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Maui Property Tax Disparities
If you have ever wanted to see a Maui Council Member’s head explode, talk to Maui Council Member Mike White and mention the property tax disparity between properties assessed with the agricultural property qualification versus properties without the same property tax assessment. It’s enough that “My head just starts exploding.” said Maui Council Member Mike White. By real-world example, two identical neighboring 2.8 acre parcels of land worth millions of dollars each have an inequality that requires one property owner to pay $20,000 in property tax for the year, whereas the neighbor paid a mere $150 for the same time period. Yes, that is correct. Two identical parcels of land, side by side, one taxed at $20,000, the other at $150.
So, what was the difference between these two neighboring pieces of property that allowed for such a huge discrepancy in property tax bills? The property with the substantially lower tax bill was classified as a qualified agricultural parcel due to a small pen used for horseback riding. Because of this horseback riding enclosure, the property value for tax purposes dropped from $5.3 million to a meager value assessment of $100.
Council Member Mike White first noticed the issue when he bought his own parcel of land several years ago. Having paid more than $400,000 for his piece of Olinda Maui paradise, he was surprised when he received his first property tax assessment that valued his land at only $8,800. After being elected to council, Mike White started looking into the issue and found that multi-million dollar estates, assessed with a low agricultural value, were paying substantially less property tax than modest residential landowners, thanks to an assessment system established and unchanged since the 1950′s.
To assess a property’s value using the antiquated system, neither the price of property purchase nor current market value are looked at. Instead, the estimated rental value of the land as agricultural property is considered based on the soil quality of the property’s area. This system was set up in the 1950s by University of Hawaii agronomists and the value that a said piece of property could be rented for is based on what researchers determined a farmland could be rented for. Those values were established 60 years ago and have carried over since, even after 1981 when the county took over the task of assessing properties from the State government. Originally designed to encourage and protect agriculture, the differences in value assessments and tax bills have grown over time.
How can this gap between property tax values be rectified? Council Member Mike White said that the issues needed more thought. “I don’t know what the answer is, but it’s a question we’ve got to ask ourselves,” he said.