Rob Parsons

Real Property Tax Office to Ag Owners-Justify Farm Use or Lose Tax Rate

Change could hit small farmers hardest

by Rob Parsons

October 29, 2009

In an apparent effort to collect revenues in the face of a lean fiscal year, the Maui County Real Property Tax (RPT) office sent letters to thousands of ag owners over the past two months, seeking proof of farming activities. The notice requires property owners to file a Request For Agriculture Use Valuation Form within 30 days, or risk losing their ag use assessment, which, "may result in a substantial difference in your real property taxes."

While there are a number of unanswered questions raised by the letter and accompanying forms linked on the RPT Web site, many owners see the measure as poorly conceived and draconian. Some say it could expose the County to a class-action lawsuit.

"This is huge—way bigger than TVRs [transient vacation rentals]," said a farmer who asked to remain anonymous. "I could lose the farm over this, but someone with a lot of money can put up a fence and bring in one cow and they are in compliance."

Kalbert Young, Director of Finance (which oversees the RPT office) said the ag verification collection program is intended to identify compliance with County code. "If you're doing ag," said Young, "be prepared and submit proof. If you're not doing ag, and can't validate it, then you shouldn't receive the benefit."

The letter states, "As part of our ongoing efforts to uniformly and equitably assess property at fair market value, the Real Property Tax Division is requiring that you file for the agricultural activity on this parcel." A three-sentence agricultural use definition is referenced, from the rules and regulations of the Director of Finance, "relating to assessment of agricultural lands under Maui County Code Section 3.48.325."

Clicking that link takes the ag owner to a section titled, "Deferred or roll back tax," and describes a process whereby, if the property is taken out of ag designation and placed in a higher use category, a tax may be computed and assessed retroactively, "provided the retroactive period should not exceed ten years."

I spoke with an Upcountry farmer who told me he was in the middle of filling out his paperwork and providing photos. "They're trying to extract money from a lot of innocent people by raising their taxes 500 percent," said the resident, who claimed more than half of his land was in fruit and vegetable production. "Marginal users will have a hard time. The paperwork said if you're growing for your own consumption, that's not good enough."

Indeed, the letter quotes the Finance Director's Rules as stating that agricultural use "does not include nor apply to areas…associated with residential use planted with fruit and ornamental trees, flowers and vegetables primarily for home use."

Former Planning Director Mike Foley believes the letter is aimed at "two-acre parcels with no ag use whatsoever." He proposes developing legitimate standards to describe ag activities, as there are many variables. "How suitable is a particular area to ag?" Foley asked. "Does it have adequate water? Good soil? Gulches?"

An Olinda resident told me she hadn't received "the letter," but neighbors on both sides of her had. "The County may be ripe for a lawsuit, maybe a class action case," she said. "Who's making the rules? Has there been a community review of the rules if they are changing?"

Past Mayor and Councilmember Alan Arakawa concurred. "I'm concerned that this is all being done administratively," said Arakawa. "There has been no public hearing, and no public discussion."

Arakawa said when he was on Council, they began discussions of what constituted agricultural use. After being elected Mayor, he tasked the Maui County Farm Bureau with arriving at a definition. After two years of wrestling with specific language, the farm bureau committee provided a draft, which Arakawa sent to the Council.

"Council never did anything to finalize and codify the process," Arakawa said. "Past practices and court decisions haven't defined farming the way it is being used here. They may find they have conflicts with the definitions in our state laws.

"Beyond that," Arakawa continued, "they are remiss in taking a proactive approach to helping and encouraging people to do farming."

Responding to a list of questions I sent, Gery Madriaga of the Real Property Tax office said approximately 6,800 letters were mailed out. Asked what percentage of a property would need to be in ag use to qualify, he responded, "The ordinance is not specific, but previous rules of thumb was at least 50 percent in use. It would be up to the appraiser and field inspection if not obvious."

One grower told me he intensively farms two acres of a larger leased parcel, for which he receives an exemption. "Now they want to limit my exemption to just the two acres," he exclaimed, "and have me pay a full rate on the rest. I might lose the farm!"

Madriaga said the effort "is part of assessment work we do annually, we just have not had the manpower to maintain [it]."

Both Madriga and RPT staffer Scott Teruya served on the MCFB committee that sent the draft definition of ag to Council for discussion. But no revised standards were set. "The updated valuations will be using the current ordinances and rules," Madriaga wrote.

William Jacintho of the Maui Cattleman's Association contacted the office and helped set up an informational workshop to help the public. Working with Kula Community Association, Jacintho scheduled the workshop for Monday, November 9, at 8:30am at the Pukalani Community Center.

"The goal here," his announcement states, "is to be informed and share your concerns. The next step would be to see if corrections need to be addressed and how to go about it."

Jacintho, who also served on the ag definition committee, said sometimes a one-size-fits-all approach isn't ideal. "You try to catch some kind of fish, and you catch a lot of others, too."