Property tax changes would help Kauai farmers and ranchers

by Jonathan Helton, Grassroot Institute

The Kaua‘i County Council is considering a bill that would make it easier for farmers and ranchers to grow and sell more local food — something that would benefit all island residents. 

The measure at hand is Bill 2987, introduced by Council Chair Mel Rapozo and Councilmember Arryl Kaneshiro. This bill would reduce the risk of farmers and ranchers paying more in property taxes than they should for having certain commercial structures on their lands, including food processing facilities or slaughterhouses. 

Currently, Kaua‘i County offers a generous tax break to farmers and ranchers who dedicate their properties to agricultural use for 10-year periods. The benefit is that the county assesses dedicated agricultural land at only 5% of its estimated market value. 

However, farmers and ranchers are not eligible for the ag dedication — and therefore cannot claim that tax break — if they sell, refine, process or distribute any food or meat grown on another farm or ranch, or even on another piece of land they own or lease. 

Kauai farmers and ranchers also enjoy a reduced property tax rate — $6.75 per $1,000 in assessed value, compared to $8.10 per $1,000 for commercial and industrial properties.

But they become ineligible for that rate if they have any kind of commercial or industrial uses operating on their property. So if a farmer allows a cell tower or warehouse to be constructed on his or her land but uses the rest of it to grow crops, the entire parcel must be taxed at the industrial or commercial rate.

Currently, about 125 of the county’s 1,500 or so parcels in the agriculture or open zones — where agricultural uses are common — are classified as industrial or commercial for tax purposes. The owners of those parcels are likely engaged in farming or ranching to some degree but paying much more in property taxes than they would if the land were taxed at the agricultural rate. 

A case in point is Moloa‘a Farms in Anahola. The farm has a 346-acre parcel that’s classified as commercial because there are two warehouses on the property, even though part of it is dedicated to ag use. 

Last year, Moloa‘a Farms owed $39,737 in property taxes on that parcel. But if the entire parcel had been taxed at the agricultural rate instead, Moloa‘a Farms would have saved about $6,000. That money could have been reinvested into the property, used to buy new equipment or put aside to cover rising costs for electricity, fertilizers and other inputs. 

Under the new rules proposed in Bill 2987, any commercial structures and the portion of the land they sit on would still be taxed at the commercial or industrial rates, but the rest of the property would be taxed at the agricultural rate. 

The bill would also allow farmers and ranchers to keep their ag designation if they sell, refine, process and distribute produce or animals grown or raised off site, as long as at least 50% comes from land they own or lease. 

These changes might seem manini, but they will no doubt help many Garden Isle ag producers thrive. With high costs bombarding farmers, ranchers and entrepreneurs of all kinds, making such changes would go far to encourage more agricultural production and help the island truly deserve its reputation as the Garden Isle.