Small Business News
August 2004 | Online Edition
City Council Votes for Tax Relief For Hawaii's Farmers
By Nicole LaPrade, HawaiiReporter
The Honolulu City Council voted 7 to 2 at the July 14, 2004, monthly meeting to pass a bill giving Oahu farmers a desperately needed property tax break before payments are due August 20, 2004.
Many farmers have seen enormous increases in their property taxes after the passage of the highly controversial law, Bill 10, which went into effect in 2001. Bill 10 changed property taxes on agricultural lands from being assessed on the value of the crops produced to the "real property value."
The city council tried to remedy the situation since the real consequences of Bill 10 were exposed, giving farmers discounted rates if their lands were dedicated to farming. If landowners dedicated their lands for one year, they would only be billed 10 percent of the real property tax, 5 percent for 5 years, and 1 percent for 10 years. This eased the tax burdens of those farmers able to get their land dedicated, but many farmers on the island lease their land from larger landowners reluctant to dedicate their land to farming for more than one year.
Bill 35, which will override Bill 10 for at least a year, will put a 1-year moratorium on the tax rates of legitimate farmers and give them a 95 percent tax break, whether or not their land is dedicated for agriculture.
Robert Cherry, a rancher from the North Shore of Oahu, is one of the many ranchers and farmers from all over the island who came to testify in favor of Bill 35, saying his ranch will be out of business next month if his property taxes are not reduced. Much of Cherry's land, although zoned for agricultural use, is not farmable because of the terrain = gulch land = so instead he raises cattle. He says property taxes on the two parcels of land he leases have risen 2,400 percent and 5,400 percent, thanks to Bill 10. To abide by Oahu's law, he must come up with $40,000 by August 20, 2004, which is impossible, he says.
Roland Silva of Mokule'ia Ranch says he has the same problem as Cherry = his taxes are going up 800 percent unless Bill 35 is signed into law and goes into effect in time to provide him relief.
Dean Okimoto of Nalo Farms was one farmer whose property taxes were actually lowered by Bill 10, but he testified on behalf of other island farmers in support of Bill 35 saying, "If [a bill] will put even one farmer out of business, something is wrong." Okimoto also told Honolulu City Council members they should "be creating incentives for farmers rather than disincentives."
Councilman Gary Okino, who is opposed to Bill 35 and is one of the two council members who voted against the change in tax rates, says Bill 10 lowered or had no effect on the property taxes of 75 percent of the farmers on the island. He also suggests those farmers who are experiencing drastic increases in their taxes should have their land's real property values re-assessed.
Honolulu Mayor Jeremy Harris noted in his 2004 State of the City address that he believes Bill 10 needs to be repealed. But there has been no effort by his administration to address the problem since. In fact, many who thought he'd support a change to Bill 10 as he had indicated were surprised by the mayor's seeming about face and open hostility toward Bill 35 and those who support it.
The bottom line is money. The Harris administration believes Bill 35 will cost his administration $9.6 million in "lost revenues" and lead to an unbalanced budget. Also, the Harris administration is in a power struggle with the council. The mayor says only the executive branch holds the right to give tax breaks, and this is not a matter that falls under the jurisdiction of the legislative branch of city government.
Ivan Lui-Kwan, director of Budget and Fiscal Services, testified for the the mayor on Bill 35, purporting the legislation violates the city's rights and is illegal. The goal of his department is to help the farmers achieve lower tax assessments, and those farmers whose land had been dedicated were not going to receive extraordinarily high tax bills, Lui-Kwan says.
The Harris administration is taking its opposition so far that it is considering a lawsuit against the council over the matter, so it is questionable whether or not the farmers will actually experience immediate tax relief, but the farmers say they have no other options.
But the majority of the city council is standing by the farmers, despite the controversy and strong opposition by the mayor.
"We want to help the farmers now, so they don't have to go to the bank to pay their taxes," says Councilwoman Ann Kobayashi.
Councilman Charles Djou says Bill 35 is important and will send a message to the farmers that the council is concerned about their welfare.
Bill 10 is not just a hot topic among farmers and elected city officials = the legislation also has become an issue in the 2004 campaign for mayor between candidates Duke Bainum and Mufi Hannemann. Bainum, who along with Hannemann is a former Honolulu city council member, introduced Bill 10 and helped get it passed = something Hannemann has criticized Bainum for in his campaign ads for mayor.
Those who voted yes in favor of Bill 35 and the change to the current tax structure, ultimately giving farmers tax relief: Donovan Dela Cruz, Charles Djou, Mike Gabbard, Ann Kobayashi, Romy Cachola, Nestor Garcia and Rod Tam. Those who opposed the measure: Gary Okino and Barbara Marshall.
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