A BILL FOR AN ORDINANCE TO AMEND
CHAPTER 5A, KAUAI COUNTY CODE 1987,
RELATING TO AGRICULTURAL USE VALUATION

BE IT ORDAINED BY THE COUNCIL OF THE COUNTY OF KAUAI, STATE OF HAWAII:

SECTION 1. Chapter 5A, Article 1, Section 5A-1.1 of the Kauai County Code 1987, as amended, is hereby amended to read as follows:

"5A-1.1 Definitions.

Whenever used in this chapter:

"Director" shall mean the Director of Finance of the County of Kauai or the authorized subordinate of the Director.

"Native forest land" means land either stocked with trees at a crown density of at least ten (10) percent or covered with shrubs to a crown density of at least fifty (50) percent, with at least fifty (50) percent of the stock of trees or shrubs being of a species indigenous to Hawaii. Indigenous means trees or shrubs that became established or evolved in the Hawaiian Islands without the aid of human hands.

"Property or real property" shall mean and include all land and appurtenances erected on or affixed to the same, and any fixture which is erected on or affixed to such land, building structures, fences and improvements, including all machinery and other mechanical or other allied equipment and foundations thereof, whose use thereof is necessary to the utility of such land, buildings, structures, fences, and improvements, or whose removal therefrom cannot be accomplished without substantial damage to such land, buildings, structures, fences, and improvements, excluding, however, any growing crops. The temporal division of any interest in real property shall not, in and of itself, affect its status as real property.

"Plan manager" shall have the meaning ascribed to it in section 514E-1, Haw. Rev. Stat., as amended.

"Time share interest" shall have the meaning ascribed to it in section 514E-1, Haw.

"Time share plan" shall have the meaning ascribed to it in section 514E-1, Haw. Rev. Stat., as amended.

"Time share unit" shall have the meaning ascribed to it in section 514E-1, Haw.

"Time share unit owner" means any person who owns a time share interest.

"Unusable or unsuitable for any agricultural use" means land which is physically incapable of being put to any agricultural use, such as gulches, mountains or pali, eroded bedrock, or rocky, hilly, or barren land."

SECTION 2. Chapter 5A, Article 8, Section 5A-8.1 of the Kauai County Code 1987, as amended, is hereby amended to read as follows:

"5A-8.1 Valuation; Considerations In Fixing.

(a) The director shall cause the fair market value of all taxable real property to be determined and annually assessed by the market data and cost approaches to value using appropriate systematic methods suitable for mass valuation of properties for taxation purposes, so selected and applied to obtain, as far as possible, uniform and equalized assessments throughout the county; [provided that the value of land located in the agricultural State Land Use District and used for agriculture, whether such lands are dedicated pursuant to Sec. 5A-9.1 or not, shall, for real property tax purposes, be the value of such land for agricultural use without regard to any value that such land might have for other purposes or uses, or to neighboring land uses, as determined as provided in subsection (e)(1) of this section] provided that land dedicated pursuant to Secs. 5A-9.1, 5A-9.2 or 5A-9.4 shall be assessed according to those respective sections, and provided further that native forest land and land unusable or unsuitable for any agricultural use shall not be assessed. In making such determination and assessment, the director shall separately value and assess, within each class established in accordance with subsection (c) of this section: (1) buildings, and (2) all other real property, exclusive of buildings.

(b) So far as practicable, records shall be compiled and kept which shall show the methods established by or under the authority of the director, for the determination of values.

(c) (1) The land shall be classified into the following general classes:

(A) Single Family Residential

(B) Apartment

(C) Hotel and Resort

(D) Commercial

(E) Industrial

(F) Agricultural

(G) Conservation

(H) Homestead

(2) The director shall assign land to one of the general classes according to its highest and best use, giving major consideration to the districting established by the land use commission pursuant to Chapter 205, H.R.S., the districting established by Kauai County in its general plan and zoning ordinance, use classifications established in the general plan of the State, and such other factors which influence highest and best use, except that parcels which are used for no other purpose than as the owner's principal residence shall be classified as "Homestead" without regard to their respective highest and best use, provided that the owner has applied for and been granted a home exemption according to Section 5A-11.4. The "Homestead" class shall also include parcels used as the owner's principal residence which are being assessed according to their agricultural use [as provided in subsection (e)(1) of this section] as provided in Sec. 5A-9.1, provided that the owner has been granted a home exemption and that no portion of the parcel be used for a purpose other than the owner's principal residence and agriculture. The agricultural use shall be limited to the cultivation of crops, pasturing of animals, and cultivation of aquaculture products, and uses which directly support the agricultural activity such as windbreaks, access roads, irrigation ditches and sheltering of farm machinery. Uses which are primarily commercial or industrial in nature, such as importing, selling, refining or distributing agricultural products, shall not qualify for the Homestead class. The residentially-used portions of agricultural land shall be assessed according to their value in residential use.

(3) When property is subdivided into condominium units, each unit shall be classified upon consideration of its actual use into one of the general classes in the same manner as land.

(4) "Homestead" shall mean properties which are used exclusively as the owner's principal residence. Uses which shall not qualify as "Homestead" include but are not limited to the following:

(A) Land which is used for commercial, income producing purposes, except as provided for in paragraph (2).

(B) Land which is used for residential rental purposes whether for long term or short term.

(d) Whenever land has been divided into lots or parcels as provided by law, each such lot or parcel shall be separately assessed.

[(e)(1) In determining the value of lands which are classified and used for agriculture, whether such lands are dedicated pursuant to Sec. 5A-9.1 or not, consideration shall be given to rent, productivity, nature of actual agricultural use, the advantage or disadvantage of factors such as location, accessibility, transportation facilities, size, shape, topography, quality of soil, water privileges, availability of water and its cost, easements and appurtenances, and to the opinions of persons who may be considered to have special knowledge of land values.

(2) A deferred or roll back tax and penalty shall be imposed on the owner of agricultural lands assessed according to its agricultural use, as provided in subsection (a) of this section, in the event of a change by the authorized state or county agency in land use classification from agriculture to urban or rural districts or upon the subdivision of the land into parcels of five acres or less; provided that the roll back tax and penalty shall be applied only to those parcels of five acres or less in size.

(A) Where a change in land use classification from agriculture to urban or rural districts has occurred and the land continues to be used for agriculture, the total amount of deferred taxes and penalties shall be computed from the end of the third tax year following the change in classification, retroactive to the beginning of the tax year for which the assessment was made pursuant to subsection (a) of this section.

(B) Where the change in land use classification from agriculture to urban or rural districts has occurred and the agriculture use is discontinued the total amount of deferred taxes and penalties shall be computed from the end of the tax year that the change in classification or use occurred, but not later than the three years provided for in Section 5A-8.1(e)(2)(A), retroactive to the beginning of the tax year for which the assessment was made pursuant to subsection (a) of this section.

(C) Where the owner has subdivided the owner's land into parcels of five acres or less, the deferred taxes and penalties shall commence from the end of the tax year in which the conversion was made, retroactive to the beginning of the tax year for which the assessment was made pursuant to subsection (a) of this section.

(D) Any other provision to the contrary notwithstanding, for purposes of determining the amount of deferred taxes to be assessed to the owner or lessee, the retroactive period shall include the period during which the land is assessed in its agricultural use following the change in classification;

the deferred tax shall not apply if the owner dedicates the owner's land as provided in Section 5A-9.1 within three years from the date of the change in land use classification and fulfills all of the requirements of the dedication;

the deferred tax shall apply only if a change in land use classification has been made as a result of a petition by any property owner or lessee and shall apply only to lands owned by the owner or lessee who has petitioned for the change in classification;

the deferred tax shall be retroactive to the date the assessment was made pursuant to subsection (a) of this section provided the retroactive period shall not exceed ten years;

the deferred tax shall not apply to lands owned by any owner or lessee who has not petitioned for the change in classification provided the owner or lessee shall continue to use the land in its agricultural use for a period of three years after the change in land use classification is made, or where the change in land use classification or zoning is initiated by a governmental agency or instrumentality;

the deferred tax for each tax year shall be based on the difference between the highest and best use value and the assessed agricultural use value of the land at the tax rate applicable for the respective years;

the deferred tax shall be payable together with a 10% a year penalty from the respective dates that these payments would have been due but shall not be applied for more than 10 tax years. The 10% a year penalty shall be assessed on the deferred tax owed and shall be imposed for each and every tax year the deferral was received;

the deferred tax and penalties shall be due and payable within 30 days following the mailing of the notice of retroactive tax assessment to the owner;

in the case where the deferred tax and penalty are imposed upon a subdivision of land into parcels of five acres or less, the roll back tax and penalty shall be applied only to those parcels of five acres or less;

any tax, penalty, and interest due and owing shall attach to the land as a paramount lien in favor of the County pursuant to Section 5A-5.1.

(3) Where lands located within agricultural districts are put to agricultural uses, that portion of such lands not usable or suitable for the agricultural use of the lands abutting the unusable or unsuitable area, whether dedicated pursuant to Sec. 5A-9.1 or not, the tax upon such unusable or unsuitable land shall be deferred and shall be imposed only upon use, change in land use classification, or subdivision of the land into parcels of five acres or less. The deferred tax shall be retroactive from the beginning of the deferment to the end of the tax year in which the roll back was imposed for each year that the taxes were deferred, provided the retroactive period shall not exceed ten years. The deferred taxes and penalties will be payable within 30 days following the mailing of the retroactive tax bill to the owner.

Notwithstanding any other provision to the contrary, if lands are put to another agricultural use, for which the land previously classified as unusable is suitable, the owner may remove such lands from the unusable or unsuitable status, without payment of deferred taxes or penalties, provided that such use does not involve change in land use classification nor subdivision into parcels of five acres or less.]

[(f)](e) A building shall be assessed only if such building is 20% or more complete as of the January 1st assessment date. Any building less than 20% complete as of the January 1st assessment date shall not thereafter be assessed for that tax year under any provisions of this Chapter. To determine whether a building is 20% or more complete, the assessor shall conduct a site inspection, or obtain written documentation from the contractor, or both. The director shall adopt rules pursuant to Chapter 91, Hawaii Revised Statutes, to establish the method for determining whether a building is 20% or more complete and for determining the value of a building under construction which is 20% or more complete.

In determining the value of buildings, consideration shall be given to any additions, alterations, remodeling modifications, or other new construction, improvement, or repair work undertaken upon or made to existing buildings as the same may result in a higher assessable valuation of the buildings, provided, however, that, any increases in value resulting from any additions, alterations, modifications or other new construction, improvement or repair work to buildings undertaken or made by the owner-occupant thereof pursuant to the requirements of any urban redevelopment, rehabilitation or conservation project under the provisions of Part II, Chapter 53, H.R.S., shall not increase the assessable valuation of any building for a period of seven (7) assessment years.

It is further provided that the owner-occupant shall file with the director in the manner and place which the director may designate, a statement of the details of the improvements certified by the Mayor or any governmental official designated by him and approved by the Council, that the additions, alterations, modifications, or other new construction, improvement or repair work to the buildings were made and satisfactorily comply with the particular urban redevelopment, rehabilitation or conservation act provision.

[(g)](f) Assessment of real property subject to a time share plan.

(1) Subject to subparagraph (6) of this subsection [(g)](f), the assessed value of each time share unit operating under a time share plan shall be the combined value of the individual time share interests contained in the time share plan.

(2) In assessing real property subject to a time share plan, the director shall look first to the resale market for time share interests.

If by January 1 of each year the director is unable to determine the assessed value of real property subject to a time share plan by looking to the resale market for time share interests, an average price for the time share interests which have been conveyed shall be calculated in accordance with subparagraph (3) of this subsection [(g)](f), and the average price shall be multiplied by the total number of time share interests in the time share unit to determine the assessed value of the unit.

(3) If there is an adequate number of typical resales of time share interests at fair market value to provide a basis for arriving at value conclusions, the provisions of subparagraph (4) of this subsection [(g)](f) shall apply. If there is an inadequate number of typical resales of time share interests at fair market value to provide a basis for arriving at value conclusions, then the director shall deduct from the purchase price received by the registered developer in an arm's length transaction "intangible costs" of the time share plan. For purposes of this subsection [(g)](f) only, "intangible costs" for real property subject to a time share plan shall include the value of personal property, atypical sales and marketing costs, and costs to provide purchase money financing.

No later than December 31 of any year, the registered developer or plan manager of a time share plan may file with the director either 1) a statement prepared by a certified public accountant certifying the percentage of the purchase price that represents intangible costs of the time share plan, or 2) documentation sufficient to establish the percentage of the purchase price received by the registered developer or plan manager that represents intangible costs of the time share plan.

If the registered developer or plan manager does not file the described statement or documentation by December 31 of any year, "intangible costs" of the time share plan shall be presumed to be fifty percent (50%) of the purchase price received by the registered developer or plan manager; provided that this presumption shall be rebuttable by the registered developer, the plan manager, of any person owning a time share interest under the time share plan. Further, the director may rebut any asserted intangible costs in excess of fifty percent (50%) of the purchase price received by the registered developer or plan manager.

The director shall protect the confidentiality of any proprietary information, trade secrets, or confidential commercial or financial information to the extent permitted by law.

(4) If there is an adequate number of typical resales of time share interests at fair market value to provide a basis for arriving at value conclusions, then for such resales the director shall deduct from the purchase price received by the seller in an arm's length transaction the value of personal property, if any, and atypical sales and marketing costs, if any. Neither the document filing provisions nor the fifty percent rebuttable presumption described in subparagraph (3) of this subsection [(g)](f) shall apply when the director considers the resale value of time share interests.

(5) The provisions of this subsection [(g)](f) shall apply to real property subject to either fee or leasehold time share interests.

(6) No time share unit that is registered under a time share plan prior to January 1, 1997 shall be subject to the provisions of this subsection [(g)](f) until the first time share interest in such a time share unit is conveyed by the registered developer and recorded in Land Court or the Bureau of Conveyances, as the case may be. Such time share units shall continue to be assessed in the same manner as they were being assessed prior to the effective date of this ordinance. Real property that is registered under a time share plan on or after January 1, 1997 shall be subject to the provisions of this subsection [(g)](f) without regard to when the first time share interest is conveyed and recorded by the registered developer.

(7) Where appropriate and as required by the context in which they appear, words and phrases used in this subsection [(g)](f) including, but not limited to, "developer", "plan manager", "time share interest", "time share plan", and "time share unit" shall have the meanings ascribed to them by chapter 514E, Haw. Rev. Stat., as amended.

(8) The director may adopt rules pursuant to chapter 91, Haw. Rev. Stat., necessary for the purpose of implementing this subsection [(g)](f).

(g) Land leased or held under a revocable permit from the State of Hawaii. Any person who either leases land or holds land under a revocable permit from the State of Hawaii may have his land valued according to this subsection (g) if the requirements of this subsection (g) have been satisfied.

SECTION 3. If any provision of this Ordinance, or the application thereof to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the Ordinance which can be given effect without the invalid provision or application, and to this end the provisions of this Ordinance are severable.

SECTION 4. Ordinance material to be repealed is bracketed. New Ordinance material is underscored. When revising, compiling, or printing this ordinance for inclusion in the Kauai County Code 1987, the brackets, bracketed material and underscoring need not be included.

SECTION 5. The repeal of the material in SECTION 2 of this ordinance shall not affect the validity of any roll back taxes and penalties which would be imposed as the result of an event occurring prior to the effective date of this ordinance.

SECTION 6. This Ordinance shall take effect upon its approval.

Introduced by: /s/ JAMES KUNANE TOKIOKA

(By Request)

DATE OF INTRODUCTION:
    August 12, 1999
Lihue, Kauai, Hawaii

P4:1921d1/rw:ao 9/16/99