Disparity of Real Property Assessments for Agricultural Lands

For generations, Maui County has recognized the importance of agriculture in our community as an economic driver and a traditional way of life.  In our county’s yesteryears, many families relied upon agriculture.   Recognizing the challenges of farming, lawmakers created special agricultural assessments to curb against escalating property values and to support the expansion and continuance of local agriculture.

With the changing global economy, farming in Maui County has become less lucrative.  Many large corporations and family farms have shut down, yet acres of agricultural land that have moved primarily into home sites continue to claim special agricultural assessments.  Many of these properties, often referred to as “gentleman’s estates,” receive the benefit of reduced taxes in the form of agricultural valuations, without contributing to our local commercial agricultural output.  There has been much discussion over the years regarding these so-called gentlemen farmers receiving County tax subsidies, yet Maui County residents do not realize the extent of the tax disparities that exist.

One example includes a 73.2 acre oceanfront agricultural lot in Haiku that was purchased in 2000 for $1.85 million.  The market value is $1.42 million, but the taxable land value is only $224,500, primarily because it is assessed for agricultural use.  In comparison, a 7,405 square foot located in Paia has a taxable land value of $224,800.  The Haiku parcel is approximately 440 times larger than the Paia parcel, yet the taxable land values of both parcels are essentially the same.

The families who own and reside in the small homes are essentially subsidizing the owners of the much larger estate properties.

 Another challenging tax issue is that of subsidized land speculation by developers who purchase large acreage of agricultural land and legally retain the property’s agricultural  assessment,  but with no intention of contributing to local agriculture in the long run.  Existing laws allow the land to be held at extremely low tax rates prior to receiving a zoning change to allow further development.  This practice appears to contradict the original intent of the agricultural assessments, which were designed to help sustain local agricultural operations, not subsidize speculation.

 In one case, a 149-acre parcel was purchased recently for $4.75 million, and because of the property’s existing agricultural assessment, its taxable value is $12,400, resulting in the owner paying a mere $150 in property tax per year!

There is no doubt that huge disparities and tax challenges exist, and solutions will not be easy to define. With so few bona fide agricultural operations remaining, we must focus tax subsidies on those who substantially contribute to our local agriculture.

 This is just the start of the discussion and decision-making process, but I would like to emphasize the need to create a clear framework of tax policies to ensure fairness for all Maui County residents and provide the real property tax division with the appropriate tools with which to do their job thoroughly and expeditiously.

 I have transmitted the following documents (click here) to the Council that will be on the September 2 agenda and referred to the appropriate standing committee for discussion and action.

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