year they are out, so if you are really close to
that range, this program would be a similar substitute because both of them have a
three percent (3%) of requirement. Again, if someone is really close to it, this would
be a preferable means to assure the stability that you are going to be paying on your
income as opposed to value.
Councilmember Kagawa: What stimulated bringing this Bill before the
Council?
Mr. Hunt: Partly through some of the inquiries that
were sent over by Councilmembers from taxpayers in looking at who really
benefited or did not benefit from some of the other relief measures. Even though
they had the income exemption, they still got a big increase in their taxes. There is
a gap saying, okay, we recognize that even though you may qualify for two hundred
thousand dollars ($200,000) in age exemption and the hundred and twenty
thousand dollars ($120,000), that three hundred and twenty dollars ($320,000) in
context of a million dollar property, you are still paying six hundred eighty
thousand dollars ($680,000) in value, is still significant to them.
Councilmember Kagawa: In response to that, I am glad that we had
problem arise to us. We gave it to you and you found some solutions for those who
are really below that income that cannot pay. Thank you for proposing this. Thank
you.
Committee Chair Chock: Councilmember Rapozo.
Councilmember Rapozo: Section 2 of this amendment, this confuses
me when I read it. What is the median income?
Mr. Hunt: Section 2, this is upon proper application, is
that what you are reading?
Councilmember Rapozo: Right. What confuses me is where it says,
okay, basically anybody that do not exceed fifty percent (50%) of the median
household income. What number is that? Is that the thirty-five thousand dollars
($35,000) that you talked about?
Mr. Hunt: That comes from the Housing Agency. They
actually provide a figure to us. The hundred percent (100%) median income is
somewhere around seventy-one thousand dollars or seventy-two thousand dollars
($71,000 — $72,000).
Councilmember Rapozo: Okay.
FED COMMITTEE MEETING 8 OCTOBER 15, 2014
Mr. Hunt: I know from this year's applications is
fifty-six thousand two hundred (56,200) so I kind of backed into the thirty-five
thousand one, if you actually...
Councilmember Rapozo: Any homeowner with a household income
less than thirty-five thousand dollars ($35,000) would qualify and they could apply.
This is where I get confused, it says, "shall be entitled to a credit in the amount that
the real property tax assessed in the homeowner property for the current year
exceeds three percent (3%) of the household income."
Mr. Hunt: Right.
Councilmember Rapozo: I do not understand that.
Mr. Hunt: It is the differential between the market tax,
if you will, that is the real property tax assessed on the homeowner is market right
now. And the difference between that and what three percent (3%) of the reported
gross income would be. So in the case where you had a market tax of two thousand
dollars ($2,000) and you had twenty thousand dollars ($20,000) gross income, you
are three percent (3%) of twenty thousand dollars ($20,000) is six hundred dollars
($600). The difference between six hundred dollars ($600) and the two thousand
dollars ($2,000) is what your credit would be, that would be the fourteen hundred
(1,400), that would established in what your credit is.
Councilmember Rapozo: Would they not qualify for the two fifty cap?
Mr. Hunt: Okay, we are talking about one is a program
change which would be effective potentially for the 2015, the Fiscal 2016 and the
credit is sort of the retro on the 2014. This is not additional relief for 2014. This is
a program for people to get additional credit so that we are not in the same
situation for next year.
Councilmember Rapozo: I do not know if that verbiage can be
changed. Maybe it is just me but I do not understand the text in...based on what
you just said it is and what is written. I do not see that. Maybe it is just me. If it is
clear to you folks then that is fine — maybe it is just my problem. If I gave this to a
member of the public, would they even understand? "Shall be entitled to a credit in
an amount that the real property tax assessed on the homeowner property for the
current year exceeds three percent (3%) of the household income." So three percent
(3%) of...let us say thirty thousand dollars ($30,000), it would be nine hundred
dollars ($900).
Mr. Hunt: So what this does is it establishes the
amount of the credit and it is the differential between the three percent (3%) of your
household income and what you are actually assessed based on market.
FED COMMITTEE MEETING 9 OCTOBER 15, 2014
Councilmember Rapozo: Okay. I understand what you are saying...I
am not sure if that is what this says. I will think about it. Thank you.
Committee Chair Chock: Councilmember Yukimura.
Councilmember Yukimura: I am beginning to see what Councilmember
Rapozo is talking about. Is it a credit in the amount that was assessed or that was
taxed?
Mr. Hunt: No, it is the differential between what was
assessed and what we would actually bill based on the percentage of the income.
Because it is something that we are going to measure like we did in the past; what
was the PHU credit? It was a credit against the market tax. So there was actually
a measurement of the credit. This would be the same thing. We would report what
the estimated market tax would be but then as an offset we would show what the
credit is on a parcel basis and then at some point, as an aggregate when we are
sending you the estimated taxes for the budget.
Councilmember Yukimura: I think maybe taking a real life example
would be helpful but I mean I too am very thankful for this and I think the
distinction is that this is a system change versus the two hundred fifty dollars
($250) cap which is an interim relief, right? That is the difference between the two
(2) bills and they would apply to different tax years. The interim relief would apply
to the 2014 tax year, this would apply to 2015 tax year, and beyond unless changed.
Mr. Hunt: Correct.
Councilmember Yukimura: Okay. Actually this Bill is being introduced
by Council Chair.
Mr. Hunt: Correct, I did not draft the Bill.
Councilmember Yukimura: So it is actually a Council initiative but with
your help in trying to make sure that it would achieve its goal without unintended
consequences. The taxpayer would have a choice between this...if they qualified for
both the home preservation and this, they would have a choice then...whichever one
works best for them?
Mr. Hunt: Correct. The home preservation has more
stringent requirements, the 10-year minimum ownership because typically the
credits are much larger as well. But this sort of as that gap proposal provides some
similar relief on an annual basis that they could apply for those with very low
income.
FED COMMITTEE MEETING 10 OCTOBER 15, 2014
Councilmember Yukimura: And this requires that they submit their
income taxes as proof every year? Does it?
Mr. Hunt: I am looking through here...although I am
speaking to 2015, I did not see an execution date here.
Councilmember Yukimura: Do you need a date if it is just going to apply
prospectively?
Mr. Hunt: It says, "and shall be annually submitted by
September 30th of the current year to be effective." We have already passed that
date.
Councilmember Yukimura: Oh, I see.
Mr. Hunt: Immediately I am concerned about next year
which was the intent.
Councilmember Yukimura: That is true.
Mr. Hunt: I can see that as we go forward but for the
first year, because we are already passed that date, this would not do anything.
With the intent of making it applicable to 2015 assessments, or the taxes I should
say, not assessments in this case, that maybe we need a deferred end date for
application.
Councilmember Yukimura: Yes, I think we should ask Staff to work on
that if we intend for it to apply to the next fiscal year.
Mr. Hunt: Timing on this was not as vital as some of
the other bills because it does not affect the notice of assessment. It affects the
back-end tax. Again, we have some flexibility but at some point prior to the
submittal of the tax role and the estimated revenue which is usually in February,
we need to have all of this calculated.
Councilmember Yukimura: What do you suggest as an alternative date
for the Fiscal Year 2015?
Mr. Hunt: I would say somewhere in the neighborhood
of mid-January.
Councilmember Yukimura: We need to draft an amendment before we
pass this Bill. Thank you, Steve.
Committee Chair Chock: Councilmember Bynum.
FED COMMITTEE MEETING 11 OCTOBER 15, 2014
Councilmember Bynum: This is coming from Council Chair Furfaro's
proposal, correct?
Mr. Hunt: Correct.
Councilmember Bynum: And it is consistent with targeted relief in an
identified population. I maybe miss something. We need an amendment? What do
we need an amendment for?
Mr. Hunt: What I do not see in here is an effective date
of application and when it would start. It just talks about "September 30th for the
current year," which 2015 is now passed.
Councilmember Bynum: Okay. Thank you. I am sorry. I missed that.
That is it.
Committee Chair Chock: Councilmember Rapozo.
Councilmember Rapozo: Steve, let us say using the two thousand
dollars ($2,000) bill on a family that has thirty thousand dollars ($30,000) a year
annual income, the credit would be the two thousand dollars ($2,000) minus the
nine hundred dollars ($900). Basically they would get eleven hundred dollars
($1,100) of credit to be applied at the next year's tax?
Mr. Hunt: Correct.
Councilmember Rapozo: In essence their tax bill would be nine
hundred dollars ($900), that is what they would be required to pay?
Mr. Hunt: Yes.
Councilmember Rapozo: We are assuming that the two hundred fifty
dollars ($250) cap is temporary and it will not be here next year; that is what you
are saying? I think realistically I do not think we will see any kind of tax reform in
the tax year. I am assuming that I would have to believe that the Council next
year, we would have to...I mean if we remove that two hundred fifty dollars ($250)
cap, we would be in the same boat.
Mr. Hunt: I would not even say remove. It is a one (1)
time so you would have to reinstate another cap.
Councilmember Rapozo: Right and I do not imagine the next Council
not doing that because it is the same problem, I guess is my point. These temporary
fixes do not fix it, it just kicks the can down the road to next year.
FED COMMITTEE MEETING 12 OCTOBER 15, 2014
Mr. Hunt: I guess interestingly there has been quite a
bit of activity as you can imagine in Real Property Assessment of late and
substantially more applications for the long-term affordable rentals for income relief
so some of these may in fact fix themselves because people by the mere fact of
getting a wake-up call with a higher bill, have now been in our office to see what
relief is available. Some of these programs that are already in place may actually
be functional in providing the kind of relief that it was intended for.
Councilmember Rapozo: Okay, so, is this Bill necessary?
Mr. Hunt: I still believe it is because you are going to
have that gap people that have very low income and higher net taxable values even
with all of the relief measures that are currently available.
Councilmember Rapozo: Okay. There is obviously going to be a
reduction in revenue.
Mr. Hunt: Yes.
Councilmember Rapozo: And how is the Administration considering
getting that back?
Mr. Hunt: At this point I do not...
Councilmember Rapozo: Are you going to transfer to the burden to
another tax class?
Mr. Hunt: I do not have an answer for you at this point.
We have already given one point nine so if these measures result in something...one
point nine or something less than we are in the same position.
Councilmember Rapozo: Yes, that is my concern. We are hoping that
it works out...we are hoping that the impact is not substantial but we do not know
and we will not know. What it does is it puts us right back in the situation of
scrambling to find more of these, what I call Band-Aid relief, and it concerns me. I
know there is no way of you knowing. Obviously there is no way for you giving us a
number because we do not know the annual income of these families.
Mr. Hunt: That is correct.
Councilmember Rapozo: I guess I am just concerned that we are
putting Band-Aids on this situation, but anyway, I am done.
FED COMMITTEE MEETING 13 OCTOBER 15, 2014
Committee Chair Chock: Just to follow-up and then I will hand the
floor over to Councilmember Kagawa. It is good news that people are actually
taking advantage of exemptions. Will that be able to help some projection moving
forward?
Mr. Hunt: Once we have the assessment and the
appeals out, and all the tax relief measures in place, it is not going to be until
sometime in January that we will be able to tell you, even preliminary of where we
are at.
Committee Chair Chock: Perhaps towards the end of
January/February we will be able to get some indication of where we are headed
and what we could anticipate in terms of the market.
Mr. Hunt: Correct.
Committee Chair Chock: And then there is a question about cost too.
You talked about the cost to the office in its entirety but did that include
administrative cost?
Mr. Hunt: In this particular Bill assuming we are
getting another hundred and forty to a hundred and eighty (140 - 180) applications
and they may already be coming in, in terms of these are the same group of pool of
the thirteen hundred ten (1,310), it is just refiling into something that gives them a
more meaningful relief as opposed to just knocking off a hundred thousand dollars
to a hundred and twenty thousand dollars ($100,000 - $120,000) from value and still
having a high taxable value. There are the same applicant, just applying for a
different program that gives them a more meaningful relief, so I do not see really an
expansion in the numbers or need for Staff to implement.
Committee Chair Chock: Easy to administrate, basically?
Mr. Hunt: Yes.
Committee Chair Chock: Okay. Councilmember Kagawa.
Councilmember Kagawa: What is the Kaua`i County Housing Agency
affordable rental housing guideline median household income for a single person
this year?
Mr. Hunt: For a single person?
Councilmember Kagawa: Is it...
FED COMMITTEE MEETING 14 OCTOBER 15, 2014
Mr. Hunt: It is usually broken out. When we get the
information from the Housing Agency if it is for the long-term affordable rental, it is
by room type. It will tell you how much rent for a one-bedroom or a two-bedroom.
Councilmember Kagawa: But they use the adjusted gross of the tax
return to determine how much their income is for a year?
Mr. Hunt: Actually, I think they use the gross. I do not
think they use adjusted gross. And it is a number that usually comes from HUD
because they are the one that does the study.
Councilmember Kagawa: Do you have any idea of what that number
is? Is it thirty thousand dollars ($30,000)? I heard Councilmember Rapozo say
thirty thousand dollars ($30,000).
Mr. Hunt: I can work backwards. I know that the...
Councilmember Kagawa: This is for people watching out there who has
small gross income and are thinking I maybe can qualify for this very generous
credit.
Mr. Hunt: Fifty-six thousand two hundred dollars
($56,200) is the eighty percent (80%) median household income for Kaua`i.
Councilmember Kagawa: Fifty-six thousand two hundred dollars
($56,200) for a single person?
Mr. Hunt: That is just the median household. It does
not measure how many people live in the house. Of that fifty-six thousand two
hundred dollars ($56,200), if you divide by eighty percent (80%), it gives you a
hundred percent (100%) of about seventy thousand two hundred fifty dollars
($70,250). Half of that would be your fifty percent (50%), so, thirty-five one hundred
twenty-five dollars ($35,125) roughly.
Councilmember Kagawa: So maybe that is the median income —
thirty-five thousand dollars ($35,000)?
Mr. Hunt: Is half of the median.
Councilmember Kagawa: I mean, half of the median. So if your
income does not exceed this number then you qualify for that.
Mr. Hunt: You would be eligible for this kind of relief,
correct.
FED COMMITTEE MEETING 15 OCTOBER 15, 2014
Councilmember Kagawa: I want to say that this is one of my issues
with that cut-off at fifty percent (50%). If a family makes forty thousand dollars
($40,000), they do not get this generous credit which is kind of like tax returns. To
me a fair way is to have a scale version between thirty-five thousand dollars
($35,000) and forty thousand dollars ($40,000), you get a percentage of it. Not just
cutoff everyone below thirty-five thousand one hundred twenty-five dollars
($35,120) get the credit but if the guy makes thirty-six thousand dollars ($36,000),
he gets nothing. That is where my problem is with these cutoffs. It is just like
federal taxes, right? If your joint is a hundred and ten thousand dollars
($110,000)...
Mr. Hunt: You move into a new bracket.
Councilmember Kagawa: ...in your joint, you pay fifteen percent (15%)
bracket. If you are over a hundred and ten thousand dollars ($110,000), you are in
the twenty-eight percent (28%) bracket. You can just be a dollar off and be in the
next bracket. I guess that is how we got to do things, I guess. Thank you.
Councilmember Yukimura: For this low income additional category, this
will be ongoing so that we just have to make the amendment for this next year and
then it will be...
Mr. Hunt: You could do a sunset. You could have an
amendment for the date that would bring us out to January 15, 2015 to have your
application in and then we can process and calculate those credits.
Councilmember Yukimura: In response to the question raised by
Councilmember Rapozo in terms of how we are going to handle the lost in revenue, I
mean one of the options for the Council is to increase the tax rate on whatever
category we want by even five cents ($.05) or whatever and it would be across the
board everybody paying for it rather than just a few individuals without hardly any
impact, right? A few dollars from everyone could offset it. But, we can address it
with rates or with an increase in exemptions. Now that we have everybody sort of
an equal level, we do not have those huge disparities. Whatever relief we give will
hit equally.
Mr. Hunt: More importantly whatever relief we give
will hit the people that actually have proven they need to relief by showing they
cannot afford it.
Councilmember Yukimura: This is moving us closer to the ability to pay
for the low income people and in that way, it is giving them some protection.
Mr. Hunt: Yes.
Councilmember Yukimura: Okay, thank you.
FED COMMITTEE MEETING 16 OCTOBER 15, 2014
Committee Chair Chock: Do we have an amendment? If there are no
further questions, I would like to open it up for public testimony. Do you have
something?
Councilmember Bynum: Just discussion.
Committee Chair Chock: Let me get public testimony out of the way.
Is there anyone who would like to testify on this item? Mr. Mickens.
GLENN MICKENS: My testimony concerns all five (5) tax
measures, it is fairly generalized. You have a copy of it. Last month the Council on
this taped taxation called costs and the international property tax institute released
a score card grading the States on our property tax administration practices, this is
from the Hawai`i Free Press. Only five (5) States scored a "D" or "D+" and Hawai`i
was one of the five (5). Of our fifty (50) States only Oregon scored a "B+" and it
would certainly behoove us to look closely to see what we might use to improve our
system which is not working. Yes, we had a two percent (2%) cap system in place for
ten (10) years, that was working fine but politics entered the picture and this
system was regrettably abandoned for a temporary two hundred fifty dollars ($250)
cap. Today's agenda includes multiple measures proposing minor changes in the
property tax law. A sound tax system should be thoughtfully considered and not
need this kind of tinkering as Mel was pointing out; the Band-Aid. We desperately
need a task force which we talked about made up with intelligent neutral people
like Walter Lewis and Carl Imparato to come up with an equitable and long term
solution to a system that is broken. Let us put this task force together immediately
to initiate a property tax system that will work well for the majority of our citizens
and no, JoAnn, Proposition 13 did not bankrupt California as you keep on saying. It
worked for forty (40) years and is still working. It helped keep my mother and
father in their home. Irresponsible spending caused the financial problems in
California, not Proposition 13. The cap does work and we should have kept ours as
it was. Thank you, Mason.
Committee Chair Chock: Thank you. Anyone else would like to
testify? No. I am sorry, Steve, I did have one question actually that I forgot to ask.
In terms of timing you said that we got some time on this Bill, if we needed to have
further discussion. I just wanted to be clear on what that time was.
Mr. Hunt: Yes, this is actually a tax credit so this does
not get applied until the tax bills or just before the tax bills go out. The actual
calculation once the rates are set probably will not happen until June. The only
difference is, based on the current rates and what the estimated credits will be,
normally when I report the estimated real property tax revenue to you for the
March budget, that is kind of what I am shooting for is to be able to provide some
sort of an estimate of the real property tax knowing what the credits are. We need
some time to allow people to come in and apply for it and a little bit time to process
FED COMMITTEE MEETING 17 OCTOBER 15, 2014
and then we will be able to provide that for you prior to the March 15th submittal for
budget.
Committee Chair Chock: Thank you. If there are no further questions,
we will call the meeting back to order for discussion.
The meeting was called back to order, and proceeded as follows:
Committee Chair Chock: I agree that we should be looking at
everything and looking at it intently. Knowing that I am supportive of what I am
reading and I am also supportive of other members wanting to feel comfortable
about where we are headed and looking at all options. I am willing to take our time
with it further, if necessary. I will open it up for discussion. Councilmember Bynum.
Councilmember Bynum: I just want to say that I am in total support
of this proposal. It is consistent with what we learned. It is focused on, probably the
most important thing that we want to make sure the people who are having
challenges in our community feel safe and secure in their homes. I applaud this
effort by Council Chair Furfaro and the work that Steve has obviously put into it.
We get good analysis from him and that is all I need to say. Obviously we should
wait to get it right because we have time and when we have time we should it to get
it right.
Councilmember Yukimura: In dealing with all of the requests from
various real property tax owners, I found places where the existing system is not
working and that is for example this elderly woman living in Kapahi who has a very
low income and her taxes went up from three hundred dollars ($300) to a thousand
dollars ($1,000). I looked at all the relief programs and her property value is not up
at seven hundred fifty thousand dollars ($750,000) yet so home preservation does
not work. This will very much help her and this is like interim relief for the people
who need it, permanently, is what this is. So anybody who voted for the interim
relief should be for this because it will give them relief beyond 2014 but as Steve
pointed out it is target relief for those who really need it. It does not cut across the
board for people and apply to people who have vacation rentals that bring in two
thousand dollars ($2,000) or ten thousand dollars ($10,000) a week and so this is the
kind of real property system that we want. This is one of the pieces that will make
it a good system. We do have an amendment to address that issue of a "past
application deadline for 2015," and it is ready.
Committee Chair Chock: I will entertain a motion to amend.
Councilmember Yukimura moved to amend Bill No. 2557 as circulated, as
shown in the Floor Amendment which is attached hereto as Attachment 1,
seconded by Councilmember Kagawa.
FED COMMITTEE MEETING 18 OCTOBER 15, 2014
Committee Chair Chock: Are there any questions for the introducer? I
think it was pretty self-explanatory.
Councilmember Hooser: I apologize coming in late to the discussion
but it seems like I heard a few moments ago that there was no time pressure and
then this says January 15th which seems...is this the time pressure that we have to
pass it by January?
Committee Chair Chock: In order to make it in time for the following
year. We wanted to put a date on it in order to...I do not know if I am explaining
this correctly...to get it prepared for the tax proposed tax year. There is a deadline
that was not submitted on the original bill that needs to be on.
Councilmember Yukimura: We need to pass this as soon as possible so
people will now know what the deadline is and can apply for it. We do not want to
pass this by January 15th because they will have one (1) or less than one (1) day to
apply. The sooner we pass this then they will know they have between whenever
this passes and the Mayor signs it into law, then they will be able to apply by
January 15th. It will give them about two and a half(2 1/4) months, three (3) months
to apply, but we have to get the word out too.
Councilmember Hooser: It still seems to contradict what the Director
of Finance says in terms of, "there was not a..." unless I misheard.
There being no objections, the rules were suspended.
Mr. Hunt: Just for clarification, when I say there is no
time pressure, there is less time pressure because it does not affect the assessment
notice which is something that goes out in mid-November. The tax credit would not
be reflected on the assessment notice.
Councilmember Hooser: It goes out next month?
Mr. Hunt: Yes.
Councilmember Hooser: When would this have to be passed?
Mr. Hunt: From the processing standpoint, in order to
reflect it on the estimated taxes that we provided for budget, it would have to be in
the mid-January range for us to have something in February for the March
submittal. If you wanted to give credit beyond that date then there would
potentially be budget amendments between whatever the submittal is and that
period. For convenience certainly, the quicker its passed, the more time we have to
get the word out but January 15th, in my mind, would still be the application
deadline for those that would qualify.
FED COMMITTEE MEETING 19 OCTOBER 15, 2014
Councilmember Hooser: Thank you.
Councilmember Yukimura: January 15th does not become the application
deadline until we pass this Bill, right?
Mr. Hunt: Correct.
Councilmember Yukimura: In order to give people time in which to
apply, the sooner the better unless we have big problems with the Bill. To give
people even a month to apply is a sort time especially if we have to get the word out
before that. Thank you for clarifying that this Bill does not affect assessment
notices and that is why...because if it did, it would be too late at this point, right?
Mr. Hunt: Correct. Other bills that are before you today
have a very tight deadline because they have to be implemented and done prior
getting the assessments out which is again, I believe, it would be the week of the
17th through the 21st — if I not mistaken of November to make our print deadline of
sending the notices by December 1st.
Councilmember Yukimura: What is the drop dead deadline of us passing
a bill that affects assessment notices?
Mr. Hunt: Depending on the work that is required in
the bill itself. If it is extensive work, there may be some bills that are
implementable as we speak.
Councilmember Yukimura: I see. Thank you.
Committee Chair Chock: Any further questions for Steve? Thank you
for clarifying, Steve, I think the comparison of what we are needing to act on right
now as opposed to the future is clear for all of us. We are in discussion right now.
The meeting was called back to order, and proceeded as follows:
Councilmember Kagawa: Thank you, Chair. I like the intentions of
the Bill. I think the Bill really attempts to help those who need it the most. My only
problem with the Bill is that it cuts off at a fixed amount of fifty percent (50%) of
the median income. If we just estimate what it would be today, it would be about
thirty-five thousand dollars ($35,000) a year. We are making the assumption that
everybody who makes less than thirty-five thousand dollars ($35,000) are entitled to
this very generous real property tax credit. And everybody over thirty-five
thousand dollars ($35,000) is not entitled to help; that they do not need any help
with their property taxes. I think that is wrong. I think there are people just a little
more than thirty-five thousand dollars ($35,000), thirty-six thousand dollars
FED COMMITTEE MEETING 20 OCTOBER 15, 2014
($36,000) or forty-five thousand dollars ($45,000), you know, that are entitled to
maybe not that generous of relief, but entitled to some relief. We live in the most
expensive place in the world on Kaua`i and money is tight. If you hang around the
people that I hang around with, money is tight and to just benefit one (1) sector that
makes thirty-five thousand one hundred twenty-five dollars ($35,125) or less, with a
very generous credit and exclude everybody else that makes a dollars ($1) more
than thirty-five thousand one hundred twenty-five dollars ($35,125), to me, is not
fair. It is not responsible. Therefore, I will not be supporting the Bill at this time. I
will look for a future meeting with Mr. Hunt to see if we can find a more innovative
way to include, perhaps some incomes that are higher than thirty-five thousand
dollars ($35,000). Thank you.
Committee Chair Chock: Okay. I will go to Councilmember
Yukimura.
Councilmember Yukimura: I would invite Councilmember Kagawa to
propose an alternative but you have to draw the line somewhere. We drew the line
at fifty-two thousand dollars ($52,000) for the low income exemptions, and now we
are drawing it even lower for thirty-five thousand dollars ($35,000). Wherever you
draw the line there is somebody above it and somebody below it. I would not want to
delay the Bill or not pass it and not give the people that are below the line an
option. They are, by definition, the lower end. That is the people we are trying to
help. It is true, wherever you draw the line there is somebody above and below. I
have not seen any suitable alternative to that.
Committee Chair Chock: I was wondering if I could just ask a
question. Councilmember Kagawa, would you be open to...looking at the
framework that we have before us...because I think what you have to offer is of
value of trying to discern maybe some intermediate needs or some other
classifications within. So maybe that some of what you are proposing could be
worked within the current Bill and if there is more time necessary to do that, that is
something you might support or not?
Councilmember Kagawa: Certainly I would like to see us perhaps
because we live in an expensive place, I am looking at maybe seventy percent (70%)
of the median income, I do not know what that number will be, whether it be fifty
thousand dollars ($50,000) or what have you, but to propose that amendment and
not know what the impact is dollar-wise and without having exact numbers, I do
not want to just propose an amendment that has ramifications that I cannot
foresee. I think I need to sit down with Steve and perhaps his Real Property Tax
Office and discuss some of the options that I have. I just have some concern that we
are cutting it off and maybe we should be including some of those incomes up to fifty
thousand dollars ($50,000) for median income. I do think up to fifty thousand
dollars ($50,000) is really not much for people. I would like to see them get some
benefit. Maybe not that huge nine hundred dollars ($900) benefit as
FED COMMITTEE MEETING 21 OCTOBER 15, 2014
Councilmember Rapozo is speaking of, but at least four hundred dollars ($400) or
something. Thank you.
Committee Chair Chock: Councilmember Bynum.
Councilmember Bynum: I think this is helpful discussion. Right now
we have median income, it is set every year, it is about seventy-seven thousand
dollars ($77,000) for a household. At fifty-seven thousand dollars ($57,000), we kick
in a hundred ten thousand dollars ($110,000) tax exemption. At the three dollars
five cents ($3.05) tax rate is worth about three hundred forty dollars ($340). So, we
are saying...and it is true, fifty-eight thousand dollars ($58,000) you do not get that
three hundred ($300), but if you are at fifty-seven thousand dollars ($57,000), you
get three hundred ($300). So there is somewhat of a graduated relief now. Now, if
you fall below this calculation of fifty percent (50%) which we know is currently is at
thirty-five thousand dollars ($35,000), now we are not going to use an exemption,
you actually have an option of using the exemption or taking three percent (3%) of
your income. So, that would be different for each individual because maybe the
income is twelve thousand dollars ($12,000) and they will pay very low taxes, and
maybe it is thirty-five thousand dollars ($35,000). So, once you get to that credit, it
graduated based on their individual circumstance, so there is a graduation now, but
Councilmember Kagawa's point is well-taken. Sometimes there are points that you
missed it by a couple dollars.
Committee Chair Chock: Go ahead.
Councilmember Rapozo: I have a question for anyone that can
answer, I hate to bring up Steve, but the IRS tax form 4506T; does anybody know
what that is?
Committee Chair Chock: Somebody does. I will suspend the rules
again.
There being no objections, the rules were suspended.
MONA W. CLARK, Deputy County Attorney: I believe the 4506T is the
request for transcript of tax return itself.
Councilmember Rapozo: So the applicant would not provide the tax
return, they would just sign the request for transcript? Do we have to get the tax
returns?
The meeting was called back to order, and proceeded as follows:
Committee Chair Chock: I have done it before.
FED COMMITTEE MEETING 22 OCTOBER 15, 2014
Councilmember Rapozo: Whoever drafted the Bill, they can help me.
Committee Chair Chock: That is a request from the IRS to receive the
documents.
Councilmember Rapozo: So the applicant just turns in a request for
transcript and we...
Committee Chair Chock: It comes to us, yes.
Councilmember Rapozo: Okay. One of the things and again, it is just
my police mind that...there are people out there that can put out a tax return that
shows very low income for whatever reason but they are not needy. You could have
people that have Trust Funds and so forth that could qualify because their tax
returns show gross income of less than fifty percent (50%) median, I do not know if
there is a way to protect against that but they are entitled to it. We talk about
providing the help where it is needed but where is the safety net for that? Again,
that is just my mind telling me, "Hey, you got a lot of people out here that can show
a low income on a tax return but they may not be low income. They may be very
wealthy people." I am asking the question, if anybody can answer that, I see
Councilmember Yukimura raising her hand, maybe she has an answer.
Committee Chair Chock: Councilmember Yukimura.
Councilmember Yukimura: Yes, I am looking to Steve, because the way
our tax laws now work and I think we have constructed it so that cannot happen. I
mean I am telling you that the people that need this are really low income; the
elderly, they barely get by, they are the kind of people that you are talking about,
Councilmember Kagawa. They are actually lower than the kind of people you are
talking about. I believe we do not allow additional income but I do not know the
details and that is why...I do not know where Steve is but I think he could answer
it.
Councilmember Rapozo: That goes with my earlier comments about
not knowing the impacts. This thing looks really good on paper and it is not that I
do not want to help the people who need it, but what are the impacts to the budget
next year? We do not know by Steve's own admission and we will not know until
this gets implemented. What happens next year? Councilmember Yukimura, she is
just real simple, let us just raise taxes across the board and I am not supporting
that. It is not that I do not want to help the people that are in need but I do not
want to put out a Bill like this and all of a sudden we end up with two million
dollars ($2,000,000) or three million dollars ($3,000,000) impact. We do not know. I
get very nervous about passing bills. We just learned the hard way. If we are going
to do a tax relief bill, we got to know impact because the next year, we do not have
the two fifty (250) cap, we do not have all these measures, they are interim. What
FED COMMITTEE MEETING 23 OCTOBER 15, 2014
happens to the next Council? What happens to the next year's taxpayer? Then we
have to scramble again and that is my point. Councilmember Yukimura said,
"Councilmember Kagawa, what is your proposed solution?" We did propose a
solution, right? To restore the cap and start all over. But I think there is an
opportunity here to have a graduated scale at fifty percent (50%) is three percent
(3%) of your income, if it is sixty percent (60%), you change the percentage. So,
everyone along that line will have some sort of relief but the problem that I see, and
Steve is back in here now, Steve, I do not know if you need to come up because we
can do this off-line. My concern is, does the 1040 tax return show all sources of
income?
Committee Chair Chock: I think we got enough questions from a few
Councilmembers that I would like to be able to vet. I will suspend the rules again,
Steve, did you get the question?
There being no objections, the rules were suspended.
Mr. Hunt: Yes, whether the 1040 includes all sources of
income. I guess the issue is when we look at income, we look at gross income, so we
take all the schedules as well. The 1040 primarily shows the adjusted gross income
and you will also see items that are non-taxable incomes. You may have bond
income or annuities or other types of income that may have tax exempt status, so
you are not actually using that in the computation of your adjusted gross which is
your taxable income but from a gross income standpoint we do look at all sources so
that bond income would actually be included. It is not a tax on wealth, so if someone
has assets that are non-income producing and they just have a lot of wealth in
asset-base but no income associated with that then would not be reflected in an
income tax return.
Councilmember Rapozo: I guess that is my concern, Steve. How do we
safeguard the County from any potential lost revenue because some wealthy person
can submit a 1040 and show a very income, but have the ability to pay. How do we
protect ourselves?
Mr. Hunt: We ask for the full return, so when you get
into the schedule C's and look at other things like gross rents and maybe able to
depreciate everything or write off a lot of expenses, some may even show negative
income as far as their adjusted gross income, but their gross income is right off the
top.
Councilmember Rapozo: And the 1040 provides that?
Mr. Hunt: The 1040...the full return. Not just the first
two (2) pages.
Councilmember Rapozo: Well, I mean...is that what we are getting?
FED COMMITTEE MEETING 24 OCTOBER 15, 2014
Mr. Hunt: For those people...yes, we are.
Councilmember Rapozo: And I am looking at the request for
transcript, which says that we are requesting the 1040. What is the 1040? Does the
1040 include all the schedules?
Mr. Hunt: Yes.
Councilmember Rapozo: It does?
Mr. Hunt: Well unless you are at the 1040EZ.
Councilmember Rapozo: No, no. The 1040.
Mr. Hunt: Typically the 1040 will include the
schedules.
Councilmember Rapozo: Okay.
Mr. Hunt: And that was our concerted effort where we
did have some people; that in our mind, were abusing the system because they were
able to have a very low adjusted gross income. That is when we made the move to go
to a higher threshold, but make it gross income rather than adjusted gross income.
Councilmember Rapozo: What is legal and what is right are two (2)
different things. We see that all too often where people take advantage of the
benefit that they legally qualify for but yet, circumventing the intent and I think
that is my concern, that you will see a lot of applications for people who have the
ability to pay but on paper they do not.
Mr. Hunt: That is the big distinction between what is
taxable income from the IRS standpoint and what is gross income for our
perspective. We are two (2) separate agencies, we do not have the same set of rules,
so we are looking at, "We do not care how creative your accountant is, we want to
know what you have in cash flow gross income."
Councilmember Rapozo: Thank you.
Committee Chair Chock: Councilmember Bynum.
Councilmember Bynum: I want to follow-up on this because it is right
in the Bill, the definition is gross income and not adjusted gross. Going back a few
years we made this change because, and correct me if I am wrong, we had homes
valued at seven million dollars ($7,000,000) to ten million dollars ($10,000,000) and
they were paying virtually no taxes even though they had income over a hundred
thousand dollars ($100,000). Rich people do not get taxed on (inaudible) and it is
FED COMMITTEE MEETING 25 OCTOBER 15, 2014
not part of the adjusted gross. We did fix this and we are doing it...and remember
there was push-back people saying, "Hey, you used to just want my face sheet with
the adjusted...and now you want...it is too intrusive." Well, no, not when you are
skirting a thirty thousand dollars ($30,000,000) tax bill that you could afford to pay,
right? Have I got this right, Steve?
Mr. Hunt: Yes.
Councilmember Bynum: Okay.
Committee Chair Chock: Councilmember Yukimura.
Councilmember Yukimura: I knew there was an answer and I appreciate
that we have thought about it so that this Bill, if passed, will actually go to the
people who are, in fact, low income people. There was a question also about the
fiscal implications which I believe you mentioned but let us get that clear again.
You said potentially, though we will not know until the applications are in,
potentially it is a hundred fifty thousand dollars ($150,000) to two hundred
thousand dollars ($200,000)?
Mr. Hunt: That would be our best guest at this point.
Councilmember Yukimura: Which is very different from the six million
dollars ($6,000,000) impact that restoring the cap would have done. Thank you.
Committee Chair Chock: Thank you. Any further questions before I
call us back to order? Seeing none, thank you, Steve.
The meeting was called back to order, and proceeded as follows:
Committee Chair Chock: We have an amendment on the table, I think
the amendment is almost ministerial because it is identifying a date that is
necessary for implementation. I would like to see that amendment move forward, if
it is the interest of the body. If the Bill needs to be deferred for more discussion, or if
anyone else want to add to it, I am open to that as well. If there is no further
discussion on the amendment then we can call for a vote. Further discussion? No.
Okay. Anybody else like to speak on this? No.
The motion to amend Bill No. 2557 as shown in Attachment 1 was then put,
and unanimously carried.
Committee Chair Chock: Then we have the main motion to vote on.
Councilmember Yukimura: As amended.
FED COMMITTEE MEETING 26 OCTOBER 15, 2014
Committee Chair Chock: I would like to entertain more discussion on
the main motion, if not. Go ahead.
Councilmember Yukimura: I hear a desire to have more time for it, and
maybe Councilmembers can confirm that, but I would then expect that in the next
Committee Meeting there will be some amendments processed that we can consider
because I do not mind people speaking against the Bill, but if they say there is an
alternative, then let us see the alternative and be able to consider it. So, if there is
going to be work on alternatives, then I am willing to defer it for two (2) weeks. If it
is just a philosophical disagreement and there is not going to be alternatives, then I
think we should just vote and see where the votes fall.
Committee Chair Chock: Okay, good. Councilmember Hooser.
Councilmember Hooser: I support what Councilmember Yukimura
just said. I think that I do not want to pass up an opportunity to lower taxes for the
very lowest income of our residents of our community, who we all love to talk about,
our generous support of them. This opportunity will actually do something, not just
talk about doing something. Is it a perfect measure? None of them are, but this is
an opportunity to do something tangible and lower taxes for homeowners, which
some of us have tried to do repeatedly over this past year, and not always been
successful with the votes. So, I will be supporting it. This does not preclude Chair
expanding it or introducing other measures or doing a full court press on our tax
system, which I support. I think we should take the time and look at all of these
things whether it is reform of whatever you want to call it, but I do not think we
should stop helping people. I think if other members object or have other
suggestions, I would like to see them on the table in the form of amendments or in
the form of bills. There is a lot of talk, a lot of rhetoric, but I have not seen the
solutions that have been proposed. I heard a few minutes ago that we did propose a
solution to restore the cap and start all over. I do not think that is an accurate
statement because I have not seen a bill that was suitable for passing at this point,
and I have said repeatedly that I am willing to look at a bill, I am willing to have
that discussion, but we need a vehicle. We need a bill that has the cost put into it
that takes out whatever. It needs to be a bill in a position to pass. We do not have
that and we have not had that. Again, I would be more than happy to have that
discussion and consider all options, but for now, we have an opportunity to lower
taxes for homeowners. I will support it enthusiastically. Thank you.
Committee Chair Chock: Councilmember Kagawa.
Councilmember Kagawa: Once again, the rhetoric is in the eyes of the
beholder. With removing the cap, it caused all of these problems. We said that
everything was going to be fine when we removed the cap, and it is not. We have
piece-meal bill after piece-meal bill, Band-Aid after Band-Aid. Every time we bring
these Band-Aids here, we rush. It is like today. We want to pass something out.
FED COMMITTEE MEETING 27 OCTOBER 15, 2014
Just because we say it is going to help people, let us pass it out. When it comes to
property taxes, we need to take our time. How many times do we have to fail before
we will take our time and not just help one (1) section of our taxpayers? Good
taxation is fair taxation across the board. Again, it is just about why do we choose
to rush when it comes to taxes? I do not understand. We should be taking our time.
Ten (10) years that cap was on. All of these Councilmembers say what a bad idea
the cap was for ten (10) years. Then why did you not take if off earlier? You waited
ten (10) years to let bad legislation continue? I mean, let us get real. Let us start
taking our time when it comes to taxes, not just for this Council, but for the next
Council, and I think we will get to a better place. We cannot just be rushing
through measures as though we are panicking, trying to appease certain
constituents. We have to take our time and look at the whole picture. What is the
best for our County going forward because we will not want to keep putting
Band-Aid after Band-Aid on our tax system? It is really stressful. It is stressful for
the public. It is very stressful for Steve's office. I am sure it has probably been the
worse year in the history of the Real Property Tax office, and why? Did it have to
happen or could it be prevented if we had taken our time? Let us really look
forward and stop pointing the fingers. Let us just take our time when it comes to
our Real Property Tax. We need a reform. We need Real Property Tax reform, we
can do it, it will take a lot of hard work, but it will best for Kaua`i in the long run for
all classes. Thank you.
Committee Chair Chock: I am sure everybody else wants to speak too
now. So, I will go to Councilmember Bynum.
Councilmember Bynum: Rhetoric is rhetoric and truth is truth when
it is backed up by audited statements and transcripts of the meetings that
happened here, and recordation of votes. Mr. Kagawa just said "Let us stop
pointing fingers" after he pointed fingers for five (5) minutes. He said, "Well, we
said if we just remove the cap, it would all be good." I know what I said because I
read it from the transcripts. What I said is, "If we remove this cap, seven hundred
(700) people are going to have large tax increases and they are going to be upset." I
put forward proposals to keep that from happening and put them on the table to
lower taxes for the Homestead rate to keep that from happening; that is what
happened this year. Councilmember Kagawa voted against lowering taxes for local
people, as did Councilmember Rapozo. I got three (3) votes on that last year when I
said the same thing. If we do not deal with this and we remove the cap without
adjusting these things, these people will scream. It was predicted and two (2) years
in a row I put forward proposals to keep that from happening. That is the facts.
Those are facts. Thank you.
Committee Chair Chock: Okay.
Councilmember Rapozo: I have a comment.
FED COMMITTEE MEETING 28 OCTOBER 15, 2014
Committee Chair Chock: Sure, I will let you have a comment. There is
enough other bills for us to continue the rhetoric but I want us to move towards a
vote here. That is what it seems like what the body is asking for.
Councilmember Rapozo: I hate Election years. What I heard
Councilmember Kagawa say earlier was, "he wanted more time to sit down with
Steve Hunt to talk about some other options," that is what I heard Councilmember
Kagawa say. What you heard Councilmember Rapozo say was, "maybe we can have
a graduated scale, maybe we can take a look at different options"...that is what I
think Councilmember Kagawa and Councilmember Rapozo said. That is not
rhetoric. Kaipo Asing came up and put the transcripts on the board,
Councilmember Kagawa and Councilmember Rapozo asked for more time; thirty
(30) days, just some time. But, no, the bill was passed. That is not rhetoric - that is
fact; documented. I think it is very reasonable, I mean, you want to call for the
question, you have the votes — it is going to pass. My concern again is I am not going
to pass something today with incomplete information and wait until next time, I do
not know if I will be here next term but if I am here, having to sit on this table and
figure out where we are going to raise taxes next to accommodate the loss that was
incurred because of this Bill. I do not want to do that. I am sick and tired of that.
We come here scrambling, we got to do this now and then to say, not say but infer
that maybe Councilmember Kagawa and myself do not want to give relief to the
poor people. That is a misstatement and rhetoric. Two (2) weeks is fine, Mr. Hunt,
said that. It is not a philosophical difference, it is a real difference, it is a financial
impact question; what is the impact going to be to the people of Kaua`i next year?
We will not know and we got to have a back-up plan. We got to have that plan from
Finance if it is a hundred and fifty thousand dollars ($150,000), this is how we plan
to make it up. If it is five hundred thousand dollars ($500,000), this is how we plan
to make it up. It is very easy for Councilmember Yukimura to say, "we will just
raise taxes, spread it across five percent (5%); everybody pay a little." Five percent
(5%), is it really if you are on a fixed income? We talk like everybody has coin and
I think Councilmember Kagawa talked about the circle of friends, relatives, and the
influence he runs around with, probably similar to mine. They do not have extra
money. They do not have...I mean if you add up all the tax increases and fee
increases, it becomes a burden. If we cannot explain the impact on this seat today
then we are not ready to pass the Bill. I support the concept of this Bill and I
believe if people need the help, then we should be there to help them. Am I
convinced that everyone that gets this credit should get the credit, I am not
convinced of that. Am I convinced that we can absorb the fiscal impact next year?
Remember now, all the other temporary measures go away, so you know those
millions of dollars that we lost, we have to make that up somewhere. Maybe that is
the reason for some of the other bills today, they see that we can go after someone
else but the bottom line is that I do not know the impact. It is very difficult for me to
cast a vote today. I would like to sit down with Mr. Hunt as well and look at a way
to make it more fair for all low income people. I think Councilmember Kagawa hit
it on the head. Forty thousand dollars ($40,000) a year; annual household income, is
FED COMMITTEE MEETING 29 OCTOBER 15, 2014
poverty. It is poverty. I know. I work a second job at night because I got to pay bills.
I live pay check to pay check. We combined make more than forty thousand
($40,000), so please, it is not a philosophical difference, it is just a difference in
opinion and a willingness for me anyway to take our time, learn all the impacts, and
them make a decision. I do not think two (2) weeks is too much to ask. I will
definitely support a deferral.
Committee Chair Chock: Great. I am going to sound like Chair
Furfaro, when he says, "I think I said earlier that I would entertain a deferral." I
still am there. I need to hear the words to come out of someone's mouth to do that.
I am going to allow Councilmember Yukimura who has not had a chance to close.
Councilmember Yukimura: Thank you because I also said that I was
willing to defer for two (2) weeks if I could hear a commitment from those who are
asking for time, that they will come back with amendments or alternatives. I know
you wanted time to talk to Steve but I did not hear a commitment that you are
going to come back with a proposal or an amendment. Even like the bill to remove
the cap, there were many problems with it but we saw no alternative or
amendments to make it something we could consider. It takes some work and I just
want some assurance that that work will be done and that we will have something
in two (2) weeks. If we could get it, you could have your deferral. I have one (1)
more thing to say. All this thing about taking our time, well some of us have been
taking the time for ten (10) years we have been taking the time. We have been
working on this for many, many years and you know, where was Councilmember
Kagawa when we were doing all this work, as a citizen, that is how I started, before
I ran. I was out there participating and proposing ideas and advocating. Also, when
someone comes in new then it is responsibility to find out what happened before
they were here, you know, life does not start when any Councilmember takes office.
One needs to look at what has been done and understand the different issues, so
there has been a lot of time and effort and in fact, this has been a three (3) year
process of putting in place a new system. One of the reasons we have not done it all
at once is because something like this cannot be done all at once. There is a proper
sequence that you have to follow in order to make it work. If fiscal impact is so
important then where is the plan to handle the six million dollars ($6,000,000) fiscal
impact that restoring the cap would have done? I mean, there is a responsibility
that you have to show that and we saw nothing of that. Why did we not take the
cap off earlier? Because "caps" by their nature are really hard to remove. They
keep...the longer you wait, the bigger the impact is going to be on those people that
have been capped and so there is a huge pressure not to remove the cap. The
discrepancy keeps growing over time which is why you do not want to put the cap
back unless you are sure how it is going to operate because even if you said, like we
did, this is a temporary measure, it will likely stay in place for ten (10) years and it
will take extraordinary political courage to remove it and change the system. We
cannot put the cap back without thinking about this but let us work with the
system we have and I am all for looking at more comprehensive tax reform but let
FED COMMITTEE MEETING 30 OCTOBER 15, 2014
us not throw the baby out with the bath water, let us pass the kind of relief we need
to pass, and then study the system and see where the changes need to be done but
make sure we know what changes we want to be done before we take action.
Committee Chair Chock: I need to end this though. We have gone far
from the agenda item here and I need to reel us back in. I want to entertain a
motion to defer. It can go on and on is what I am saying. If you have something
that you would like to share that would help us get to a deferral...
Councilmember Kagawa: She asked me a question. I did not ask
anybody else no questions.
Committee Chair Chock: Okay.
Councilmember Kagawa: If you ask me a question, I want to answer
the question.
Committee Chair Chock: Okay.
Councilmember Kagawa: I do not rush with tax legislation. I take my
time and two (2) weeks is rushing...I cannot guarantee you that I will have
sufficient amendments that you want. Just to correct you, it took one point two
million dollars ($1,200,000) to remove the cap. My math tells me that it will take
one point two million dollars ($1,200,000) to put back the cap but I did not have my
Staff draft all of the amendments to make it a one point two million dollar
($1,200,000) bill because I did not have the votes. I do not waste staffs' time if I do
not have to. Thank you.
Committee Chair Chock: Councilmember Hooser.
Councilmember Hooser: For the record, this is my second time, I
think I am one of the only people that have spoken once.
Committee Chair Chock: That is true.
Councilmember Hooser: Again, I echo what Councilmember
Yukimura said and it was very clear that if someone wants to propose an
amendment that they think will improve this measure and they are willing to do
the work, I am willing to support a deferral today. But just to talk about
amendments or what you want to see, I do not think is a good use of our time.
Looking over the record as Councilmember Bynum said, the budget was past how
long ago, the cap was removed how long ago, and there has been plenty of time.
Plenty of time for any Councilmember; months and months and month, a year
actually on some of this stuff for Councilmembers to propose legislation or
amendments to put the cap back or not put the cap back. Those amendments have
FED COMMITTEE MEETING 31 OCTOBER 15, 2014
not be proposed. Those bills have not been proposed. To me, that is where the rub
is. We sit here and talk about trying to do the right thing for the people by lowering
taxes, trying to fix the tax issues and there is much and much rhetoric. I would like
to see tangible proposals like what we are working on today, I have submitted
several and some we are going to talk about later; many of us have, but I think that
is where the discussion starts when a person puts something tangible on the table
and that is what I want to see us work on. Not just the rhetoric. Thank you. If
Councilmembers are serious about this, I would be happy to support a deferral.
This has already been deferred once, so it had plenty of time for people to meet with
the Director and to come up with solutions to any perceived inadequacies this Bill
might have.
Committee Chair Chock: Councilmember Bynum.
Councilmember Bynum: I will try to make this the last time. People
can just read the transcript of this meeting. Just a few minutes ago, I said,
"Councilmember Kagawa, your concerns are legitimate. If you need more time and
we have it, let us do that." Nobody resisted or tried to rush this through. Then
when he took the floor it was like, "You guys said removing the cap would do this,"
and all of these factual things started coming up that were not factual. I am not a
voting member of this Committee but I said, "Hey, you are raising good points, let
us see if we have time, let us talk about it and see if we can make this Bill better."
That is what happened, I remembered it, it was just a few minutes ago and it will
be in the transcripts of this meeting.
Councilmember Yukimura: I want to make a motion.
Committee Chair Chock: Please.
Councilmember Yukimura: Out of courtesy Councilmember Kagawa and
Councilmember Rapozo, I will move to defer but I really do feel that two (2) weeks is
good enough time to develop some alternatives. It is not a very complex Bill. But I
did not want to cut off any more discussion, Chair, but if you are ready for the
motion, I will make it.
Upon motion duly made by Councilmember Yukimura, seconded by
Councilmember Rapozo, Bill No. 2557, Draft 1 was deferred.
Bill No. 2546, Draft 1 A BILL FOR AN ORDINANCE AMENDING
CHAPTER 5A, KAUAI COUNTY CODE 1987, AS
AMENDED, RELATING TO REAL PROPERTY
TAXES (Agronomics / Agricultural Use Definition
/ Reporting) (This item was Deferred.)
FED COMMITTEE MEETING 32 OCTOBER 15, 2014
Councilmember Hooser moved for approval of Bill No. 2546, Draft 1,
seconded by Councilmember Yukimura.
Councilmember Hooser moved to amend Bill No. 2546, Draft 1 as circulated,
as shown in the Floor Amendment 1 which is attached hereto as
Attachment 2, seconded by Councilmember Yukimura.
Councilmember Hooser: If I may?
Committee Chair Chock: Yes, please.
Councilmember Hooser: This is primarily a housekeeping
amendment which puts items that have already been passed into law into this Bill.
So it is not substituting at all. Staff can correct me if I am wrong. That is correct.
Thank you.
Committee Chair Chock: Any further discussion on this amendment?
Councilmember Yukimura.
Councilmember Yukimura: Yes, I concur that it is housekeeping because
the amendments are those that were made to the Residential Investor Bill which we
already passed so I call for the question.
Committee Chair Chock: Any one else? Questions to the introducer on
the amendment?
The motion to amend Bill No. 2546, Draft 1 as shown in Attachment 1 was
then put, and carried by a vote of 4:1 (Councilmember Kagawa voting no).
Committee Chair Chock: Motion passes. We have more amendments
yes? I think we want to take Councilmember Bynum's, is that right?
Councilmember Hooser's.
Councilmember Hooser moved to amend Bill No. 2546, Draft 1 as circulated,
as shown in the Floor Amendment 2 which is attached hereto as
Attachment 3, seconded by Councilmember Yukimura.
Committee Chair Chock: Go ahead Councilmember Hooser.
Councilmember Hooser: This amendment redefines the applicability
of the Bill and essentially says that the new tax classification shall include "parcels
which are used for the purposes of supporting the research and cultivation of living
organisms or plant materials whose deoxyribonucleic acid (DNA) has been
manipulated through genetic engineering techniques resulting in the introduction
of new trait(s) that do not occur naturally in the species and that are regulated by
FED COMMITTEE MEETING 33 OCTOBER 15, 2014
the Federal Government." So this applies to regulate it genetically modified crops
as opposed to deregulated crops and also includes on the first page, to the middle of
the page, the "name of each licensee" so the Department of Finance is required to
submit reports so we are inserting that addition to these other reports they also
name the lessee and the licensee which has been information missing in the past
and Councilmember Bynum is not a member of the Committee but he has worked
on this extensively. Can he offer comments on this?
Committee Chair Chock: Sure.
Councilmember Bynum: Yes. As I will get into in a few minutes there
has been a number of County Attorney opinions, there have been questions when
we floated this Bill that came from the landowners and all of that has been taken
into consideration during this time and also having a pragmatic clear definition of
what lands are included and what lands are not. All of those are incorporated into
this amendment and I believe from my perspective with this amendment the Bill
stands pretty solid. There may be other issues and so...and then I have a
presentation that I can do later that goes into the rationale and the overall and
some data that we have been seeking for over a year that has just been made
available to us through the good efforts of Mr. Hunt.
Committee Chair Chock: Mr. Bynum would you like to do that
presentation now?
Councilmember Bynum: Sure.
Committee Chair Chock: Okay.
Councilmember Bynum: I can go into that. So I prepared a three and
a half(3%) hour presentation but I am going to do this in much less time than that.
The staff has been really great in helping me narrow focus but we need to start with
some context, just a general explanation. We have a whole bunch of agricultural
land on Kaua`i and we have a program that has been in existence for many years
that has overwhelming support from every Councilmember, every Mayor that has
ever been, I believe, to incentivize the active use of our agricultural lands. We have
set up a system called agriculture dedication. Most lands we do an assessed value
and we get a market value of the lands and we apply the tax rate and that comes up
with the tax bill for the property. When we do an agriculture dedication we say,
"No, we are not going to set this value based on market value. We are going to set
the value based on the product that the land is producing." In the past we did
studies and we determined that there were two (2) rates or two (2) ways to adjust
the value. 1) For virtually anything that grows; flowers, coffee, sugar, whatever. A
commodity that is sold for a profit and the Bill has been modified over the years to
really focus on and so the whole premise of the dedication is you either get pasture
which is at one (1) value or you get diversified agriculture which means other things
FED COMMITTEE MEETING 34 OCTOBER 15, 2014
that grow but the overlay, and if you look at the administrative rules and this is the
three (3) hour part I am not doing, it repeatedly goes back to show us the General
Excise (GE), show us the cash product you are getting from this land because that is
how we value it. I learned over the process of the last few years that much of our
land had changed use. It was not in diversified agriculture producing a product or
pasture. It was in a new use called research use. And that research use does not
produce a product that is sold off of the land. It is using the land for research so
how do you value it? If there is no product how do you value it? So that is kind of
where I started and it leads to logical questions. What is the value of this use for
research? How do you value it? What is the fiscal impact of this program overall?
If you could put up the one (1) sheet of paper. Over a year ago on
September 30th, in preparation for this Bill I asked for information. What lands are
dedicated to whom, where? Right? Of those lands that are dedicated what are the
market value of the taxes? How much is the subsidy? Quantify the subsidy, the tax
credits or in essence that we are giving. These are logical questions. What is the
duration of the lease? What is the history of the use? When has it changed and
how do changes impact values? Those are all logical questions for us to look at and
so I asked for that. It is all public record and we are giving tax credits here that are
recorded in the deeds. You know this is serious stuff that has to be calculated
property and the response to this memo was we do not know. We cannot tell you.
We cannot give you this information. Even the aggregate, what is the total impact
much less, the narrow down. Well that is still of a huge concern to me that we
have...now instead of that I said just give me some of these and it is a year later
and we still do not know. A couple of weeks ago I did a new request for this Bill and
said what is the fiscal impact for these properties that are impacted and Steve Hunt
has been doing yeoman's work and you can see how busy he is dealing with all of
these issues and just literally during lunch today we finalized some
really...numbers that some of which that are exact and some of which are very close
or good enough for an analysis and I want to share that but the problem is that we
did not have this data and we still do not have it total. We were able through tax
records to get some big numbers. For the entire agriculture dedicated program,
that is about one thousand nine hundred (1,900) parcels, I think, Steve has said.
The subsidy that other taxpayers give is eight million five hundred dollars
($8,500,000). That is a lot of money and I totally support most all of that subsidy
because it is keeping agriculture lands in productions which is a very high value for
our community and always has been. But this other use that does not produce a
product that does not fit what are we going to do with it and that is what this Bill is
about. Do we want to continue...well we need to learn some things about values
and I am going to share some of that right now and do we want to continue to give
this tax subsidy to a change of use of the land that has lead to a more intensive use
and has lead to frequent spraying of pesticides that has been documented
elsewhere? With that as an overlay I actually have to start with the last slide first.
There are only a few slides but now this Bill with this amendment is very clear that
this is about the seed company operations here on Kaua`i that have changed. The
FED COMMITTEE MEETING 35 OCTOBER 15, 2014
use has changed. The rationale for this is that we are looking at a different change
of use. The current valuations do not fit, that is clear, and so we need to take a look
at this. It is not...I have been accused of targeting the seed industry. Well it is the
seed industry that came here and made these dramatic changes in use that were
different than what we had. It is not targeted at that industry; it is just where this
change of use has occurred. Looking at the sixty-two (62) properties that are
operated by seed companies in whole or part, the total acres of all of those parcels
where they have some operation is forty-four thousand (44,000) acres. But the
dedicated acres, so the acres that are actually being used for this research purpose
is around twenty-four thousand (24,000). Now I was surprised by that because I
have heard people say it is fifteen thousand (15,000) but this is according to our tax
records and our best estimate that are not exact but pretty close. Of all of those
properties the market value is two hundred twenty-four million dollars
($224,000,000). Remember I said this was about value. We start with market value
but then when you dedicate it you come up with this dedicated value based on the
value of the product being produced. The dedicated value of that same parcel is one
hundred nineteen million five hundred three dollars ($119,000,503). If this subsidy
were removed where all of the parcels that are applicable under this law the
dedicated taxes are eight hundred seventy-nine (879) so the difference is seven
hundred and fourteen thousand dollars and sixteen cents ($714,000.16). So I said
the whole subsidy for all agriculture dedicated properties like eight million five
hundred thousand dollars ($8,500,000). For those who are impacted by this Bill it is
a total of seven hundred fourteen (714). Now with one (1) caveat there is one (1)
parcel, the urban parcel here that accounts for over two hundred thousand
(200,000) of that figure. So I told Mark Phillipson the other day at the farm fair
that our best guess, which this is better than the best guess was that the impact on
these lands was about five hundred thousand (500,000), so it was a pretty good
guess because this is more accurate and if you eliminate that one (1) parcel that I
have said from the beginning is extraordinary because of it being in urban.
I want to drill down so we can understand more about value. So that means I
go back to the beginning of this and we now have some contracts that the seed
company, in this instance Agrogenics or Dow has with the landowner. And the first
thing you see is about license fee. This is the initial contract and so what is it. That
was the logical question. If we cannot value the product what is the value of this
lease? This starts to answer that question because the base term was four hundred
seventy-five dollars ($475) per acre for these five hundred twenty-nine (529) acres
that are in this example. But in addition to the minimum fee there is a research
fee. This says if licensee used a portion of the license premises for seed research
crops in contrast to parent seed corn production at any time during the license year
there is a additional annual fee of two hundred dollars ($200) an acre. So the
initial...at the beginning of this contract it was four hundred seventy-five dollars
($475) or maybe up to six hundred seventy-five dollars ($675) if that was used as
research but we do not know how that is delineated in the contract requires them to
report that to the less...requires the lessee to report it to the lessor. But then there
FED COMMITTEE MEETING 36 OCTOBER 15, 2014
have been amendments to this contract and this is the most recent amendment.
What they apparently have done is bifurcated the fees. Now there is a fee for land
and a water charge. Licensees shall pay a water charge for agricultural water
delivered to the boundary of a license property. So now we are in this 514 — 515
period so we know that there is a base three of three hundred forty-five dollars
($345) and an additional fee at two hundred thirty dollars ($230) for water delivery
and then on top of that a research fee of up to two hundred dollars ($200) an acre.
So let us put that all together and say in this example this contract is for five
hundred twenty-nine (529) acres of those twenty thousand (20,000). The initial
lease payment at a minimum was two hundred fifty-one thousand dollars (251,000)
a year for these five hundred twenty-nine (529) acres or a maximum of three
hundred fifty-seven thousand dollars ($357,000) depending on how much was used
for this more intensive research use.
Ms. Marugame: Ten (10) minutes.
Councilmember Bynum: I assume the landowner wants more money
for that use because of the more intensive use but that is my assumption. The
amended lease payment or what it is now is for this five hundred twenty-nine (529)
acres a minimum payment is being paid to the landowner of three hundred four
thousand dollars ($304,000) and this is every year or a maximum of four hundred
nine thousand dollars ($409,000). So somewhere between three hundred and four
hundred thousand dollars ($300,000 and $400,000) is the fee that the landowner is
paying. Now normally this would be private information between two (2) parties
but when you ask the County of Kaua`i to give you a tax subsidy and we have to
know this information and so this is from public record. Preliminary tax
estimates...so let us look at the five hundred twenty-nine (529) acres. The
dedicated value...remember you have the market value based on highest and best
use is one million seven hundred seventy-seven thousand dollars ($1,777,000) but
the dedicated value when you apply the agriculture dedication is one million
fifty-nine thousand dollars ($1,059,000). The market taxes would be twenty-four
thousand dollars ($24,000). So if this tax benefit or this tax subsidy was lifted from
this five hundred twenty-nine (529) acres the impact on the landowner would be
seventeen thousand dollars ($17,000). This seventeen thousand dollars ($17,000) is
the difference between what they are currently paying so the owners receiving three
hundred to four hundred thousand dollars ($300,000 to $400,000) a year for the use
of this land and the lessee is being asked to pay seven thousand one hundred fifty
dollars ($7,150) in taxes. If this Bill were to pass in its current form the taxes on
this particular lease would be twenty-four thousand five hundred fifty-four dollars
($24,554) or a difference of seventeen thousand dollars ($17,000). To me that is
really important because how are we going to set the value well now we have a
sense of what the value is and how are we going to...you know what is the tax
benefit? That is what Tom and who is here in the audience they need to know.
Steve has generated estimates for each of these sixty (60) parcels. I am not going to
go into details because that is the three (3) hour version but in each one we could
FED COMMITTEE MEETING 37 OCTOBER 15, 2014
look at a similar circumstance. To me this is a very modest proposal. The seed
companies are very large operations here. We see that they are paying considerable
sums of money for this use of the land and asking them to pay...and I am
suggesting that we not continue to have other taxpayers in the County subsidize
this particular use. I am not at all talking about any other agriculture dedication.
If you are doing flowers, you are growing coffee, you are doing pasture, you are
doing other things nobody I can imagine would want to change that. Let me also be
clear that this Bill says these lands we will put in a separate tax category. It does
not mean that we are going to tax that the same as the agriculture. That is up to
the Council to decide at budget. It is just saying this use is different and so we
want to put it in a different category and then we will determine what is
appropriate. Do we want to continue to give subsidies for this use? We may. This
Bill does not make judgments about that. It just says...well I have. I will be clear.
I am not going to beat around the bush. I think that is what we should do. I think
the landowner should pay this twenty-four thousand dollars ($24,000), they can
afford it because that is twenty-four thousand dollars ($24,000) that is coming from
our homeowners or other tax categories who do have to pay market taxes. They do
not get this kind of subsidy. Do I want to continue to subsidize papayas, flowers,
pasture, and cattle? You bet. Do I want to continue to subsidize the research use of
the land that is a very more intensive use and is generating much more revenue for
the landowners than pasture or diversified agriculture was? To me we have this
amendment that solves that. I will close by saying I wanted to release and I said
this a month ago all of these opinions that mostly were answering questions raised
and concerns that came from landowners. Unfortunately I am not going to be able
to do that. The paperwork was not processed in time for us to do that today but I
feel comfort that the amendment that Mr. Hooser has out forward addresses all of
those concerns.
Committee Chair Chock: Thank you for your presentation. If there
are not any more questions for the introducer, I would like to call the Director of
Finance up as well.
Councilmember Yukimura: That is what I wanted.
Committee Chair Chock: That is what you wanted. Okay. Steve.
There being no objections, the rules were suspended.
Committee Chair Chock: Councilmember Yukimura had her hand up
first so we will go there.
Councilmember Yukimura: Okay, thank you. Steve, so these figures
that were and maybe we can put them up on the screen that were in
Councilmember Bynum's presentation, the market value is the accurate value
to...that is something that you participated in determining.
FED COMMITTEE MEETING 38 OCTOBER 15, 2014
Mr. Hunt: Yes. I did notice in the presentation itself
that figure of one million seven hundred seventy-seven thousand four hundred
dollars ($1,777,400) actually only represents one (1) parcel.
Councilmember Yukimura: Can we get two (2) slides before...oh, I am
sorry.
Mr. Hunt: That is the slide we need. That number is
actually only one (1) of the three (3) parcels that were used. I believe and I know
that Councilmember Bynum was rushed to get this out but I believe that is actually
over three million dollars ($3,000,000).
Councilmember Bynum: Which one?
Mr. Hunt: The one million seven hundred
seventy-seven thousand four hundred dollars ($1,777,400). That is the market
value of just one (1) of the parcels. I believe that would be the last parcel on your
list.
Councilmember Bynum: I did not get the aggregate total.
Mr. Hunt: Yes. But you did not add the other two (2)
parcels which would have been one million one hundred ninety-five dollars
($1,195,000) and six hundred sixty-five thousand three hundred dollars ($665,300).
Councilmember Bynum: So this number should be...
Mr. Hunt: Sorry the totals would be one million five
hundred fifty-two thousand three hundred dollars ($1,552,300) plus six hundred
sixty-five thousand three hundred dollars ($665,300) plus the one million seven
hundred seventy-five thousand four hundred dollars ($1,777,400).
Councilmember Bynum: For about four million dollars ($4,000,000)?
Mr. Hunt: Yes. When you look at the dedicated value
and the market value it is only a seven hundred thousand dollar ($700,000)
difference it would not result in triple the taxes.
Councilmember Bynum: And that should have leaped out because the
math does not work.
Mr. Hunt: It leaped out to me.
Councilmember Bynum: So to be very clear, this number is correct for
all three (3) parcels?
FED COMMITTEE MEETING 39 OCTOBER 15, 2014
Mr. Hunt: Yes.
Councilmember Bynum: But this number should have been about
four million dollars ($4,000,000)?
Mr. Hunt: Three million six hundred thousand dollars
($3,600,000), I believe, somewhere in that range.
Councilmember Bynum: So that more dramatically shows how the
dedicated valuation changes it. But these numbers are correct, right? The
dedicated taxes...
Councilmember Yukimura: Market taxes are not.
Councilmember Bynum: And the market taxes are correct, right?
Mr. Hunt: The market tax is based on what would have
been the three million six hundred thousand dollars ($3,600,000), I believe, yes.
Councilmember Bynum: So it is this figure...
Mr. Hunt: It is that figure that is incorrect. That is
only one (1) of the parcels that you asked to include.
Councilmember Bynum: And I want to say that Ashley put this in and
I told her to put that one so it is my mistake.
Councilmember Yukimura: So if I may continue the questions.
Councilmember Bynum: Please.
Councilmember Yukimura: But the market tax represent three (3)
parcels but the market value does not represent three (3) parcels? Is that what you
are saying?
Mr. Hunt: Correct. The taxes on the dedicated value of
the one million fifty-nine thousand dollars ($1,059,000) represents three (3) parcels
but the one million seven hundred seventy-seven thousand dollars ($1,777,000)
represents one (1) of the three (3) parcels market value.
Councilmember Yukimura: And so if we could go to the previous slide
where you showed total acreage, total dedicated, market value, and dedicated value.
It was one of your first slids. The market value there is correct Steve? I know these
are all approximations.
FED COMMITTEE MEETING 40 OCTOBER 15, 2014
Mr. Hunt: Yes approximately.
Councilmember Bynum: That is the whole sheet, yes.
Councilmember Yukimura: The market value, am I correct is under the
present laws that regulate how agriculture land can be used reflects a highest and
best use. Is that correct?
Mr. Hunt: Correct.
Councilmember Yukimura: So it would be reflecting the value of the land
if it can be developed into agriculture subdivisions or country estates.
Mr. Hunt: And some of the lands like the urban pieces
are not all in agriculture. There are other zonings and uses in there as well so it
will take into consideration factors such as zoning.
Councilmember Yukimura: Right. But say a piece of land that is still
zoned agriculture, it is still going to reflect an agriculture subdivision value at
highest and best use?
Mr. Hunt: Correct. It would reflect what a market
buyer would pay for the land as unencumbered as opposed to as encumbered by a
lease or an agriculture use requirement.
Councilmember Yukimura: Okay. So the taxes then and depending on
the rate of course but would be based on what an agriculture owner, agriculture
landowner could get if they were to develop the property?
Mr. Hunt: Yes. It would be...I guess it would be the
base because they would have to factor in absorption, development cost, all of those
things so it would not be the aggregate amount of sales but rather where they think
the land cost should be in order to provide them a rate of return of the certain
threshold and some people just do it for land banking but ultimately in this stage
with agriculture lands and the entitlements they currently have most are for future
development, residential.
Councilmember Yukimura: Okay. I do have an amendment that I want
to propose that would keep these lands in the agriculture exemption category but
would create a different valuation that would reflect the higher lease rents. We
could not go to market value. It would then be an agriculture valuation but at a
higher level than pasture or diversified crop.
Mr. Hunt: I think I am supportive of that approach. I
think the concern I have would be looking at in totality what is the cost of the...the
FED COMMITTEE MEETING 41 OCTOBER 15, 2014
terms of the lease may be very different. So you may have one (1) where a small
farmer may be charged water separately where as one (1) is built-in price per acre.
It includes maybe unlimited water, it is not regulated. So you would have to
determine the use. There could be other situations where the costs of maintaining
the water system are born by the lessee. Really the terms...you cannot just use the
number themselves on the lease necessarily to make those differentials and that
would be my concern. To make sure that when we are comparing...to come up with
the differential using that analysis that we are making sure that we are comparing
apples and apples. That would be my only concern.
Councilmember Yukimura: So that would take...
Committee Chair Chock: I am sorry. Kala mai. We have to change
the tape so can we come back to it in ten (10) minutes?
Councilmember Yukimura: Yes. Yes.
Committee Chair Chock: Okay. We are going to be at recess. Ten (10)
minutes.
Councilmember Yukimura: And you are going to take a caption break as
well?
Committee Chair Chock: Yes. We are going to do a caption break too.
Let us do the caption break now too. Thank you. We will be back in ten (10)
minutes.
There being no objections, the Committee recessed at 3:26 p.m.
The meeting was called back to order at 3:36 p.m., and proceeded as follows:
Committee Chair Chock: Welcome back from our break and we were
in discussion with the Director of Finance. I think Councilmember Yukimura still
has the floor.
Councilmember Yukimura: If I remember correctly, we were discussing
market value versus agriculture valuation.
Mr. Hunt: Yes. We were discussing the potential of a
third valuation category and how that might be developed within the agriculture
classification itself.
Councilmember Yukimura: I mean I did say at the very outset when this
Bill was introduced that I suspected that the leases by seed companies had
increased lease rents by a quantum leap and that if we are going to value...if taxes
FED COMMITTEE MEETING 42 OCTOBER 15, 2014
are to be according to valuation we should maybe create another category. I believe
that is logical in your framework of agriculture assessments, right?
Mr. Hunt: What we would do and if the data were
available we would do what we call the paired sale. In this case a paired lease
analysis. If on the same property you had two (2) separate leases or adjacent
properties you have two (2) separate leases, one (1) was for biotech and one (1) was
just for diversified we would do a step by step analysis of the leases themselves and
look at not just what the gross rents are but also what the obligations of the lessees
are. And then we would have to compare that over the again same period of time to
see if there is a differential that is being paid. And then you could capitalize that
differential into a value.
Councilmember Yukimura: And that is something that is a normal
process of...a normal assessment procedure or process, valuation?
Mr. Hunt: Lease analysis more on the income approach,
which is something that the assessment office really does not do. We do cost and
market but it is a recognized approach so as a former private commercial
independent fee appraiser it is a technique I am very familiar with for comparison
but it is just something that by ordinance we have not used.
Councilmember Yukimura: In terms of the Administration's position, I
am wondering which one is preferable if you are able to say?
Mr. Hunt: I believe the Administration is supportive of
keeping the biotech type use under agriculture as a tax class.
Councilmember Yukimura: Okay. Whatever the use the land is
agriculture land and we want to keep it in agriculture land. Thank you very much.
Committee Chair Chock: Question?
Councilmember Bynum: I just want to follow-up. So the Mayor's
position on this is we should continue...the other taxpayers of the County should
continue to give five hundred thousand dollars ($500,000) or seven hundred
thousand dollars ($700,000) of tax subsidies to this agricultural use, research use?
That is the Mayor's position?
Mr. Hunt: That is not exactly what I testified to. The
Mayor's position is he believes that this use should be classified under agriculture.
Tax class.
FED COMMITTEE MEETING 43 OCTOBER 15, 2014
Councilmember Bynum: Well it is going to be under agriculture
research. So he is not...he wants to continue these subsidies that other taxpayers
make? Is that correct?
Mr. Hunt: I will not answer for the Mayor on that.
Councilmember Bynum: Well that is the outcome, right? You do not
make any changes, that is the outcome. Okay, thank you.
Committee Chair Chock: I am going to have Councilmember Hooser go
next and Councilmember Yukimura.
Councilmember Hooser: Just to follow-up briefly on what
Councilmember said. So the Administration's position is the status quo? They
prefer the status quo?
Mr. Hunt: The Administration's position is that this
biotech research is an agriculture use.
Councilmember Hooser: And in terms of the tax situation they prefer
the status quo not Councilmember Yukimura's proposal. Not our proposal but just
the status quo? Is that the position?
Mr. Hunt: I would not go that far.
Councilmember Hooser: So I have to guess how far you have to go?
So at some point you will be telling us on behalf of the Administration? I am
confused. Could you explain what the position is?
Mr. Hunt: The position is that the Administration
believes that the biotech research is an agriculture use on agriculture lands and
also when important agriculture lands enter the picture will be a continual
allowable use on agriculture lands.
Councilmember Hooser: Correct me if I am wrong. None of these
measures change the agriculture lands...that they are agriculture lands right?
They are still agriculture lands. Correct?
Mr. Hunt: Agriculture zoned lands?
Councilmember Hooser: Yes.
Mr. Hunt: Correct.
FED COMMITTEE MEETING 44 OCTOBER 15, 2014
Councilmember Hooser: They are still agriculture lands. And in
terms of the development potential it is my understanding that the maximum, even
if that was the worst case situation the maximum would be five (5) units on any
single parcel? So mass development of a one thousand (1,000) acre parcel means
five (5) units, would be the worst case situation. I am not saying it is a good thing
but is that correct?
Mr. Hunt: I do not want to speak on behalf of the
Planning Department now.
Councilmember Hooser: It is my understanding that current law
allows no more than five (5) units on any un-subdivided parcel. If you could put
that back up there, with the lease amounts. And so we have competing, if you
would proposals to try to accomplish a similar end, I think. And my question is
according to this...does it have the dollar amount per acre on it? Another slide with
the dollar amount per acre? Oh, that is. Five hundred seventy-five dollars ($575)
an acre. So between five hundred seventy-five and seven hundred seventy-five
dollars ($575 - $775) an acre per acre that is annual I believe to lease. What would
be typical pasture land lease?
Mr. Hunt: I have not seen a recent contract. I could not
tell you.
Councilmember Hooser: How about an old contract? I mean is it
twenty dollars ($20), thirty dollars ($30), ten dollars ($10)?
Mr. Hunt: I could not tell you. One hundred fifty
dollars ($150), two hundred dollars ($200)...I have no ballpark.
Councilmember Hooser: How about diversified agriculture? We do
not have any? I can try to track that down.
Mr. Hunt: I do believe water is probably, which is in
this two hundred thirty (230) is probably a separate charge though.
Councilmember Hooser: But it seems like the amount being paid is a
multiple of many factors. What is paid for in diversified agriculture and ranching
and so from a policy perspective, my point is that if we want to support diversified
agriculture and ranching that they are not equal. That no landowner can get this
kind of income is going to want to lease to ranchers or diversified agriculture. So I
think that is a public policy question that we are trying to address here. It is what I
am trying to address. I do not want to speak to the group. Could you get us at some
point what the average lease is or I am sure your agriculture person must know
because that is what you base it on, the value, right? You base the taxation for
those two (2) categories on the value?
FED COMMITTEE MEETING 45 OCTOBER 15, 2014
Mr. Hunt: No. It is the carrying capacity of the land
and again it is not by product and it is aggregated into two (2) separate categories
so obviously some produce produces more than others. So it is not just a matter of
converting lease rent. It is actually looking at what a farmer could afford to pay for
land or diversified and make a profit and cover his expenses.
Councilmember Hooser: So that is how it is determined? Okay. So
you would use...if you had the agronomics in a similar kind of fashion, so you would
have ranching, eco...as Councilmember Yukimura...you would use a similar
formula to determine the taxes?
Mr. Hunt: If we had data that would be something we
could approach but I think as many have already spoke to, you are saying there is
no income produced so how would I start with the sales?
Councilmember Hooser: So how would you implement that model?
Mr. Hunt: That would be the challenge.
Councilmember Hooser: So the model that is on the table now is
pretty basic, I think. It is a new category and whatever rate the County would want
to choose. So it might be easier to implement instead.
Mr. Hunt: I think once the parcels have been identified
and you are moving them it probably would. There potentially would be some
issues with parcels that have multiple uses some of which do qualify and some
which do not in creating what we call these multi-pit parcels which in the past have
been done by zoning. So now we would have to do it based on reported uses. I am
not saying it is on doable but that would be the wrinkle.
Councilmember Hooser: Which would be the most challenging or the
easier one to implement? Which model? I mean we have to make that decision. I
assume we are making that decision so I need some...
Mr. Hunt: I guess...can I ask some questions because in
answering that question I would want to know a little bit more. Are we
determining that...is this a go forward bill? In other words of the parcels that are
already in this use that are already dedicated that may have nine (9) years, that
may have nineteen (19) years, it may have one (1) year left, is it a phase out and we
are not allowing new dedicantes to come in but we are honoring the existing
dedications or are we saying no. This cancels all of the dedications that were
already recorded and reported going forward. That would be part of my decision in
implementation obviously.
FED COMMITTEE MEETING 46 OCTOBER 15, 2014
Councilmember Hooser: Okay, that is good. And would this Council
have the ability to choose between those options? I mean in terms of the legal
authority or whatever?
Mr. Hunt: I would defer to our legal on that whether
you have the authority to cancel a dedication.
Councilmember Hooser: Okay. On the other model would you have to
look at the individual leases?
Mr. Hunt: The other model we would still have to look
at individual leases to determine if it falls in the category of bio research or biotech.
Councilmember Hooser: And to calculate a value perhaps.
Mr. Hunt: And the to come up with a method by which
since we do not have sales to necessarily back into what a carrying capacity the
land would be I think again an alternative approach would be to look at the lease
differentials but again looking at it with all cost factors involved if there are
other...like again water may be charged separately to a lessee that is not included
in the rent where as this one may be all inclusive and I do not know how much
water is used. Those kinds of things would have to be analyzed obviously.
Councilmember Hooser: One (1) more question if I could and then I
will...and so it seems like to implement either one of these you would need
information.
Mr. Hunt: Yes.
Councilmember Hooser: And so that information would include the
lease which shows that land area and would also have to include what is actually
being grown on the land area to see if they did it. That is pretty much...
Mr. Hunt: Would need...yes, I would need lease
information on those areas and for comparison purposes leases on the other types of
uses.
Councilmember Hooser: And I would imagine the lease would have to
have a nature of the activity to know whether it falls under this category or not,
right? Whether they are growing tomatoes or whether they are growing something
that qualifies.
Mr. Hunt: I would need to know...right. And again
corn, there is also other people who grow corn here that is sweet corn that is organic
so corn does not necessarily show me that it has to be in the new category.
FED COMMITTEE MEETING 47 OCTOBER 15, 2014
Councilmember Hooser: Exactly. This is pretty specific of what it
calls for. So the lease would have to have that or whatever information that is
requested would have to have that information as well. Thank you.
Committee Chair Chock: I would like to let everyone have a chance to
speak too so I am going to go to Councilmember Kagawa next and then back onto
this side.
Councilmember Kagawa: Steve, during the break you showed me a
breakdown of the difference between I think the forty something...
Mr. Hunt: The forty-four thousand (44,000) and the
twenty-four thousand (24,000)...
Councilmember Kagawa: The forty-four thousand (44,000) and the
twenty-four thousand (24,000) that is dedicated. So the twenty-four thousand
(24,000) dedicated agriculture that is all seed corn or is it mixed?
Mr. Hunt: To the best of my knowledge it is seed corn or
other uses that would be in research but again it is a rough and dirty number that I
had to pull from information that just says maybe corn or diversified large acreage
but maybe a lessee name. Some have, some do not, so as I go through on a parcel by
parcel basis I am trying to use my best guess to collect that information. But that is
not how we collect the information necessarily so again this is requesting
information that in the past was collected as detailed as would be needed for this
type of information.
Councilmember Kagawa: Do we have a map that shows where these
twenty-four thousand (24,000) dedicated parcels are?
Mr. Hunt: No. Only the...and I do not even have a map
but I have the parcels, the TMKs which could be mapped. We could assign that but
it would not show within the parcel that area that is specific to this use.
Councilmember Kagawa: I guess I would appreciate at some point if
you guys, if it does not take too much work by your staff to do a map so we can get
an idea of where these twenty-four thousand (24,000)...
Mr. Hunt: Well it would be a map with the forty-four
thousand (44,000) that is the problem. We would not be able to identify the
twenty-four thousand (24,000)...
Councilmember Kagawa: You cannot separate it?
FED COMMITTEE MEETING 48 OCTOBER 15, 2014
Mr. Hunt: We have possibly some hard map...I mean
hard plot plans that are very...it is not scaled necessarily that we could transport
into a GIS map so it would be very challenging and time consuming.
Councilmember Kagawa: So even the TMKs, they are not broken up on
maps? Not yet.
Mr. Hunt: Not in any kind of electronic form, no.
Councilmember Kagawa: That would be nice. So just to reiterate, the
Mayor, his stance...I must ask the question again. It was asked several times to
you but I just want to ask one (1) time and I will take your answer. The Mayor at
this time does not support separating...
Mr. Hunt: A new class?
Councilmember Kagawa: Yes.
Mr. Hunt: No.
Councilmember Kagawa: And he basically wants to keep it the way it
is for now?
Mr. Hunt: He believes it is an agriculture.
Councilmember Kagawa: Is there another...who is the agriculture
person in the Real Property Tax Division?
Mr. Hunt: Damien Ventura.
Councilmember Kagawa: And does Damien have a breakdown like per
say of Kekaha, of all of the different types of...because I did my own research and I
am very surprised and actually elated that I see so much different use in Kekaha.
It just blows me away that I did not know were growing so many acres of things like
sweet potato and ginger. So does Damien have knowledge of these different uses,
and where?
Mr. Hunt: He probably has personal knowledge but
again not in map form. Most of the maps that we collect from the applicants, the
ones that are dedicating are in hard copy form.
Councilmember Kagawa: I guess it is kind of where this County is
headed to. To kind of get a handle on all of the different types because if we keep
hearing that everything is the seed corn and it really is not if you look down this list
I have ten (10) different items of pretty large parcels that have different things. I
guess down the line if we can expand Damien's...I guess it would help economic
FED COMMITTEE MEETING 49 OCTOBER 15, 2014
development or what have you with what exactly is out there and this is just
Kekaha. I know there is a lot elsewhere as well. Thank you.
Committee Chair Chock: Councilmember Bynum.
Councilmember Bynum: I want to follow-up on stuff he said earlier.
You said a couple of time the Mayor's position is that this is agricultural use of the
land. I totally agree with that and this rhetoric out there that we are redefining
agricultural use and saying this is not agricultural use...this is just for tax
purposes. We are saying that this not agricultural use that is the same as
diversified and we are saying for dedication purposes. So I just want to really be
very clear about this. Again this is as rhetoric. Oh, this is an attack on agriculture.
No, it is not. Of course this is agriculture and part of the large overall, global but
what it is here on Kaua`i is it does not fit our agriculture dedication, that is the
point. So it is not that this is not agriculture, it is just we want to define it
differently for tax benefit purposes, correct?
Mr. Hunt: Yes, but can I respond to that?
Councilmember Bynum: Yes please.
Mr. Hunt: To that point there a other agriculture uses
which we do not recognize as dedicatable uses that are under agriculture zoned
lands too. So if you were to define this in the existing agriculture dedication
program to say these uses are not dedicatable it still remains in agriculture it just
say you cannot dedicate them. This creates a new class that actually could have a
new...
Councilmember Bynum: Called research agriculture. It is just a
different category of agriculture.
Mr. Hunt: Correct but now it is no longer potentially
falling under agricultural rates and other agriculture treatments. So we are just
saying if it is a valuation issue and you do not want it to be dedicated, they pay
market tax but it still stays within the agriculture category. Much like the
timeshare people came up and says we do not want a new timeshare class, we are
okay with hotel and resort, you can value us the correct way...I kind of view that in
a very similar situation.
Councilmember Bynum: I understand. You said about implementing.
Mr. Hunt: Yes.
Councilmember Bynum: I want to follow-up on that. First of all, the
law currently says you shall consider all of these documents, right? But we have
FED COMMITTEE MEETING 50 OCTOBER 15, 2014
not been collecting. So you agree that the law says you should have these
documents, right? How do you consider a document if you do not have it? So this
burden could and should put on the landowner. They are asking for a tax benefit.
So you tell us graphically illustrate what lands you are talking about. Steve, does it
not concern you as the Finance Director that a year later we do not know who has
what lands dedicated for what purposes even though we are giving tax benefits?
Does that not concern you?
Mr. Hunt: I would love to have more data, I would love
to have more resources to collected more data. There are challenges.
Councilmember Bynum: Well I will not go into the data issue so much
but it is like last week when you did yeoman's work to help us get these estimates,
which are good ones but you had to ask me where there was the list of agriculture
dedications. Where did I get that? I got it from the landowners. I requested it
during Bill No. 2491. Here we are almost a year later and as the County of Kaua`i
we do not independently who is doing what where. That is a very serious concern so
in terms of implementation once we know that then this gives the option to say stay
in this rate, which let us say we set it the same as the current agriculture rate. It
could be less, it could be more but we set it the same. You move into this category,
you put the burden on the landowner to show you where they are asking for this
status and then it is simple to implement is it not? It is just math then after you
get the basic data down. Now if you are going to change the valuation you are going
to need every lease because it is going to be different. Maybe Grove Farm
negotiated better rates than Alexander & Baldwin (A&B) or the Robinson family. I
know they negotiated much better rates than the Agribusiness Development
Corporation ADC who are leasing this land for fifty dollars ($50) an acre. Let us
look and see what pasture use is. I think it is between ten and fifty dollars
($10 - $50) so that is why we do not have as much pasture happening because those
people have lost their leases to these higher payments. Is it not...the question is
here is it not that implementing once we determine who is doing what on these
portions then it is simple to implement, is it not?
Mr. Hunt: The only difference between implementing
under the agriculture classification and creating a new classification is being able to
identify the area and create a multi-pit. We would add another pit. Under the
agriculture we would not have to add the multi-pit nor amend those as they change.
Councilmember Bynum: If I am the lessee who has to pay these taxes
because everyone I have ever seen the lessor tells the lessee you are responsible for
the taxes. If I am the lessee right now I have a choice of...status quo I do not have
to do anything but if we value the dedicated they are going to have to give us all of
this data on an ongoing basis in order to calculate the valuation, correct?
Mr. Hunt: Say that one more time.
FED COMMITTEE MEETING 51 OCTOBER 15, 2014
Councilmember Bynum: If we are going to create a new valuation for
this research use rather than a new tax category, right? Those are the options that
are being laid out here. Then we are going to need to have the lease data with the
lease payments on an ongoing basis from everyone because they are going to be
different, right? And maybe different to...I do not know what other land...I know
what the ADC negotiated...fifty dollars ($50). Fifty dollars ($50) for somebody
that...they are the ones that are supposed to give us business sense and manage our
state assets on behalf of the people and we are only getting fifty dollars ($50). The
people getting fifty dollars ($50) six hundred seventy-five (675) for...
Mr. Hunt: And that is where I agree. I do not think we
should be doing this on a lease by lease basis. We should use that as the analysis to
set sort of the average much like we did with the diversified and the pasture
because again you could have more productivity and different leases between
different crops. We are just sort of making it standardized otherwise we are going
to need a lot more staff.
Councilmember Bynum: So we put this in a different category which
is what I am purposing, putting it in a different category. Landowners do not have
to give us these documents anymore.
Mr. Hunt: Because it becomes market.
Councilmember Bynum: Because it goes to whatever the rate we set.
It may be market but...that will be market.
Mr. Hunt: If they are non-dedicatable they are market.
Yes, so under this proposal it would be market value.
Councilmember Bynum: But we are saying that current rate in
agriculture is...I forgot. Seven...
Mr. Hunt: The tax rate?
Councilmember Bynum: The agriculture rate...yes.
Mr. Hunt: Six dollars and seventy-five cents ($6.75) per
one thousand (1,000) is the rate.
Councilmember Bynum: So we are going to put this in a separate
category and we could set that rate at five dollars ($5.00). We could continue to give
a tax break compared to other markets if we chose to. I am just saying that is it not
much simpler once you identify the land then you do not have to worry about all of
these documents, right? So if I am the landowner I am going to say I would rather
pay the two thousand six hundred thousand dollars ($2,600) more a year than jump
FED COMMITTEE MEETING 52 OCTOBER 15, 2014
through all of these hoops and me giving my proprietary information to the County
of Kaua`i?
Committee Chair Chock: Are you done with your question?
Councilmember Bynum: Yes.
Committee Chair Chock: Thank you.
Councilmember Yukimura: What seems to be missing here is that a new
tax category does not just affect what rate gets set. It greatly affects the assessed
value, right?
Mr. Hunt: Yes.
Councilmember Yukimura: And so this new tax category taken out of
agriculture dedication will go to a market value which is not even based on
agriculture leases. It will go to a market value of a development level of that
agriculture land and if they subdivide it is not just five (5) units. It is multiple
agriculture parcels each allowed five (5) units, up to five (5) units actually based...I
think the five (5) acre ones are only three (3) units. It is a tremendous increase in
assessed value. That is what worries me about the present proposal. What I am
proposing is keeping it within the agriculture dedication process but creating a new
value and I agree with you Steve. That it would...I do not think we should do it
parcel by parcel. I think you should find some kind of benchmark just like you have
with diversified and pasture and use that. Going back to the question about status
quo, in terms of what this new agriculture value classification would do is it would
not keep the status quo. There would actually be an increase in valuation but it
would reflect in general terms the new lease values that are coming out of the
biotech leases. Is that correct?
Mr. Hunt: I think it would reflect, if you are going that
route, it would reflect the differential. So if you have a diversified lease and say it is
one hundred fifty dollars ($150) an acre and then you have another one that is at
four hundred dollars ($400) an acre and you have a differential between the two (2)
you could apply that potential differential to the diversified rate to come up with the
new valuation rate. That is kind of the track that would go on.
Councilmember Yukimura: I do not know...assuming that we defer this
matter you could help me figure out or maybe you know already with in an
agriculture category there would be an increase in taxes but it still would be
agriculture based rather than fair market value or development value based? Is
that correct?
Mr. Hunt: That would be the likely outcome and just
thinking a little bit more about the complexity about the additional class and I want
FED COMMITTEE MEETING 53 OCTOBER 15, 2014
to answer this because if you have say a one thousand (1,000) acre parcel. Two
hundred (200) acres are being used for bio research, two hundred acres (200) are not
dedicated, and the six hundred (600) acre balance is in a multiple of pasture,
diversified, and other uses that are dedicated. If it just a matter of providing as you
mentioned the leases, we do not need the leases anymore. We still do need the
leases because I need to be able to tell that two hundred (200) market versus the
two hundred (200)...because this would market at agriculture that stays in
agriculture verses the two hundred (200) acres that is now going to be pulled out
and moved into a new category. If I cannot separate that four hundred (400) acres
of non-dedicated into market in agriculture and market in agronomics, I still need
that information. Do you follow me?
Councilmember Yukimura: Yes.
Mr. Hunt: So you have three (3) tenants with two
hundred (200) acres each that are two (2) pasture and one (1) diversified. Those are
all dedicated, they are all ongoing. You have a biotech for two hundred (200) acres
and you have two hundred (200) acres that you just did not dedicate. Maybe you
were going to do a subdivision or do something with it so you are paying market tax
on that. That two hundred (200) acres that are in the biotech, you are saying that
they do not need to report these leases anymore. How do I determine of that four
hundred (400) acres that is not dedicated how much to pull out and put into the new
category?
Councilmember Bynum: Can I answer?
Committee Chair Chock: Is it okay if he answers?
Councilmember Yukimura: Yes.
Councilmember Bynum: You have the lessee...it is their land. They
have to tell us who is doing what where. You put the burden on the...like it is in
the law right now. The law right now says you shall consider and it has this list of
documents you have not been collecting all of them consistently, correct?
Mr. Hunt: Some of them do not even get filed because
Schedule F corporations file Schedule C. We would never collect a Schedule F.
There are just some documents that just do not get filed. So you are correct we do
not collect them all.
Councilmember Bynum: The current language says the Director shall
consider these documents. If you do not even ask for them then you cannot consider
them.
Committee Chair Chock: Okay. Thank you for clarifying.
FED COMMITTEE MEETING 54 OCTOBER 15, 2014
Councilmember Yukimura: Following up on that I think we want to
figure out if we are going this route of creating a third agriculture valuation what
the procedure would be and then what information you would need and we would
amend the law in terms of what needs to be looked at or what needs to be submitted
because right now there is a disconnect between all of the things that should be
considered and what is actually the process of assessing value. I think we first have
to get the basic structure of what we want to do. Do we want to take these biotech
lands and move them out of an agriculture tax category and put them into the
highest and best use category which is the regular way real property is assessed or
do we want to keep it within agriculture, create a third category of valuation, figure
out how you will do that valuation and I vote for a benchmark of some sort and then
what kind of information you would need in order to do that. And I think it the
question has also been raised of what happens if within a year's time the land is
used sometimes for biotech but then used for other purposes and I am not sure what
the answer to that question but I think it could be addressed either by some
ordinance or some rules. Thank you.
Committee Chair Chock: Any more questions for Steve? You have a
question?
Councilmember Bynum: I lost it. I will wait.
Committee Chair Chock: I want to move to some public testimony if
we can now that we kind of got a sense of the amendments that are before us.
Councilmember Yukimura: Chair.
Committee Chair Chock: Yes.
Councilmember Yukimura: I have not really introduced it and should not
but there is another amendment pending but I could just circulate it for
informational purposes.
Committee Chair Chock: Why not do that.
Councilmember Yukimura: Okay, so to both the Council and the public.
Committee Chair Chock: Yes, that would be good if we could send it
out.
Councilmember Yukimura: And I am moving in my mind toward a
deferral so that we can really digest all that is being proposed and said here, get
input from the public on these fairly complex proposals and then come back later.
FED COMMITTEE MEETING 55 OCTOBER 15, 2014
Committee Chair Chock: And that is kind of where I wanted to move
as well and I wanted to just share because I am kind of still stuck on unintended
consequences and I do not feel that I have heard enough from the public, certainly
not from our farmers or the seed companies on this potential Bill and I am hoping
that we do get a bit more interaction and communication moving forward because I
have heard things about infrastructure that may be of concern that we need to take
into consideration and I want to make sure that we are moving in a direction that
we are taking it all into consideration. I did...if I could just share also, I could not
find very much help but I did find a census on a Hawaii Data Book from 2013. It
says we have five hundred ninety-one (591) farms on the island and they vary in
sizes; acres one through nine (1 — 9) about three hundred forty-eight (348), which is
a significant amount of that total. And out of those about two hundred sixty-six
(266) are irrigated lands and so again the question that I have for the agriculture
industry is who takes care of that infrastructure because I was told that our seed
companies have a big role in that and how would this affect that distribution? The
other question I have is about mixed uses as I have mentioned before because I
think that we have some parcels that are utilized in different ways and I have
talked a little to Steve about how me might be able to mitigate that but I think I
need to hear more from really what is happening on the ground there and so I just
really wanted to share that, where I am. I am supportive of getting more
information. I think Councilmember Hooser has more as well. Do you have a...I
just wanted to throw that out there for community actually. So if they are willing to
come and speak. You have something that you want to...
Councilmember Bynum: I want to respond to some of the things you
said and we do that now. We have pasture in a portion and we have diversified
agriculture in a portion. We already do that and the landowners are required under
the law to give a change of use petition. I showed you in the old Grove Farm where
they changed half(.5) an acre from...and they did it every year. It is a requirement
of the law now to tell us what these various uses are in one (1) parcel and so I think
it is a bit of a paper tiger to say how are we going to do that? We are already doing
it and we put out to the landowner you tell us where you are using what parcels of
land. We are already asking that. We just have not been collecting that. Change of
use petition. It is a requirement of the law to delineate and tell us what type of use
is happening on which portion. Even though they have to tell us that we cannot, a
year later answer the question as the County of Kaua`i. That is pretty frightening
to me.
Committee Chair Chock: Councilmember Hooser.
Councilmember Hooser: It is basically discussion responding to your
comment. Would you like me to continue or...
Committee Chair Chock: Sure then I want to move towards taking
public testimony.
FED COMMITTEE MEETING 56 OCTOBER 15, 2014
Councilmember Hooser: I can wait.
Committee Chair Chock: Let us move to public testimony. I
appreciate that. We can come back to discussion. Would anyone like to testify on
this item? Yes. Thank you, Mr. Shigemoto.
TOM SHIGEMOTO: For the record Tom Shigemoto. I will reserve
comment on whether I have testimony or not but I have a basic question...a
question on the amendment introduced by Gary and it seems to be a conflict in what
is being proposed here because the highlighted section say first of all in Section 1
parcels, you know this real tax class involved include parcels which are used for the
purpose of research and when I testified earlier or previously I asked the question
because Kaua`i Coffee has pockets of corn that are grown and we lease these areas
to the seed corn companies but the primary...and the when you...I am sorry. When
you jump to the second paragraph you are including the definition of agriculture for
what Kaua`i Coffee is doing because it is not primarily used for research but we do
have these pockets that are leased for corn or seed corn production. So what is it?
Is it Kaua`i Coffee agriculture use or is it not? And are we being taxed on the entire
three thousand (3,000) that we grow coffee on or not? That is basically my question.
Committee Chair Chock: Councilmember Bynum.
Councilmember Bynum: The answer is the coffee land continue to be
agriculture dedicated, continue to have these...the portion of the land...so we
already made those distinguishes. You have about two thousand (2,000) acres in
lease to the seed companies according to the data that we have, right, on three (3)
parcels.
Mr. Shigemoto: I am not exactly sure how much. You said
two thousand (2,000) acres to corn companies?
Councilmember Bynum: Can I answer your question in short? The
law already distinguishes between different uses on one (1) parcel and it will
continue to do that under any of these proposals.
Mr. Shigemoto: Right.
Councilmember Bynum: Anyone who is doing anything other than
federal research on genetically modified organisms will continue to have their
agriculture dedications just like they do. I would like to meet with you now that I
have this data that just yesterday about your properties and let us sit down and
talk about it. That is what I wanted to do a month ago but I have not been provided
the data or the information. Can we do that?
FED COMMITTEE MEETING 57 OCTOBER 15, 2014
Mr. Shigemoto: Where you waiting for me to give you that
information?
Councilmember Bynum: No. No. I have been waiting for the
Administration to give us that information for over a year and they have not yet but
they were able to, with our tax data and the information we had, get these
estimates that are very close, right? And you can compare them. There are three
(3) parcels that are labeled Alexander & Baldwin here, out of the sixty-five (65)
there are three (3) so my information that I am given just a day ago is that you have
three (3) parcels and about two thousand (2,000) acres under dedication to seed
companies. And you have a whole lot more of land than that under dedication,
right? And I can show you this data offline and you can confirm with your own
records.
Mr. Shigemoto: I do not think it is that much but I have to
look at the data and what parcels are involved.
Committee Chair Chock: Can we move that down?
Councilmember Bynum: Yes.
Committee Chair Chock: Any...Councilmember Hooser.
Councilmember Hooser: Just a brief question. I want to thank you
for engaging in the dialogue. In order for us to do our work we need to hear it and
this is good. This is good stuff to hear what your concerns are. And I encourage
others in the industry to do the same thing. The timeshare industry...it was
obvious that we were having a discussion about raising timeshare taxes or having a
different category. Those industry representatives came and said okay we
understand you need to do something. This is what we would prefer how you
handle it rather than the way you were going to handle it and so without that
dialogue it is hard for us to make the best decision we want to make. So I want to
thank you for being willing to be engaged that dialogue.
Mr. Shigemoto: You are welcome.
Councilmember Hooser: The intent and the writing would not affect
you coffee fields at all as Councilmember Bynum said. The coffee fields. If you were
subleasing, just like now, just like in the existing law, if you had pasture here or
something it would be different but it would not affect you coffee fields.
Mr. Shigemoto: Thank you.
Councilmember Hooser: Thank you.
FED COMMITTEE MEETING 58 OCTOBER 15, 2014
Committee Chair Chock: No further questions? Thank you. Anyone
else who would like to testify on this item? Seeing none...Oh. We do?
Councilmember Yukimura: Mr. Dyer.
Committee Chair Chock: Oh, yes. Mike. Thank you.
MIKE DYER: Mike Dyer. I am no longer involved in
agriculture but was for twenty plus (20+) years. I am not sure where the direction
of this is going but I know even in the old days when we started back in the 80's it
was hard and now we are talking about I think making it harder and potentially
more expensive. I wrote in testimony opposed to creating a separate classification
for research. I think Councilmember Yukimura's amendment is well intended but if
I am reading it correctly it says that you would end up in the third category under
agriculture if you were growing genetically modified crops, right? If I were in
business today we use to grow Sunrise which was a hybrid. I do not know if that
would qualify but if I were in business today because of the Ringspot potential
problem I would be growing Rainbow which is genetically modified and I would end
up in the third group. After we went out of farming we ended up going into pasture.
If you keep making it harder for the higher financially difficult more expensive
crops...you go from pasture which is really cheap and relatively easy to do to
diversified, which becomes much, much more expensive because of the second
category. Now you want to go to a third one you will basically get the reverse of
what you pay for. The harder you make it everything will tend to back down into
pasture and I think I heard Councilmember Bynum say that it is so sad we have
pasture going into other crops but the other crops are the ones that produce the
jobs, and the income, and things like that and products. I have nothing against
cows and goats but it is expensive to produce the other things. Just my observation
is there is a problem because we tax at market value as the only other alternative.
Why are you guys putting a tax of six hundred seventy-five dollars ($675) on vacant
land? How do you justify that other than you are trying to force it into development
as somebody was saying. Either set these lower rates under dedication...I did not
want to get into dedication. I had to. I had to spend money to get into dedication. I
had to fence our old croplands because as soon as I stopped producing after twenty
plus (20+) years the tax offices said, "Oh boy, now we got you" and the taxes went
from nothing to sixteen thousand dollars ($16,000) a year. There was nothing in
between. There was nothing to just say, okay sit there and hang on to that land
and keep it for your kids or just keep it for the next idea that comes along. I just
sold most of my old farm to a young thirty (30) year old guy who wants to do
permaculture. I had to keep it in pasture in between to bridge that gap between
when we had to quit and now he comes in and picks up our dedication and converts
it to diversified agriculture instead of pasture.
Ms. Marugame: Three (3) minutes.
FED COMMITTEE MEETING 59 OCTOBER 15, 2014
Mr. Dyer: There is a lot of things in the agriculture
area that I think really need to be looked at. If you really want to drive agriculture
zoned land to development, keep a nice high tax rate on it, increase the value and
you will get it turned into development, I guarantee it.
Committee Chair Chock: Thank you. We have a couple questions.
Councilmember Bynum, Councilmember Kagawa.
Councilmember Bynum: Mike, thank you always for your testimony.
I am not going to do it with you here but you are illustrating a point that I want to
talk about later but my question is your taxes, you said went from like one
thousand dollars ($1,000) to one fifteen thousand dollars ($15,000). Then you
fenced it and it went back down and now you are going to move to diversified
agriculture?
Mr. Dyer: I am not. I am an old guy. I am selling it to
a young guy.
Councilmember Bynum: But the land is going go to diversified
agriculture.
Mr. Dyer: Yes he is going in...we have to be extremely
careful because the tax office if you make one (1) misstep they are going to come in
and knock you out of dedication and roll you back. It is a deadly fearsome thing to
be in dedication in my opinion.
Councilmember Bynum: I am sorry...what you just said is very
meaningful to me. It is like hey, you have to be careful, you have to do it right, you
have to report the right data, and you, your taxes went up and then came back
down and you had to invest money and do all of that, right?
Mr. Dyer: Right.
Councilmember Bynum: And knew that when you ended the
dedication you had a responsibility to inform us, right?
Mr. Dyer: Yes.
Councilmember Bynum: And you knew that your taxes would go up
and they did and then you knew what you needed to do to get it back in dedication,
correct?
Mr. Dyer: Yes.
Councilmember Bynum: And you followed all of those rules.
FED COMMITTEE MEETING 60 OCTOBER 15, 2014
Mr. Dyer: First of all let us remember in the old days
you had a situation where you could be in diversified agriculture and probably in
pasture too and did not have to be dedicated if you were just doing it. You got a low
rate. You got the five thousand dollar ($5,000) an acre rate. Then you changed it
and made it so that you had to dedicate. Then you changed it to make it so that
you, I think if you are over ten (10) acres you can dedicate but if you are under ten
(10) acres you cannot and so you are stuck. There is nowhere to go. I am sorry to
interrupt but there are a lot of things that have been happening under dedication
and in agriculture. We started in the 80's, there were a lot of transitions that took
place during that time. Dedication was the only way to get out from under just
having vacant land that was formerly in agriculture and just letting it lie fallow
because it went to market value and that was a big killer.
Councilmember Bynum: Right and you asked a great question. Why
are we setting the agriculture rate at six hundred ninety dollars ($690)? Actually I
found out that a lot of the land is not even impacted by that because it is in this
program, right and that is a great question and the things that you just talked
about, the changes our staff here, Christiane Nakea outlined all of those. They
were to address abuses that were happening. People getting gentlemen estates
agriculture dedicated and not doing anything, right? But in the long run we follow
these rules and so I do not disagree with you that maybe we need to look at the
bigger picture about this market rate and should it be six hundred ninety dollars
($690) but that is not what this law is about. Those are things that are in place that
are there. This law, we have a lot of loss revenue from agriculture and it turned out
that this dedication has a lot to do with it.
Committee Chair Chock: Question?
Councilmember Bynum: I am done.
Committee Chair Chock: Okay. Mr. Kagawa.
Councilmember Kagawa: Mike, thank you for your testimony. How
many acres is you...
Mr. Dyer: I had twenty-five (25).
Councilmember Kagawa: Twenty-five (25) acres and what is
permaculture.
Mr. Dyer: Well I am learning it on the fly. I looked it
up on Wikipedia. It is where you do a lot of different kinds of tree crops and under
story crops and you try to make everything synergistic. This guy calls himself the
forest of food so they are planting different tree crops and things like that. So it
FED COMMITTEE MEETING 61 OCTOBER 15, 2014
may not fit these categories you are talking about and I do not know. It is just a
new thing. Ours was just straight diversified agriculture; papayas, pineapple, bell
peppers.
Councilmember Kagawa: So it is some type of tree crop?
Mr. Dyer: It is a mixture of tree crops. Right now he is
going in fast. He has to get some income going. He is going to grow some root crops
and things like that. He is tilling for that but he is going try to make an integrated
area of agriculture that...like me, look it up on the computer. There are about forty
(40) pages on that.
Committee Chair Chock: Councilmember Yukimura.
Councilmember Yukimura: Mike, thank you. I really appreciate the
point you made because in terms of if you are growing rainbow papaya or anything
that is production, it is not research and I think the intention here was more toward
research. I have examined the wording of my proposal and I see that we have
included production so that a small farmer growing something that is genetically
modified would be affected by this.
Mr. Dyer: That is the way I read it.
Councilmember Yukimura: I will take a look at that and we might
maybe do it just by acreage, I do not know yet but thank you for your input.
Committee Chair Chock: Councilmember Hooser.
Councilmember Hooser: Good afternoon. Since you are the real
farmer at the table here, the one with the history, did you see the lease rents that
are being charged or paid for the research that were on the board earlier?
Mr. Dyer: I did not really understand them. I was not
here for that part of the presentation.
Councilmember Hooser: Between five hundred and seven hundred
dollars ($500 - $700) an acre and so in your opinion can farmers growing diversified
agriculture afford those kinds of leases and make money?
Mr. Dyer: Well they would not want to. Some of the
stuff that is going on now, people have a big piece of land and a very intensively run
hydroponics or lettuce operation, there is a lot of that going on in our area on the
north shore. We have to be really water frugal now a days because a lot of our areas
do not have water available and stuff like that. So that is a very high price but
again, will the landowner stay in it, keep his land in agriculture if he does not get a
high rent? It sort of goes to that idea that do we want to drive our vacant space,
FED COMMITTEE MEETING 62 OCTOBER 15, 2014
open spaces to other things? But those rents are high. I use to tell when people
would ask me what kind of rent would you pay if you were leasing instead of you
owning it and bought a long time ago. I say I probably would pay one hundred
dollars ($100) an acre for the kind of stuff we are doing; papayas and things like
that but that is old information and I am interested in what the lease rates are
going to but we closed down in 2002 or 2003. Something like that.
Councilmember Hooser: Thank you.
Committee Chair Chock: Councilmember Bynum.
Councilmember Bynum: So Mike, the question is you said on your
twenty-five (25) acres losing the dedication and going to market cost fifteen
thousand dollars ($15,000) roughly.
Mr. Dyer: Yes.
Councilmember Bynum: I do not know if you saw this but here in the
acrogenics example five hundred twenty (529) acres removed the tax difference is
seventeen thousand dollars ($17,000). Wait a minute. Twenty-five (25) acres that
Mike Dyer has loses the dedication, fifteen thousand dollars ($15,000) your taxes go
up. Five hundred twenty-nine (529) acres over here in Puhi and why is that? Do
you know?
Mr. Dyer: Yes. I know partly what it is. It is basically
how you do or rather how the Tax Office does assessments. These huge parcels will
have a lot lower per acre value. Mine was a twenty-five (25) acre piece. The Tax
Office compared it to a nearby piece that was the same size that had a nice view of
the Kilauea River Valley and said yours is worth two million dollars ($2,000,000)
too. And I said no it is not. And it was not as it turned out.
Councilmember Bynum: I do not want to go through this analysis
with you but you understand it and it is the answer to Councilmember Yukimura's
question earlier, right? Is this going to drive these large parcels into market? Not
when there is only a seventeen thousand dollar ($17,000) difference. You might
have a lot of pressure to sell that or develop it because that was significant for only
twenty-five (25) acres and not a big corporation or a big landowner and so not all
agriculture land is created equal in terms of its value under this program. That is
why eight million five hundred thousand dollars ($8,500,000) total loan in subsidies
but only five hundred (500) of that to these large parcels, over twenty-two thousand
(22,000) acres, if you take out that one (1) urban parcel.
Mr. Dyer: No, I understand what you are talking about.
We just had a gigantic sale, as most of you know in the Kilauea area. A couple of
big pieces of agriculture land sold for fifty million dollars ($50,000,000) and things
FED COMMITTEE MEETING 63 OCTOBER 15, 2014
like that. So for the big pieces changes the whole picture substantially. Now the
tax office is going to go, wow, big pieces of agriculture are worth this now. Those
guys that are in pasture around me are going, I have to hang on to that pasture. I
cannot make any mistakes or I am going to go to a market value of fifty million
dollars ($50,000,000).
Councilmember Bynum: Thank you Mike.
Committee Chair Chock: Thank you for your testimony. I appreciate
it. Anyone else who would like to testify on this item?
The meeting was called back to order, and proceeded as follows:
Committee Chair Chock: We have one (1) amendment on the floor. I
know that one (1) is circulating. I know there has been many questions still that
need to be answered so if we want to defer this now is the time. Councilmember
Bynum.
Councilmember Bynum: I have no problem with the deferral to get
this right however the amendment that Councilmember Hooser has introduced
addresses a lot of the earlier concerns and is not inconsistent with Councilmember
Yukimura's should it pass and then modify that so my suggestion, just a suggestion,
I am not a Committee member was that we vote on that amendment, defer the Bill
as Draft 2 or whatever that is and give Councilmember Yukimura time and also
that will buy time for us to drill down on some of this research further.
Committee Chair Chock: More discussion? Anyone else? On the
amendment...whether or not we should move on the amendment. Councilmember
Yukimura.
Councilmember Yukimura: I would prefer to just defer so everybody gets
to look at both amendments and do research. I guess at this point I would vote
against the amendment.
Committee Chair Chock: Anyone else?
Councilmember Rapozo: What are we on?
Committee Chair Chock: We are on the amendment that was
introduced by Councilmember Hooser. I think there is an intention to defer the
main motion until we can get more answers and more input. Anyone else?
Councilmember Rapozo: Not on the amendment.
Committee Chair Chock: Okay.
FED COMMITTEE MEETING 64 OCTOBER 15, 2014
Councilmember Hooser: It seems clear that there are five (5) people
on the Committee and the votes are not there to pass the amendment as we sit here
today in my opinion and so I think we could wait another two (2) weeks and then let
Councilmember Yukimura work further on her amendment and...
Committee Chair Chock: Four (4) weeks.
Councilmember Hooser: Four (4) weeks.
Committee Chair Chock: November 12, 2014.
Councilmember Hooser: This is important public policy decisions and
so they need to be thoughtful, they need to be thought out. We are here today not
just to raise money but to address the appropriate use of our agriculture lands and
we subsidize agriculture because we value food sustainability and keeping our
agriculture lands in agriculture and because we recognize that farmers have a hard
time making ends meet and so we provide subsidies to farmers for that reason. I
am happy and proud to do so. In this case we are looking at major corporations who
number 1 do not need the subsidy and number 2 are not contributing to food
sustainability locally and number 3 they have a very intense impact on the land, the
air, and the water and so there are plenty of good, positive public policy reasons to
take the action we are doing and whether that path is Councilmember Yukimura's
path or the path that Councilmember Bynum and I had charted I am open to either
one. I will support a deferral.
Committee Chair Chock: I think there are some significant differences
in terms of the amount of money involved and also in terms of process, the
administration of it. Again, I think it was said earlier like with the timeshare
leaders who came to us and said, look we understand that you are looking at this.
This is what we would like to see happen and it created a really good foundation for
us to build upon and I really would like to encourage that we have those types of
discussions to meet towards a solution here.
Councilmember Hooser: Can I ask just briefly? If I could, that is an
excellent suggestion and that is how good laws are passed with the stakeholders
involved and contribute rather than just sit back and let things happen and then
deal with the impacts. I would also like to encourage the Administration. Knowing
that what I believe the majority of the Council is heading down this path anyway to
come up with their suggestions on a proposal that would be achievable in terms of
implementation. Rather than we just do something and they have to deal with it.
If they could help us out here and provide some suggestions on how they would
prefer if we did go down this path. Which way to do it and how best to do it? I
think that is how good laws are passed I believe. Thank you.
Committee Chair Chock: Go ahead please.
FED COMMITTEE MEETING 65 OCTOBER 15, 2014
Councilmember Yukimura: I do agree that there is significant difference
between the two (2) amendments. Even though it is just for tax purposes you are
actually taking the lands under Councilmember Bynum's proposal out of
agriculture. You are creating another category called agronomics but it is no longer
agriculture. Whereas my proposal would be to keep it under agriculture, however
the similarities between the two (2) amendments is that a recognition that the
biotech leases and uses have really increased the value of leased agriculture land
and that perhaps should be reflected in how we tax agriculture land. They would
still remain dedicated and they would still remain under the agriculture valuation
process but there would be a reflection of the increased value that they bring and
they do then put diversified lands at risk if they are diversified lands can be leased
at a higher rate it would encourage landlords to lease it to biotech uses rather than
diversified uses. I think my proposal is a more gradual approach but it does and
will result in higher taxes to the biotech industry but I believe it will be a fairer
increase rather than to tax biotech industry at highest and best use which reflects a
developmental use that I do not feel is appropriate to reflect because the lands are
still in agriculture, they are still for growing crops and there is the issue in my mind
of the contribution of the seed companies to maintaining the water systems that are
really important to the sustainability of our agriculture lands and these water
systems are irreplaceable if they are allowed to go into disuse as they have been in
Kilauea. The agriculture potential of the land is severely reduced and so we have to
recognize that it is potentially in the category for unintended consequences and I
think we really have to look at that and I think it is really appropriate to have some
input from the seed companies about this and others who are involved so that we
can, here around the table, can make better decisions.
Committee Chair Chock: Councilmember Rapozo.
Councilmember Rapozo: Thank you, Mr. Chair and thank you
Mr. Dyer for coming up because I think it is important to hear from farmers and
you are not a GMO farmer, you are not a research farmer, you are a farmer. A true
traditional farmer and I appreciate your input. This whole issue boils down to
really one (1) thing is what do we consider agriculture use? If you do not believe
that the seed companies on Kaua`i are an agriculture use than you support the Bill.
If you believe that they are agriculture, true agriculture than you do not. I believe
that the operations on Kaua`i is agriculture and for those reasons I am not going to
support the Bill in any fashion because every campaign, every election is the same
thing. We talk about diversified agriculture. We talk about helping the farmers.
We talk about creating jobs. We talk about all of these things that the seed
companies provide and yet we are here to try to figure out a way to get more money
from them. As Mr. Dyer put it, you said it best why do you keep on making it
harder and harder and harder for farmers? Your quote, I actually wrote it down
and I know you were being facetious or maybe not but "now we got you" was your
perception of what was going on and I tend to agree with you. We are looking at
these opportunities to go out and get more revenue and that is not how we are
FED COMMITTEE MEETING 66 OCTOBER 15, 2014
supposed to treat farmers when we are saying we have to take of our farmers.
Again it comes down to an opinion. I respect the other Councilmember opinions
that they do not believe it is agriculture use. I do and you have to look at it big
picture. What we are doing on Kaua`i are helping farmers all over the world. What
we are doing on Kaua`i is creating opportunities for farms throughout the country
and throughout the world to produce food. Some will say that I am nuts or some
will say I am paid off by the seed companies. Look at my campaign spending report;
zero (0). I believe that what they are doing on Kaua`i number 1 is an agriculture
use, it is farming and they provide a valuable service for farming and agriculture in
general. Not just here on Kaua`i. We should be and I am not saying that we should
subsidize anything that they do and maybe we need to take a look at the valuation.
I am not disagreeing with that but I know when the timeshare people come it did
not take long for this Council to say take that thing out of...let us not create a new
class because a lot of those timeshare people were E-mailing us hundreds and
hundreds and hundreds if not thousands telling us please do not create a special
class for us and this Council relatively quickly took that right out of the amendment
and that needs to be done in this case as well because it is in my opinion an
agriculture use but for me I guess what is troubling is we are targeting and
industry. We are targeting an industry and I am uncomfortable with that and I
think we have to be careful. I do not care if it is the timeshare industry or the seed
corn industry or whatever industry it is I think there has to be a rational basis and
I think when you look at the use of the land some would argue that they changed
the use. They are not doing traditional farming. I do not know what traditional
farming is. You plant a seed, you water it, fertilize it, pesticide it, and it grows. I
am not so sure the change in use but the change in use did not happen overnight.
The change in use occurred I do not know how many years ago, a long time ago and
only today, only now we are looking at it as a new change of use and I believe that is
very dangerous. That is a dangerous road to go down and I am hoping that we can
get more dialogue from farmers like Mr. Dyer, from farmers that are raising
different crops here on Kaua`i whether it is taro, whatever is out there because I
want to hear from the real farmers. Seven (7) of us have no farming experience.
JoAnn? Really, what did you grow?
Councilmember Yukimura: We had a farm up in Namahana. I use to
harvest boxes of cucumbers.
Councilmember Rapozo: Sorry, I misspoke. Six (6) of us have no
farming experience but I think that is where we have to go. We cannot pretend to
be farmers and cannot pretend to be experts in this field and that is why I think it
is important that people like Mr. Dyer come up and all of you that we have those
discussions because I think what we do here will have ramifications that will go for
a long, long time and may affect the farming industry on Kauai and I am concerned
about that. So Mr. Chair I apologize. I do want to make a comment that I think as
we sit around this table and we had the little speech from Jay this morning about
limited time and that...I know Councilmembers utilize the question and answer
FED COMMITTEE MEETING 67 OCTOBER 15, 2014
period for their own discussion and it does not count against their time but we have
sat here for many hours and I just think we have to get a better handle on the
discussion and reserving that discussion for the end and utilizing the time because I
know Mr. Bynum was not here when Jay came up but he basically gave us a little
scolding and a little reminder about that and I just...it is frustrating to sit here and
listen to discussion in the question/answer and watching that clock go on and on
and on knowing that we still have a whole bunch more Bills to go through so I just
ask your consideration as we move forward. Thank you.
Committee Chair Chock: Councilmember Kagawa.
Councilmember Kagawa: Thank you, Chair. On the positive note
there is one (1) thing that I agree with Councilmember Chock and Councilmember
Yukimura that is that they are worried about the unintended consequences and in
recent weeks I have gotten very scared of where the State is headed with those
commercials that you see regarding the Maui initiative that is...some of the
unintended consequences that we need to be aware of are the same as the
commercial is saying. We do not know now what it would be if it is five hundred
thousand dollars ($500,000) more tax of course we are not going to see the big lose
in jobs or what but who knows what that tax rate will be and who knows what
amount of acreage we are going impose that tax on. There is loss of jobs that could
occur. Less money for local people to spend in their local mom and pop stores et
cetera that circulates around Kaua`i. There is a possibility of having negative
effects on other farms because the seed corn company does have a lot of money.
They do take care of a lot of the infrastructure that goes a long with a lot of these
farms. Even in Kekaha. Look at these different things that they grow; mango,
sweet potato, ginger, like I said beans, wine, taro. Again the unintended
consequences that come with these types of targeted legislation is my concern and I
have grown up, like I said two (2) houses away from Ola Kele Sugar Plantation in
Hanapepe Heights and you cannot believe the amount of dust that we went through
being the neighbor of...being two (2) houses away from the sugar but it was a way of
life. I have lots of family, my closest friends, parents all worked for the plantation
and if we get away from big agriculture I am worried about how that Westside
community, my hometown what it would look like if we do not have large
agriculture because one (1) of my good friend who use to substitute for me at Kapa'a
High School, she worked for an organic farm in Kilauea and she told me that she
wishes she could do that full time but the employer always kept her under that
nineteen (19) hours or what have you because he could not pay the benefits for her
so she could not do it full time and so she had to substitute teach. So I mean small
farms, yes, we want to grow more food. We want to produce more food that stays
here to feed our families but it is not that easy. When they get a heavy rain, crops
all wash out, total loss. Just simple things like that but this agriculture that we
have with the seed corn companies is stable. It provides solid jobs with medical,
with everything and I am just worried that if we be too quick to pass this type of
legislation, we go after them because we feel that they have a lot of money to pay, I
FED COMMITTEE MEETING 68 OCTOBER 15, 2014
am just worried about the unintended consequences and that is where I really agree
with Councilmember Chock and Councilmember Yukimura and I will be supporting
the deferral. Thank you.
Committee Chair Chock: Councilmember Bynum. Closing statement.
Councilmember Bynum: Thank you for this discussion today and your
patience on this issue. This is not...I am tired of this...this is targeting this
industry. This industry brought these land use changes to our island. Not only did
they bring these land use changes, they did not bother to follow the laws and tell us
about the changes they made and the changes of lessees. They did not bother to get
conservation plans and protect our health and welfare and their change of use
research, we now know, they told us that they obfuscated that there was no product
now they finally admit that because it is just a fact. The law did not fit so we tried
to fix it but these companies also came here and started doing this research use that
we have overwhelming evidence leads to very frequent spraying of pesticides at very
high quantities. Why are the landowners requiring a premium for that research
use that is different from the parent seed research that they are doing because, I
believe they know it is an intensive use of the land. Under the law they were
required to tell us about these things and we can easily delineate different uses on
one (1) parcel we just have not bothered to collect the information. It should be very
disturbing to every citizen that a year later after I have made requests and even
legal requests that are required to be followed by law that your information about
where you are giving subsidies is not readily available to us. So we have really
serious problems about information being unavailable to us for lengthy periods of
time or purposely being withheld. Mr. Hunt asked if we change this dedication are
we going to honor the dedications that currently exist for ten (10) years or are we
going to change it next year? I have showed overwhelming evidence that they
accepted a whole bunch of new petitions that were inappropriate and they have not
dealt with the petitions that are in breach. It is in this context that a logical
question gets asked. Do the rate payers, the residents of Kaua`i and other
taxpayers like hotels and timeshares, do we want to continue to give a tax benefit
for these land use changes that have impacted our health and welfare and our
economy? That is a logical question. For me the answer is easy and apparent. Now
the last thing is Mr. Dyer gives really needed testimony. I have been seeking
information on other parcels that have been agricultural dedicated and that
information has not been provided to me either. The question was asked today
what the lease payments for pasture are. I have requested those documents that
are public documents. They were due here on October 2, 2014 and I have not seen
them. It would take the Administration ten (10) minutes to find those documents
and to scan them and send them over here. Why are those...I am trying to answer
these questions and I cannot even get access to public records as your
Councilmember to answer those questions. But Mr. Dyer helped us answer it.
Twenty-five (25) acres because it is in a high value area, because we tax at highest
and best use. The tax implications for this one (1) individual on twenty-five (25)
FED COMMITTEE MEETING 69 OCTOBER 15, 2014
acres were fifteen thousand dollars ($15,000) yet on five hundred twenty-nine (529)
acres the difference is only seventeen thousand dollars ($17,000). Why is that? It is
because of the way we do these values. I just shared that for twenty-two thousand
(22,000) acres the tax difference will be about five hundred thousand dollars
($500,000). Believe me these seed companies...they are paying for that one (1)
parcel about that much just for one (1) of the sixty-five (65) in payments each year.
They are not going to abandon their work here because they have to pay seventeen
thousand dollars ($17,000) more in taxes. Mr. Dyer did not abandon his dreams
and his parcel when he had to pay fifteen thousand dollars ($15,000) on only fifteen
(15) acres. He said in his testimony...I am going to get the words Mike. It is like
boy would you not apply for dedication. Watch out because the Tax Department is
going to make you jump through all of these hoops and get it right. Well I am glad
that you had that experience because this is money, we have to get it right. These
vase acreage of land, they did not even bother to tell us so they did not have to go
through that? Why should Mr. Dyer and Bette Midler, who is the other example I
am trying to do. Who paid all of their taxes, jumped through all of the hoops, had to
deal with the tax department to get it done and these massive changes of land use
none of that has happened because they did not even follow the law and apply. Now
in that context I have go no problem saying that you know what biggest
corporations in the world that have brought these land use changes to my
community please pay a decent tax for the use of the land.
Committee Chair Chock: That is five (5) minutes.
Councilmember Bynum: Thank you.
Committee Chair Chock: Thank you. Can I get a motion to defer?
Upon motion duly made by Councilmember Kagawa, seconded by
Councilmember Yukimura, and unanimously carried, Bill No. 2546, Draft 1
was deferred.
The Committee proceeded on its agenda item, as shown in the following
Committee Report which is incorporated herein by reference:
CR-FED 2014-36: on Bill No. 2558, Draft 1 A BILL FOR AN ORDINANCE
AMENDING CHAPTER 5A, KAUAI
COUNTY CODE 1987, AS
AMENDED, RELATING TO REAL
PROPERTY TAXES (Retroactive Real
Property Tax Measures and
Extensions) (Approved.)
The Committee proceeded on its agenda item, as follows:
FED COMMITTEE MEETING 70 OCTOBER 15, 2014
Bill No. 2559, Draft 1 A BILL FOR AN ORDINANCE AMENDING
CHAPTER 5A, KAUAI COUNTY CODE 1987, AS
AMENDED, RELATING TO REAL PROPERTY
TAXES (Tax On Use) (This item was Deferred.)
Councilmember Hooser moved for approval of Bill No. 2559, Draft 1,
seconded by Councilmember Yukimura.
Committee Chair Chock: I know we did get a communication. It just
came this afternoon. I do not know if you folks had a chance to take a look at it but
I will suspend the rules for Mr. Hunt to come back.
There being no objections, the rules were suspended.
Committee Chair Chock: Councilmember Kagawa.
Councilmember Kagawa: Thank you, Chair. Steve.
Mr. Hunt: Yes.
Councilmember Kagawa: What is your opinion on this Bill? Is it
implementable or is it problematic?
Mr. Hunt: It is implementable but not for the 2015
Fiscal Year and it is very labor intensive in order to create the distribution, the
allocation of values. The only procedure that I would know how to do would be to
create an artificial CPR for tax purposes only to assign portions of the overall value
and set valuation classes for each of those CPRs to make sure that they are paying
based on the correct tax rate.
Councilmember Kagawa: So on a single lot with two (2) houses on it, it
would be problematic?
Mr. Hunt: A single lot, two (2) houses we would still
have to create the distribution of value based on percentage.
Councilmember Kagawa: Based on percentage of size of the house?
Mr. Hunt: That is the way I read the Bill, it is based on
square footage so if there is one (1) garage that is shared or even not shared a
portion of that total building value would be then ascribed based on the square
footage of the uses. So if we determine so much in residential use, so much in
vacation rental use we would do that proration of all of the...part of the pool if they
had a pool, part of the tennis court if they had a tennis court, part of their garage or
laundry area all of that would have to be split between the two (2) parcels because it
FED COMMITTEE MEETING 71 OCTOBER 15, 2014
is based on square footage and then we would have to apply the valuation class for
each of those units of the whole.
Councilmember Kagawa: So you are saying that the labor that is
required if we pass this Bill is going to have to the next...
Mr. Hunt: It would go...because you would now be
starting with one (1) parcel and you would take that parcel and create now three
(3). You would have the parent, which is where the original valuation is that we are
using to value the property and then you would have the two (2) keiki of that parent
that would be the CPR units and each of those would then have a portion of the
value and different tax rates associated to get that use on a percent basis. So now
you are managing three (3) properties parcels instead of one (1) as the assessor.
Councilmember Kagawa: So you would value whatever...you would
take a percentage based on the value of whatever is part of the home, whatever is a
part of the rental you would get a percentage and you divide the total value of the
lot by that percentage?
Mr. Hunt: Yes and it would not be the lot. It would be
the improvements because we do not have a distinction. It is single value now so we
would have...say if you have a five hundred thousand dollar ($500,000) property in
total and twenty percent (20%) was used as vacation rental and eighty percent
(80%) as a primary residence. So you would now take that five hundred thousand
dollars ($500,000) and say four hundred thousand dollars ($400,000) is homestead
and the balance, the one hundred thousand dollars ($100,000) would now be
vacation rental. So we would now have to create those CPRs to host the value and
then be able to apply the rates on this.
Councilmember Kagawa: Did we ever have taxes done in that manner
in any category in the history?
Mr. Hunt: We have created artificial CPRs before but
we have not done it for this specific use.
Councilmember Kagawa: What about any other counties in Hawai`i?
Mr. Hunt: No that I am aware of.
Councilmember Kagawa: Not that you are know of. Okay. Thank you,
Chair.
Committee Chair Chock: Thank you. Councilmember Hooser.
Councilmember Hooser: How many counties do it by use? All of us?
FED COMMITTEE MEETING 72 OCTOBER 15, 2014
Mr. Hunt: Nope.
Councilmember Hooser: We are the only ones?
Mr. Hunt: Only one (1) in Hawai`i.
Councilmember Hooser: So we are the only county that does it by
use?
Mr. Hunt: Yes.
Councilmember Hooser: And so when that process was started this
was what we got now.
Mr. Hunt: Yes.
Councilmember Hooser: Looking at you staffing projections the cost of
that you estimated is just under two hundred thousand dollars ($200,000), one
hundred ninety-five thousand dollars ($195,000).
Mr. Hunt: For the first year.
Councilmember Hooser: For the first year and after that it drops
down to one hundred sixty something thousand.
Mr. Hunt: Yes, plus fringe a little bit lower than that
but you would take out the temporary Tax Clerk and the fringe and medical from
that.
Councilmember Hooser: The two (2) positions...it sound like most of
the work you are describing is work is computer work basically, right? Working
with the program, setting up the different values, and inputting that data into it?
Mr. Hunt: That would be the Appraiser's role, yes.
Councilmember Hooser: And then the other would be an inspection, a
compliance?
Mr. Hunt: The compliance that would verify that the
use is are in fact proportional, that they have not changed, that you started with
one (1) bedroom Transient Vacation Rental (TVR) and now it is two (2) and now you
have to update the square footage.
Councilmember Hooser: So with the compliance we do not check
every single property in the County do we? No one has been to my house to
FED COMMITTEE MEETING 73 OCTOBER 15, 2014
measure my footprint, I do not believe, at least I have not given them permission to
do so.
Mr. Hunt: They probably did when it was constructed
and then if there was any permits to add on to it, it was probably done for the
inspection of that as well.
Councilmember Hooser: So these properties both have already
undergone the same type of thing. I just do not understand the need for the
full-time compliance person. I understand the need for compliance and to do some
spot checking if you would but I do not understand the need for a full-time...
Mr. Hunt: Well currently the way we are doing it is it is
not prorated. It is either whatever rate is the highest so there is no need to verify
square footages so we know the value of the property, here is your tax rate. Now we
are saying we need to know the area that is specifically used for this and all we
have is the footprint or the square footage of the whole. So now we are going to
monitor annually how much of it is being used for each use and the uses may
change and the square footages may change.
Councilmember Hooser: I guess the point or the principle behind it is
that we do not need to know it annually. We could choose to know annually. We
could choose to check every couple of years or more often, monthly we could choose
to check and I do not believe we check agriculture parcels for example annually to
verify that this number of acres are growing bananas or whatever, right? We take
the landowner, on most cases we take the lessor or the applicant's word for it. Is
that not correct? That is how most of these things are right now?
Mr. Hunt: The majority of them are taken on faith but
with the exception of the dedications you have sort of the ability to go back.
Councilmember Hooser: Right and so I recognize that. We have the
ability and we have an obligation to do some checking to make sure people are doing
it but I do not see why we would need to all of a sudden make this more stringent
and more expensive than all of the other things that we are doing right now.
Mr. Hunt: Well frankly looking at the face of potential
3.17 for not doing this I want to be proactive and make sure we have adequate staff
to enforce and if we already have deficiencies in staffing to do what the law may tell
us for other areas I do not want to be in that position again.
Councilmember Hooser: And I can appreciate that. I do. And that is
why written into the Bill was a measure for an affidavit, a signed affidavit by the
landowner or property owner to declare their use and so that the intent of that was
to provide some higher level of accountability to them and less need for inspections
FED COMMITTEE MEETING 74 OCTOBER 15, 2014
and so I am thinking that could be...as long as the Tax Office gave the property
owner the right parameters and said you have to sign an affidavit and swear that
this is the use and this is the...that would solve some of that. But either way I will
accept your estimate of numbers but I believe that they could be done...there are
other was it could be approached without...it would be less expensive and just to
restate what you meant before that you believe that this would be a more equitable
in terms of the...it measures the actually use.
Mr. Hunt: It is definitely more accurate means but
again if we are going to be looking at accuracy then I think that compliance to
continue that accuracy would be something that would be warranted.
Councilmember Hooser: Final question quickly?
Committee Chair Chock: If you could hold that next question because
we have to take a break.
Councilmember Hooser: Sure.
Committee Chair Chock: So I will recess now for another ten (10)
minutes. Caption break. Thank you.
There being no objections, the Committee recessed at 5:39 p.m.
The meeting was called back to order at 5:46 p.m., and proceeded as follows:
Committee Chair Chock: We are back from our recess. Do we have
any further questions for the Director of Finance on Bill No. 2559, Draft 1?
Councilmember Yukimura.
Councilmember Yukimura: Steve, in fact, the other item on the agenda;
Bill No. 2560 which is the Commercialized Home Use bill, is actually an alternative
way to deal with the problem that Bill No. 2559 is trying to address, right?
Mr. Hunt: It is an alternative way, correct.
Councilmember Yukimura: And the fiscal impact of Bill No. 2560 is
likely to be less than Bill No. 2559?
Mr. Hunt: It is difficult to say without knowing the
percentage of use of each of the potential classes and/or what the tax rate ultimately
is set for commercialized to home use. Those are variables that I cannot judge what
the impact will be without looking at all of those.
FED COMMITTEE MEETING 75 OCTOBER 15, 2014
Councilmember Yukimura: But it is easier administratively; Bill
No. 2560, easier to apply...
Mr. Hunt: Absolutely. No staff, it could probably be
done almost in a day to aggregate all those with home uses, out home use
exemptions outside of the Homestead Class and put them into a new override
category and send out assessment notices that way. It is very implementable for
the fifteenth (15th) year.
Councilmember Yukimura: It is not as accurate?
Mr. Hunt: Correct and you will have more relief from
people that are coming from the higher paying classes, again, but I do not know
what percentage use. You have some in vacation rental but may be vacation
renting a room, you have some that may have a whole separate house that they
vacation rent as compared to those in the residential that have renting a room or a
second `Ghana unit that they rent long term, so the differential in rates, the ones
that are coming from the vacation rental would see more benefit but again they are
all homeowners, they reside on property.
Councilmember Yukimura: Both these Bills would apply to the same
number of properties?
Mr. Hunt: I am not sure because I believe the class on
use could extend to properties...I do not think it requires a homeowner's exemption.
I do not recall saying that.
Councilmember Yukimura: Bill No. 2560?
Mr. Hunt: No, Bill No. 2560 are all those who have
home use exemptions.
Councilmember Yukimura: But...
Mr. Hunt: Bill No. 2559, I am not sure if it is clear on
that.
Councilmember Yukimura: And it is potentially that Bill No. 2559 would
be applying to a larger class than Bill No. 2560.
Mr. Hunt: Potentially you could have split uses of
property and have to (inaudible) the square footage for those properties as well.
Councilmember Yukimura: We should verify that. The last question
would be...Bill No. 2559 would be more accurate but in my mind not accurate
enough because I do not think square footage is necessarily the best way to divide
FED COMMITTEE MEETING 76 OCTOBER 15, 2014
up the valuation. It seems to me actual value would be the way to divide up, which
you explained at a previous meeting would be even more complex and
administratively difficult. But even the common area assessed divisions are
complicated under Bill No. 2559. Is there a dividing line we could make in terms of
properties that are part of the homestead house versus properties that are separate
but on the same parcel because those would tend to be the more expensive. What I
am thinking and I am thinking out loud is of a sub-category to this classified
commercialized home use that would somehow give a little bit...it is an effort to
separate the higher value from the lesser value because we are putting both these
different properties, mixed use and treating them together and it seems like it
might be useful to distinguish.
Mr. Hunt: Again I have some challenges because square
foot is just square footage, it does not talk about what square footage you have.
When you have may be a division of industrial and you have a residence, the
warehouse space is certainly of a different construction material quality but it is
square footage. If you have a ten thousand (10,000) square foot warehouse and a
five thousand (5,000) square foot home, on percentage, the home actually may cost
more to build and may have more value than the warehouse if it is just tin or...but
even there might be some issues. I believe the intent was primarily residential uses
but it is not specific so the division of square footage could be problematic to
interrupt and implement.
Councilmember Yukimura: We could also pass Bill No. 2560
Commercialized Home Use as somewhat of an interim or transitional law that
would...it is a less precise method but it is a way to give some relief and address the
issue while we look at a more detailed or comprehensive or complicated process for
addressing these issues. Even if we wanted to refine Bill No. 2559 and work on it
later, that would be an alternative; to go right now with the administratively simple
one.
Mr. Hunt: Well Bill No. 2560 is certainly something
that is implementable for this coming year. Bill No. 2559 although more precise, I
really do not see how it could be implemented before. Our data extraction which is
in mid-November.
Councilmember Yukimura: I think too from my standpoint, the
administrative cost and complexities are a factor. I mean if we can get some
approximate relief with an administratively easier thing, that makes the
administrative easier, but I am willing to work on a more complicated approach
later on. Thank you.
Committee Chair Chock: Any further questions? I will call for public
testimony. No one is here.
FED COMMITTEE MEETING 77 OCTOBER 15, 2014
The meeting was called back to order, and proceeded as follows:
Committee Chair Chock: I am not ready to move on this Bill. I am
willing to defer or receive it right now. I think that it could warrant some future
discussion and continue to look at it. Comparatively to what we are looking at in
Bill No. 2560, I think that we need to really consider what it is going to take. There
is a long list of things that are listed here in terms of the implementation of it, as I
said, I am willing to look at it further but not to move it forward out of Committee
at this time. That is my stance on it and anyone else, in terms of discussion?
Councilmember Hooser: I differ in my opinion and I certainly respect
yours. Of all the bills that we are doing, a lot of talk about systemic change and
doing things that mean something for the long term and this measure deals with
what I believe is the biggest problem, the biggest increases, the most outraged
homeowners, the people who had their lands taxed at a rate just because they
happen to be renting out a bedroom or have some smaller use and then resulted in
large increases. The measure is simple in concept and allows the tax office to
develop rules to flesh out if they wanted to have more detail and how they are
reporting; they could develop the forms and rules. It is perhaps more restrictive
than our Ag law that we have in place now. It has been said repeatedly that it is
fair and equitable. They are fairer perhaps but they still just give one (1) tax rate
for the entire property. So you have a hundred (100) farm and they have a one (1)
bedroom, they rent out the entire farm is taxed at the higher rate. They have a little
fruit-stand on a thousand (1,000) feet, that entire place have the higher rate. Now if
we blend that with this other proposal, you are still planning a higher rate and so it
is not equitable at all. The cost which I believe is too high but even if we accept
those costs, I would propose that we take those money's out of other parts of the
County and not just add to the budget. There has been a lot of talk in this Council
about how the fat and extra positions here and there, let us shift some positions
around if we need to. Why should the taxpayers have to be paying this extra two
hundred thousand dollars ($200,000) a year to subsidize a tax system that is not
fair to them? It is a simple straightforward measure, it does not preclude us if we
wanted to also have some version of this other bill that is on the table. You can
even have that for the next year and have this kick in after that. I am ready to vote
on it. I am going to vote in support and let the cards fall where they may. I believe
this is important and this is equity should be one of our primary objectives; fairness
and equity in our tax structure and this Bill provides that. Is it more complicated?
Yes. Does it require more work from the tax office? Yes. Is the computer program
ready to except it? No. But I do not believe that we should let that computer
program or the fact that it is a little more complicated keep us from doing the right
thing and passing Ordinances much more fair and equitable then what we have
now. Thank you.
FED COMMITTEE MEETING 78 OCTOBER 15, 2014
Councilmember Yukimura: I am listening carefully to Councilmember
Hooser's arguments. I have a question in terms of some actual cases that would
help me decide how to vote. Is there really a particular case where there is a fruit-
stand and a farm and how exactly is that...I mean a fruit-stand is a farm activity, is
that affecting the use? Do we need Steve to answer that question?
Councilmember Hooser: I can give you a brief answer. I have several
small farmers tell me that this use provision caused their entire property to be
taxed at a higher rate whether it was from the fruit-stand or one (1) bedroom rental.
I could not tell you at this moment. It is my understanding that a fruit-stand is a
commercial use and if they put a store on their property...the Director can answer...
There being no objections, the rules were suspended.
Mr. Hunt: In the case of that specific situation, if the
fruit-stand requires a commercial use permit which I believe most do, then it would
be considered commercial. The property would not be valued as commercial but the
tax rate that is applied to it would be commercial. As you know the difference
between six dollars seventy-five cents ($6.75) and eight dollars ten cents ($8.10) is
the differential in rates.
Councilmember Yukimura: How many properties are involved in that
applies to exemptions?
Mr. Hunt: I believe there are seventeen hundred and
eighty-eight (1,788) properties that have home use exemptions that are outside of
the Homestead class.
Councilmember Yukimura: Alright. I guess what this is telling me is
that I would be in favor of deferring this for more work but not ready to vote for it at
this time. Thank you.
Councilmember Rapozo: All of the discussion's today clearly
illustrates the need to expedite the start of the discussions for the property tax
reform. I mean just the overlap between bills as we are comparing two (2) different
bills and we are trying to get everything done in a quick matter. I think we need to
slow down and be careful; cost is one thing, but again, we also got to consider the
impacts of the action we take. I do not oppose the deferral. I think the discussion is
healthy but I do not know how we can move the reform process quickly a head. I
think a lot of the questions we are having today, we should be having this in a task
force setting with members from different...representatives from different segments
of the community; the farmers, commercial, industrial, and have everybody sharing
ideas because again when you start tweaking one area, there is an effect somewhere
else. There is a cause and effect. It is very difficult when we are limited to discuss
one (1) bill just because the way the law is structured as opposed to discussing a
much broader area of concern. I will support the deferral. I am not ready to vote for
the bill today as far as approving it. I think we are trying to do the reform in
FED COMMITTEE MEETING 79 OCTOBER 15, 2014
segments and I do not know if that is the right way to do it. I will definitely support
a deferral to engage more discussion. My comments relate to the next item as well.
I am not prepared to vote. If I have to vote today I would vote against it. Thank
you.
Councilmember Kagawa: Similar for me, I like the idea of where this
Bill is headed to properly divide various uses by a more logical and fair way but the
point that you brought up about having a quonset hut that is large and you have a
house, if you split is by percentage, it would be unfair because the quonset hut is
much cheaper to build then the house. In that case, it would not be fair but I think
that is the direction that I think we would like to head to finally find a solution to
this mix use problem. I believe highest and most best use is not the fairest way, it
is in fact very unfair but we are headed in the right direction but I am not in favor
of every aspect of splitting it by square footage because I believe, like Steve said, it
could be unfair.
Committee Chair Chock: Thank you. I am going to turn it over to
Councilmember Hooser. I think what I heard is exactly what I was feeling, so I
wanted to add to that. We talked about sort term and then maybe some mid-term
maybe for next year but we are already starting to look further down the road on
some of the other tax reform needs. We have also talked about some task force, a
committee being formed, the possible need of that, I guess what I am saying is, it
feels to me that we need to a little bit more organize around the different options as
we look further down the road before we start to move some of these initiatives
forward. Again, that is sort of what I am feeling on where I am right now so that we
can take our time and engage a lot of the stakeholders as necessary.
Councilmember Hooser: If the members of this Committee who are
requesting a deferral are prepared to offer amendments to make the Bill better so
we can move it forward as it has been stated for earlier bills, I could support that.
But if this is going to get deferred into oblivion and form into a task force that takes
two (2) years to come to conclusions that do not get implemented, I do not want this
to get mixed up. This is an important one. It is straightforward and it deals with the
most important issue and I am open to making it better but I do not want to see it
get buried in the...I mean face it, how many bills do we have on the table now that
have gone on and on and not reach conclusions with task force. That could very
well happen to this also. If we think we can vote on it in a month from now, I think
a month is plenty time to look at the specific issue. This is not about a bunch of
exemptions, this is about how you value property. It is not about income, it is about
how you value property and I think we should be able to...it has already been on the
table for a month and another month. If people are sincerely interested in
improving the language in the Bill then I would like to hear that and I would
support the deferral and we can move on. Thank you.
Committee Chair Chock: Councilmember Yukimura.
Councilmember Yukimura: I am committed to looking very closely at it
but I am not committed to having a solution by the next meeting. When I look at
what I have to do from now to the next meeting, I do not know if I could do it but I
am willing to work on it. That is all I am saying and I am being really honest.
FED COMMITTEE MEETING 80 OCTOBER 15, 2014
Committee Chair Chock: Thank you. That is what we need, honesty.
And the other thing for me, I did receive this just this afternoon and I would like
more time to look at the specific steps that are being proposed here and hear more
from our stakeholders on this initiative. I have heard a lot of people respond to
other bills so again I do not know if I can promise you some solid amendments, I
will continue to look into it if is deferred.
Upon motion duly made by Councilmember Kagawa, seconded by
Councilmember Yukimura, and carried by a vote of 4:1 (Councilmember
Hooser voting no), Bill No. 2559, Draft was deferred.
The Committee proceeded on its agenda item, as shown in the following
Committee Report which is incorporated herein by reference:
CR-FED 2014-37: on Bill No. 2560 A BILL FOR AN ORDINANCE AMENDING
CHAPTER 5A, ARTICLE 6, SECTION 5A-
6.4, KAUAI COUNTY CODE 1987, AS
AMENDED, RELATING TO REAL
PROPERTY TAXES (Commercialized Home
Use Tax Classification) (Approved.)
Councilmember Yukimura moved to adjourn the Finance & Economic
Development (Tourism / Visitor Industry / Small Business Development /
Sports & Recreational Development / Other Economic Development Areas)
Committee Meeting, seconded by Councilmember Kagawa, and unanimously
carried.
There being no further business, the meeting was adjourned at 6:25 p.m.
Respectfully submitted,
Lori L. Marugame
Council Services Assistant I
APPROVED at the Committee Meeting held on November 12, 2014:
MASON K. CHOCK, SR.
CHAIR, FED COMMITTEE
Attachment 1
(October 15, 2014)
FLOOR AMENDMENT
Bill No. 2557, Relating to Real Property Taxes (Low Income Tax Credit)
Introduced by: JOANN A. YUKIMURA
Amend Bill No. 2557, SECTION 2, by amending Section 5A-11.4, subsection (e), to
read as follows:
"(e) Low Income Tax Credit.
(1) When used in this Section, the following words and phrases
shall have the following meaning unless it shall be apparent from the context
that a different meaning was intended:
"Homeowner" means a person who filed and was granted a home
exemption claim under Section 5A-11.4.
"Homeowner property" means the property with regard to which
a homeowner filed and was granted a home exemption claim under
Section 5A-11.4.
"Household income" means the total gross income of all
titleholders for the preceding tax year.
"Income" means the sum of Federal gross income as defined by
the Internal Revenue Code of 1986, as amended, or the sum of Hawaii
gross income, as defined in Chapter 235 of Hawaii Revised Statutes,
as amended, whichever is greater.
"Titleholder" means the property owner and any other entity
listed on the deed or any other legal instrument establishing the
entity's ownership right in the property.
(2) Upon proper application, a homeowner whose household income
does not exceed fifty percent (50%) of the Kauai median household income as
set forth in the Kauai County Housing Agency Affordable Rental Housing
Guideline for the calendar year preceding the year in which the application is
filed, shall be entitled to a credit in the amount that the real property tax
assessed on the homeowner property for the current year exceeds three
percent of the household income. In no event shall the real property tax due
after the application of the credit be less than the minimum tax pursuant to
Sec. 5A-6.3(g).
The credit shall be applied in equal pro rata amounts against each
payment due for the next tax year following the year in which an application
for credit is submitted and granted. No credit shall be applied if taxes on the
property are delinquent.
(3) No credit shall be granted pursuant to this section unless an
application for credit and proof of income is filed with the Department of
Finance. Applications shall be submitted in a form prescribed by the Director
of Finance and include a U.S. Internal Revenue Service Form 4506-T. For the
2015 tax year only, applications shall be filed by January 15, 2015. For all
subsequent tax years, all applications should be annually submitted by
September 30 of the current year to be effective for the next fiscal year
beginning on July 1.
(4) Credits granted pursuant to this section shall not be
transferable to other persons or properties.
(5) The director may adopt rules and prescribe forms to implement
this section."
(Material to be deleted is bracketed. New material is underscored.)
Attachment 2
(October 15, 2014)
FLOOR AMENDMENT#1
Bill No. 2546, Draft 1, A Bill for an Ordinance Amending Chapter 5A, Kaua`i
County Code 1987, as Amended, Relating to Real Property Taxes (Agronomics /
Agricultural Use Definition / Reporting)
Introduced by: GARY L. HOOSER
Amend Bill No. 2546, Draft 1, by amending SECTION 2 in its entirety to read as
follows:
"SECTION 2. Chapter 5A, Section 5A-6.4, of the Kaua`i County
Code 1987, as amended, is hereby amended to read as follows:
"(a) For purposes of tax rates, real property shall be classified
into one (1) of the following general classes according to the property's
actual use unless otherwise provided in this Chapter:
(1) Residential.
(2) Vacation rental.
(3) Commercial.
(4) Industrial.
(5) Agricultural.
(6) Conservation.
(7) Hotel and resort.
(8) Homestead.
(9) Residential Investor.
(10) Agronomics.
Vacant property shall be classified as zoned until actual use is
established[, except for vacant property previously classified as
apartment shall be classified as hotel and resort until actual use is
established]. If a property has multiple actual uses, it shall be
classified as the use with the highest tax rate.
(b) When property is divided into condominium units, each
unit shall be (1) classified upon consideration of its actual use into one
of the general classes in the same manner as other property, and (2)
deemed a parcel and assessed separately.
(c) Parcels which are used for no other purpose than as the
owner's principal residence shall be classified as "homestead" provided
that the owner has applied for and has been granted a home exemption
according to Section 5A-11.4. The homestead class shall also include
parcels used as the owner's principal residence which are being
assessed according to their agricultural use as provided in Section 5A-
9.1; provided that the owner has been granted a home exemption and
that no portion of the parcel be used for a purpose other than the
owner's principal residence and agriculture. The agricultural use shall
be limited to the cultivation of crops, pasturing of animals, and
cultivation of aquaculture products, and uses which directly support
the agricultural activity such as windbreaks, access roads, irrigation
ditches and sheltering of farm machinery. Uses which are primarily
commercial or industrial in nature, such as importing, selling, refining
or distributing agricultural products, shall not qualify for the
homestead class. The residentially-used portions of agricultural land
shall be assessed according to their value in residential use. The
homestead class shall also include parcels used as day care centers by
licensed day care providers; provided that the owner has been granted
a home exemption, no portion of the parcel is used for any other
commercial activity, and that owner has provided a current copy of the
day care provider license to the Director on or before September 30th
prior to the applicable tax year. The homestead class shall also include
parcels that have applied for and have been deemed a long term
affordable rental pursuant to Section 5A-11A.1. "Homestead" shall
mean properties which are used exclusively as the owner's principal
residence, except as otherwise provided in this Section. Uses which
shall not qualify as "homestead" include, but are not limited to, the
following: (1) real property which is used for commercial, income
producing purposes, except for the agricultural, licensed day care, and
long term affordable rental uses provided above; and (2) real property
which is used for residential rental purposes, whether for long term or
short term, except as provided above and otherwise in this Chapter.
(d) [The owner may appeal the property's tax rate
classification as in the case of an appeal from an assessment.] For the
purposes of this Article, the tax rate classification for Residential
Investor shall be applied to properties that do not qualify for the home
exemption, are improved with a dwelling unit(s), and not vacant land,
and have an assessed value of two million dollars ($2,000,000.00) or
more.
(e) Parcels which are used for no other purpose than science,
research, and development of crops shall be classified as "Agronomics."
[(e)] (f) The owner may appeal the property's tax rate
classification as in the case of an appeal from an assessment."
(Material to be deleted is bracketed. New material to be added is underscored.)
(V:\2014-Term\FA\Bill No. 2546-Relating to RPT—GH#1-AB_lc.doc)
Attachment 3
(October 15, 2014)
FLOOR AMENDMENT#2
Bill No. 2546, Draft 1, A Bill For An Ordinance Amending Chapter 5A, Kaua`i
County Code 1987, As Amended, Relating To Real Property Taxes (Agronomics /
Agricultural Use Definition / Reporting)
Introduced by: GARY L. HOOSER
Amend Bill No. 2546, Draft 1, in its entirety to read as follows:
"SECTION 1. Findings and purpose. The purpose of this bill is to
include "Agronomics" as an additional Real Property Tax Rate Classification.
This new tax classification shall include parcels which are used for the
purpose of supporting the research and cultivation of living organisms or
plant materials whose deoxyribonucleic acid (DNA) has been manipulated
through genetic engineering techniques resulting in the introduction of new
trait(s) that do not occur naturally in the species and that are regulated by
the Federal Government.
This bill further clarifies the definition of "agricultural use," by
removing "horticulture" and excluding lands that are used primarily for the
purpose of the research and cultivation of living organisms or plant materials
whose deoxyribonucleic acid (DNA) has been manipulated through genetic
engineering techniques resulting in the introduction of new trait(s) that do
not occur naturally in the species and that are regulated by the Federal
Government. Furthermore, this bill requires the Director of Finance to
submit annual reports to the Mayor and the Council of all agricultural
dedicated properties, to include, but not be limited to, the name of the land
owner, name of each licensee or lessee who is authorized to occupy the
property for in excess of one year, Tax Map Key (TMK) of the dedicated area,
period of the dedication, size of the dedicated area, description of the existing
agricultural use, and amount of taxes.
SECTION 2. Chapter 5A, Section 5A-6.4, of the Kaua`i County
Code 1987, as amended, is hereby amended to read as follows:
"(a) For purposes of tax rates, real property shall be classified
into one (1) of the following general classes according to the property's
actual use unless otherwise provided in this Chapter:
(1) Residential.
(2) Vacation rental.
(3) Commercial.
(4) Industrial.
(5) Agricultural.
(6) Conservation.
(7) Hotel and resort.
(8) Homestead.
(9) Residential Investor.
I.
110) Agronomics.
Vacant property shall be classified as zoned until actual use is
established[, except for vacant property previously classified as
apartment shall be classified as hotel and resort until actual use is
established]. If a property has multiple actual uses, it shall be
classified as the use with the highest tax rate.
(b) When property is divided into condominium units, each
unit shall be (1) classified upon consideration of its actual use into one
of the general classes in the same manner as other property, and (2)
deemed a parcel and assessed separately.
(c) Parcels which are used for no other purpose than as the
owner's principal residence shall be classified as "homestead" provided
that the owner has applied for and has been granted a home exemption
according to Section 5A 11.4. The homestead class shall also include
parcels used as the owner's principal residence which are being
assessed according to their agricultural use as provided in Section 5A-
9.1; provided that the owner has been granted a home exemption and
that no portion of the parcel be used for a purpose other than the
owner's principal residence and agriculture. The agricultural use shall
be limited to the cultivation of crops, pasturing of animals, and
cultivation of aquaculture products, and uses which directly support
the agricultural activity such as windbreaks, access roads, irrigation
ditches and sheltering of farm machinery. Uses which are primarily
commercial or industrial in nature, such as importing, selling, refining
or distributing agricultural products, shall not qualify for the
homestead class. The residentially-used portions of agricultural land
shall be assessed according to their value in residential use. The
homestead class shall also include parcels used as day care centers by
licensed day care providers; provided that the owner has been granted
a home exemption, no portion of the parcel is used for any other
commercial activity, and that owner has provided a current copy of the
day care provider license to the Director on or before September 30th
prior to the applicable tax year. The homestead class shall also include
parcels that have applied for and have been deemed a long term
affordable rental pursuant to Section 5A-11A.1. "Homestead" shall
mean properties which are used exclusively as the owner's principal
residence, except as otherwise provided in this Section. Uses which
shall not qualify as "homestead" include, but are not limited to, the
following: (1) real property which is used for commercial, income
producing purposes, except for the agricultural, licensed day care, and
long term affordable rental uses provided above; and (2) real property
which is used for residential rental purposes, whether for long term or
short term, except as provided above and otherwise in this Chapter.
(d) [The owner may appeal the property's tax rate
classification as in the case of an appeal from an assessment.] For the
purposes of this Article, the tax rate classification for Residential
Investor shall be applied to properties that do not qualify for the home
exemption, are improved with a dwelling unit(s), and not vacant land,
and have an assessed value of two million dollars ($2,000,000.00) or
more.
(e) Parcels which are used for the purpose of supporting the
research and cultivation of living organisms or plant materials whose
deoxyribonucleic acid (DNA) has been manipulated through genetic
•
engineering techniques resulting in the introduction of new trait(s)
that do not occur naturally in the species and that are regulated by the
Federal Government shall be classified as "Agronomics."
[(e)] (f) The owner may appeal the property's tax rate
classification as in the case of an appeal from an assessment."
SECTION 3. Chapter 5A, Section 5A-9.1, of the Kaua`i County
Code 1987, as amended, is hereby amended by amending subsection (a) to
read as follows:
"(a) Definitions. As used in this Section:
"Agricultural use" means the use of land on a continuous and
regular basis that demonstrates that the owner intends to obtain a
monetary profit from cash income received by:
(1) Raising, harvesting, and selling crops;
(2) Feeding, breeding, managing, and selling of livestock,
poultry, or honey bees, or any products thereof;
(3) Ranching of livestock;
(4) Dairying or selling of dairy products;
(5) Animal husbandry, provided that the exclusive
husbandry of horses for recreational or hobby purposes shall not
be considered an agricultural use under this Section;
(6) Aquaculture;
[(7) Horticulture]
[(8)] al Participating in a government-funded crop
reduction or set-aside program; or
[(9)] 01 Cultivating of trees on land that has been
prepared by intensive cultivation and tilling, such as by plowing
or turning over the soil, and on which all unwanted plant growth
is controlled continuously for the exclusive purpose of raising
such trees.
Factors that shall be considered to determine whether an owner
intends to obtain a monetary profit from the listed activities include,
but are not be limited to, evidence that the land enjoys County
Department of Water agricultural water rates, filed copies from the
immediate preceding year of U.S. Internal Revenue Service Schedule F
forms showing profit or loss from farming, filed copies of federal fuel
tax exemption claims made pursuant to Section 6427(c) of the U.S.
Internal Revenue Code, sales receipts generated from the listed
activities, a valid, current, State general excise tax license, and
covenants, conditions and restrictions encumbering or affecting the
property which prohibit or limit agricultural activities.
Physical evidence such as grazing livestock, fences, artificial or
natural windbreaks, water facilities, irrigation systems, or crops that
are actually in cultivation, or indicia that farm management efforts
such as weed control, pruning, plowing, fertilizing, fencing, or pest,
insect, or disease control are occurring on the land, shall also be used
as factors to determine whether the land is being used for any of the
listed activities.
Agricultural dedication applications involving petitioned areas
that are less than one hundred (100) acres in size must have the
petitioned area entirely in cultivation and/or production at the time of
filing of the petition to dedicate. For agricultural dedication
applications that involve petitioned areas of one hundred (100) acres or
more, the larger of one hundred (100) acres or fifty percent (50%) of the
petitioned area must be in cultivation and/or production at the time of
the filing of the application to dedicate. Any approved petitioned areas
that exceed the one hundred (100) acre or fifty percent (50%)
requirement (aforementioned), but not yet in cultivation and/or
production at the time of filing, shall be planted at a rate of ten percent
(10%) per year, each year thereafter.
For parcels involved in the ranching of livestock, the entire
dedicated area shall have established fences and livestock present at
the time of filing a petition to dedicate.
Land areas which are part of a tree farm management plan that
was prepared, submitted and is in compliance with K.C.C. Section 5A-
11.26 shall be deemed to be in "agricultural use," notwithstanding the
fact that said areas are not in cultivation and are yet to be planted.
Any area that is not in cultivation or production at the time of the
filing of a petition to dedicate shall be planted at a rate of ten percent
(10%) per year, each year thereafter, as detailed in a farm
management plan to be submitted with the application for agricultural
dedication; provided that if the existing tree farm management plan
specifies a rate of planting other than ten percent (10%) per year, the
rate of planting specified in the tree farm management plan shall
prevail and control.
The term "agricultural use" shall not mean uses primarily as
yard space, landscaped open areas, botanical gardens, [or the raising of
livestock or fruit trees primarily for home use.] the raising of livestock
or fruit trees primarily for home use, or for the purpose of the research
and cultivation of living organisms or plant materials whose
deoxyribonucleic acid (DNA) has been manipulated through genetic
engineering techniques resulting in the introduction of new trait(s)
that do not occur naturally in the species and that are regulated by the
Federal Government.
"Crop" means produce that is raised, harvested and sold to a
consumer, and includes produce such as sugar cane, pineapple,
papaya, eggplant, beans, truck crops, grain or alfalfa, orchard crops,
flowers, nursery or ornamental crops, but excludes (i) produce that is
cultivated for science, research or development of crops or parent seed
production and (ii) in the urban district, forage crops used for soilage or
silage, such as hale koa, panicum, pangola, kikuvu, and napier grass,
which are deemed to be pasture usages within the urban district.
"Homesite" means any portion of land, on a dedicated parcel
intended for existing or future residential use that is not in a dedicated
or unusable area, including garages, sheds, yard space, landscaped
open areas, and driveways, and not including non-agricultural use
areas such as areas left fallow and/or overgrown with weeds, or
portions of driveways used for agricultural use.
Any undedicated or unusable land area on a dedicated parcel
will be valued at its proportional share of the fair market value of the
total land area of the said parcel. The homesite area for each
residential building that is twenty percent (20%) or more complete as
of the October 1st assessment date, shall be valued on a building by
building basis, at its highest and best use, based on comparable values
or similar size lands used as residential use as reflected in the market
and shall not include the value of any additional density allowed by the
County of Kaua`i's Comprehensive Zoning Ordinance.
"Owner" means possessors of fee simple estates and lessees and
licensees holding leases or licenses whose terms extend for at least ten
(10) or twenty (20) years, as the case may be, from the year in which
the petition to dedicate is filed.
"Parcel" means a subdivided lot or an "apartment" created by
the submission of land to a condominium property regime pursuant to
the provisions of Hawai`i Revised Statutes Chapter 514A or 514B.
"Petitioned area" means lands within a parcel which are
intended to be dedicated to an approved "agricultural use" as described
in Section 5A-9.1(a).
"Unusable" means land which is physically incapable of being
put to any agricultural use such as gulches, mountains, or pali, eroded
bedrock, or rocky, hilly, or barren land."
SECTION 4. Chapter 5A, Section 5A-9.1, of the Kauai County
Code 1987, as amended, is hereby amended by adding a new subsection (n) to
read as follows:
"(n) The Director shall submit annual reports to the Mayor
and the Council of all agricultural dedicated properties, to include, but
not be limited to, the following:
(1) Name of land owner;
(2) Name of each licensee or lessee who is authorized to
occupy the property for in excess of one year;
(3) Tax Map Key (TMK) of dedicated area;
(4) Period of dedication;
(5) Size of dedicated area;
(6) Description of the existing agricultural use;
(7) Taxes resulting from the dedication compared with
their market value."
SECTION 5. If any provision of this Ordinance, or the
application thereof to any person or circumstances is held invalid, the
invalidity does not affect other provisions or applications of the Ordinance
which can be given effect without the invalid provision or application, and to
this end the provisions of this Ordinance are severable.
SECTION 6. Material to be deleted is bracketed. New material
is underscored. When revising, compiling, or printing this Ordinance, the
brackets, bracketed material, and underscoring need not be included.
SECTION 7. This Ordinance shall take effect upon its approval."
(Material to be deleted is bracketed. New material to be added is underscored.)
(V:\2014-Term\FA\Bill No. 2546-Relating to RPT—GH#2-AB_lc.doc)