Monday, January 30, 2023
Hawai'i Free Press

Current Articles | Archives

Sunday, November 28, 2021
Tax Isn’t a Peanut Butter Cup
By Tom Yamachika @ 5:00 AM :: 2180 Views :: Honolulu County, Energy, Land Use, Taxes

Tax Isn’t a Peanut Butter Cup

by Tom Yamachika, President, Tax Foundation Hawaii

Once upon a time there were some property developers on Oahu.

They thought that agricultural development would be a good thing. There were lots of tax incentives associated with agricultural development.

Then they got the idea that putting some solar panels on the land would be a good thing too. There were lots of tax incentives associated with renewable energy.

So, they put some solar panels on the agricultural land too.

We have agriculture. And we have renewable energy. Are these two great tastes that taste great together?

Come on. Let’s be real. We’re talking about property tax, not a peanut butter cup. It turned out to be a recipe for disaster.

Clearway Energy Group, for example, submitted testimony to the Honolulu City Council of their plight. These folks built two solar projects on agricultural land, and, they said, incorporate compatible agriculture into their ongoing operations. Solar energy generation is an allowable use on agricultural zoned land under the city’s Land Use Ordinance, they argued.

But the real property tax folks saw the situation a little differently.

To get the special ultra-low property tax rate for agricultural use, the landowner had to make a “dedication agreement” with the tax authorities. Basically, the landowner promised to use the property for agriculture for a certain period of time. The tax folks saw solar panels on the properties and said, “Uhm, that’s not agriculture.” So, they took away the ultra-low tax rate, and, while they were at it, they took away the property’s agricultural classification. It’s industrial property, they said, which happens to be taxed at a rate more than double the agricultural rate even without any dedications.

At the end of the day, Clearway had a real property tax bill of $30,154 for the 2020-21 tax year (they go with a fiscal year ending June 30), but for the 2021-22 tax year the bill jumped to an eye-popping $835,710.

Clearway’s tale of woe attracted a lot of attention, so much that the Council is now considering Bill 39, which is supposed to address this problem, and state agencies aplenty, including the Governor, the State Energy Office, and DBEDT, have weighed in.

One of the reasons behind this kerfuffle is that this is not just Clearway’s problem. Any solar project that is located on agricultural land is subject to this kind of reclassification, and the financial impact would vary depending on how much solar went on the land and how much of the land was previously subject to the ultra-low rates for land dedicated to agriculture.

And then, of course, there is the issue of who is going to pay the enhanced tax if the real property tax folks’ methodology is upheld. Clearway and the other power producers have long-term agreements with power buyers such as Hawaiian Electric. If this enhanced charge becomes Hawaiian Electric’s problem, it then becomes a problem for all of us who pay electric bills. If the enhanced charge impacts the developers, it will send shock waves through the industry of people who finance renewable energy projects because of the risk of a property developer getting overwhelmed by this tax surprise and thereby going into default on its financing.

What a mess!

Ultimately, the City might legislate itself out of this situation, making some allowances for solar and agriculture peanut butter cups. But for the rest of us the moral of the story is that two great tax-favored tastes won’t always taste great together, and one must be extremely careful when mix-matching tax incentives.


TEXT "follow HawaiiFreePress" to 40404

Register to Vote


808 Silent Majority

ACA Signups Hawaii

Alliance Defending Freedom

Aloha Pregnancy Care Center

American Council of Trustees and Alumni


Antonio Gramsci Reading List

A Place for Women in Waipio

Astronomy Hawaii

Back da Blue Hawaii

Ballotpedia Hawaii

Better Hawaii

Broken Trust

Build More Hawaiian Homes Working Group

Christian Homeschoolers of Hawaii

Cliff Slater's Second Opinion

DVids Hawaii


Fix Oahu!

Frontline: The Fixers

Genetic Literacy Project

Grassroot Institute

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii Coalition Against Legalized Gambling

Hawaii ConCon Info

Hawaii Credit Union Watch

Hawaii Crop Improvement Association

Hawaii Debt Clock

Hawaii Defense Foundation

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii Future Project

Hawaii Gathering of Eagles

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii Legal News

Hawaii Legal Short-Term Rental Alliance

Hawaii Matters

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together



Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Navy League

Honolulu Traffic

House Minority Blog

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

July 4 in Hawaii

Kakaako Cares

Keep Hawaii's Heroes

Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Malulani Foundation

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

NAMI Hawaii

National Christian Foundation Hawaii

National Parents Org Hawaii

NFIB Hawaii News

No GMO Means No Aloha

Not Dead Yet, Hawaii

NRA-ILA Hawaii

Oahu Alternative Transport


OHA Lies

Opt Out Today

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Pritchett Cartoons

Pro-GMO Hawaii


Rental by Owner Awareness Assn

ReRoute the Rail

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

Save Dillingham Airfield

School Choice in Hawaii

Sink the Jones Act

Statehood for Guam

Talking Tax

Tax Foundation of Hawaii

The Real Hanabusa

Time Out Honolulu

Trustee Akina KWO Columns

UCC Truths

US Tax Foundation Hawaii Info

VAREP Honolulu

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii