Since the Legislature passed a measure giving landowners incentives to protect important agricultural lands in 2008, the state Land Use Commission has been presented with a total of five IAL petitions. In the first two years after passage of Act 233, just two petitions were brought seeking designation of IAL status for lands on Kaua`i and Maui. Both were brought by Alexander & Baldwin.<\/p>\n
In the last six months, however, the pace has picked up. In November, the LUC received the third such petition, for designation as IAL of some 5,000 acres owned by Moloka`i Properties, Ltd. By the end of December, the fourth petition was filed, this time by Castle & Cooke, proposing to designate as IAL four discrete properties on O`ahu, having a combined area of 902 acres. In February, Maha`ulepu Farm, LLC, filed a petition seeking IAL status for 1,553 acres at Koloa, Kaua`i.<\/p>\n
Why the rush?<\/p>\n
Under the law, private landowners have three years after Act 233 took effect \u2013 that is, until July 1 of this year \u2013 in which to petition for IAL status before counties are allowed to begin their own designation process. After that, landowners are free to petition for IAL status for their lands, but the county process kicks in as well. Once that happens, the lands identified and proposed for IAL designation by the counties may not be the same ones that the landowner would want to see so designated. Counties are allowed to recommend designation of up to 50 percent of a given landowner\u2019s holdings (not counting any lands in the Conservation District). Thus, some landowners, not trusting the county to act in their best interests, might wish to decide for themselves which of their lands to place in the IAL category.<\/p>\n
Still, given the counties\u2019 general lack of progress in carrying out their statutory mandates, there would seem to be no reason for private landowners to rush in with petitions for IAL designation to the LUC. A poll of county planning departments shows only Kaua`i County will come close to having prepared IAL maps \u2013 and even there, the county is running behind schedule.<\/p>\n
Since the Legislature passed a measure giving landowners incentives to protect important agricultural lands in 2008, the state Land Use Commission has been presented with a total of five IAL petitions. In the first two years after passage of Act 233, just two petitions were brought seeking designation of IAL status for lands on Kaua`i and Maui. Both were brought by Alexander & Baldwin.<\/p>\n
In the last six months, however, the pace has picked up. In November, the LUC received the third such petition, for designation as IAL of some 5,000 acres owned by Moloka`i Properties, Ltd. By the end of December, the fourth petition was filed, this time by Castle & Cooke, proposing to designate as IAL four discrete properties on O`ahu, having a combined area of 902 acres. In February, Maha`ulepu Farm, LLC, filed a petition seeking IAL status for 1,553 acres at Koloa, Kaua`i.<\/p>\n
Why the rush?<\/p>\n
Under the law, private landowners have three years after Act 233 took effect \u2013 that is, until July 1 of this year \u2013 in which to petition for IAL status before counties are allowed to begin their own designation process. After that, landowners are free to petition for IAL status for their lands, but the county process kicks in as well. Once that happens, the lands identified and proposed for IAL designation by the counties may not be the same ones that the landowner would want to see so designated. Counties are allowed to recommend designation of up to 50 percent of a given landowner\u2019s holdings (not counting any lands in the Conservation District). Thus, some landowners, not trusting the county to act in their best interests, might wish to decide for themselves which of their lands to place in the IAL category.<\/p>\n
Still, given the counties\u2019 general lack of progress in carrying out their statutory mandates, there would seem to be no reason for private landowners to rush in with petitions for IAL designation to the LUC. A poll of county planning departments shows only Kaua`i County will come close to having prepared IAL maps \u2013 and even there, the county is running behind schedule.<\/p>\n
Castle & Cooke<\/i><\/b><\/p>\n
In the first two IAL petitions before the LUC, approval was relatively straightforward. The tracts were large (3,773 acres along Kaua`i\u2019s South Shore, 27,104 acres in West and Central Maui), contiguous, and there was little dispute about their agricultural productivity.<\/p>\n
In the Castle & Cooke petition, however, some LUC members, as well as the state Office of Planning, the Department of Agriculture, and the City and County of Honolulu Department of Planning and Permitting, expressed reservations about the suitability of two of the four areas proposed as important agricultural lands.<\/p>\n
The four parcels that were the subject of the petition totaled 902 acres \u2013 a figure that approximately equals the acreage proposed for redistricting into the Urban land use classification in Castle & Cooke\u2019s Koa Ridge petition. (Of the 900 acres proposed in that docket, 576 were approved.) As the LUC was considering that petition last fall, commissioners raised concerns over the loss of productive agricultural land. To allay those concerns, Castle & Cooke volunteered to prepare and deliver to the LUC a petition to designate as IAL a roughly equivalent area by the end of the year. The petition considered by the LUC at its March 23 meeting was in satisfaction of that commitment.<\/p>\n
But it differed in several important ways from what the commission had seen in the two earlier IAL petitions. Rather than the proposed lands making up one large tract, the Castle & Cooke lands were broken up, with no parcel larger than 242 acres. They spanned the island, from Mililani in the south to Waialua, on O`ahu\u2019s North Shore. In terms of their agricultural productivity, the parcels also reflected a wide diversity. Two are currently under intensive cultivation of diversified food crops (the Waialua and Mililani properties), whereas the remaining two parcels (205 acres near Whitmore Village and 223 acres formerly a part of the Dole Plantation) have little ongoing agricultural activity. The Dole site, in fact, is largely a gulch that has been dammed to create a reservoir, known variously as the Tanada, Tanaka, or Upper Helemano reservoir, with a capacity of roughly 158 million gallons. The Whitmore parcel used to be in pineapple cultivation but has no water supply at present and is fallow.<\/p>\n
Ben Matsubara, attorney for Castle & Cooke, defended the inclusion of the Dole and Whitmore parcels in the IAL package. The Whitmore land had been in active pineapple cultivation for 100 years, until 2001, he said, and while there is no irrigation line serving the tract, it does receive an average of 60 inches of rain a year. He also noted that nothing in the statute requires land to be in active cultivation as a condition of IAL status.<\/p>\n
As to the Dole parcel, it was not true that it was entirely unproductive, Matsubara said, noting that some 31 acres in land around the reservoir are under cultivation at present. In addition, the reservoir serves 2,500 acres of ag lands in the area, he said, pointing out that one of the objectives of the IAL law is to promote maintenance of irrigation systems. IAL designation, he said, would make it possible for Castle & Cooke to receive tax credits for maintenance of the reservoir.<\/p>\n
The City and County of Honolulu, represented by Dawn Takeuchi-Apuna, corporation counsel for the Department of Planning and Permitting, raised the point that the lands being proposed for IAL status might not be the highest quality ag lands held by Castle & Cooke. And, with the county facing a statutory limit on the IAL lands it proposes for designation of no more than 50 percent of land held by a given owner, the county was asking for Castle & Cooke to provide an inventory of all its ag lands to allow for prioritization.<\/p>\n
Russell Kokubun, director of the Department of
\n Agriculture, also expressed concern over inclusion of the Whitmore and Dole lands. It is fragmented by gulches, he noted, with no current production and questionable access to water. \u201cWe want to have a high standard for IAL,\u201d he said, suggesting strongly that the Whitmore and Dole parcels fell short.<\/p>\n
The new director of the Office of Planning, Jesse Souki, echoed Kokubun\u2019s concerns over the quality of the Whitmore and Dole land. In the first IAL docket \u2013 that involving A&B lands on Kauai \u2013 \u201cone of the findings was that of the more than 3,000 acres [proposed for designation], 80 percent was in active ag and 12 percent was reservoirs, streams, and gulches,\u201d Souki said. \u201cHere we have the reverse,\u201d he noted, referring to the Dole parcel. As for the lack of water on the Whitmore parcel, Souki said, under the statute, if an area deemed an IAL is without water for a length of time, the IAL designation can be removed from it. With no water for Whitmore, \u201cyou\u2019re starting out on the wrong foot already,\u201d he said.<\/p>\n
Matsubara responded by asking, rhetorically, \u201cWhat is there to lose if we are given IAL status?… We\u2019re not trying to develop a huge project in the middle of agricultural land. We\u2019re trying to make it ag land.\u201d He noted that Castle & Cooke was \u201cfulfilling a promise we made to you\u201d in the Koa Ridge case. And, he added, \u201cwe promise to go a step further in committing this land to IAL. Come what may, we\u2019ll utilize it as best we can to fulfill the objectives of the IAL law.\u201d<\/p>\n
Designation of the Dole parcel, with the reservoir, was especially important, Matsubara said, since Castle & Cooke could then seek tax credits for maintaining the reservoir. \u201cKaua`i had that horrible catastrophe where maintenance was overlooked,\u201d he said, referring apparently to the breach at Kaloko reservoir in 2006.\u00a0<\/p>\n
At-large commissioner Charles Jencks moved to approve the petition, with a second by Thomas Contrades of Kaua`i. But commissioner Ronald Heller objected to a vote on all four parcels. \u201cI think we kinda got two different questions,\u201d he said. \u201cThe easy part is designation for Waialua and Mililani South. The harder one is for Whitmore and Dole Plantation. Maybe we ought to deal with them separately.\u201d The motion of Jencks was then amended, calling for designation of just the two non-controversial parcels. It easily passed on a unanimous vote of the seven members present. (Six votes are required for designation, a two-thirds majority of the commission\u2019s nine members.)<\/p>\n
Jencks and Contrades then moved for designation of the remaining two parcels. \u201cI have more difficulty with this part of the petition because I\u2019m not sure what distinguishes these parcels as important ag lands,\u201d Heller said.<\/p>\n
When the vote came, the motion failed, on a vote of five to two, with Jencks, Duane Kanuha, Lisa Judge, Contrades, and chairman Vladimir Devens voting in favor. Opposed were Heller and Kyle Chock.<\/p>\n
Commissioner Judge then asked whether the commission could take a vote on the two parcels \u2013 Whitmore and Dole \u2013 separately. That threw the commission into uncharted territory.\u00a0<\/p>\n
After a brief consultation with the deputy attorney general advising the LUC, Devens said, \u201cbased on my reading of the law, we may not have the authority to do a revote right now\u2026 I hate to keep commissioners from looking at this another way, but it seems I cannot do that right now.\u201d<\/p>\n
Matsubara pointed out that the statutory deadline for consideration of the petition was less than a week away, not allowing for another scheduled meeting of the commission. However, he suggested, the commission could revisit the issue the next day \u2013 March 24 \u2013 if he were allowed to submit a motion for reconsideration before the day was out. (The LUC agenda typically provides for a two-day meeting.)<\/p>\n
\u201cOr,\u201d he continued, \u201cis the commission willing to waive its rules requiring a written motion [for reconsideration], and allow me to make an oral motion now? If the commission waives that rule, I could make the oral motion now\u201d for reconsideration of the Dole and Whitmore parcels.<\/p>\n
After a short executive session, the LUC reconvened, asking Matsubara for the oral motion. After accepting that, the commission voted on whether to approve designation of the Dole land, with the reservoir, as IAL. On a five-two vote, the motion failed. The Whitmore land, on the other hand, squeaked through to IAL status, with six affirmative votes. Heller was alone in his opposition.<\/p>\n
The state Commission on Water Resource Management did not have a seat at the table during the LUC\u2019s deliberations on the Castle & Cooke IAL petition. However, it did submit comments, noting that Castle & Cooke had not submitted monthly water usage reports for the Waialua pump since 1997 and that the commission was reviewing the Waiahole Ditch allocation of 2.13 million gallons a day for the Mililani South parcel, in light of four years of non-use. According to a staffer at the Water Commission, a recommendation to revoke the Waiahole allocation will probably be taken up at CWRM\u2019s May meeting.<\/p>\n
* * *<\/i><\/b><\/p>\n
Maha`ulepu Petition<\/b><\/p>\n
On February 23, attorney Ben Matsubara submitted to the LUC a petition seeking IAL designation of 1,533 acres of land at Maha`ulepu, Kaua`i. The area, once part of the Koloa sugar plantation, nestles into a valley on the southeastern part of the island. Since 2007, about 200 acres have been leased to W.T. Haraguchi for taro cultivation; according to the petition, Haraguchi will expand that to more than 400 acres, \u201cwhich will nearly double the entire statewide production of this culturally significant crop.\u201d Small ranches and a stable occupy most of the rest of the more mauka portions.<\/p>\n
In the lower areas, seed corn is the predominant crop, with some 564 acres under lease to Pioneer. \u201cThe lease term extends to 2019 and the tenants have plans to expand the leased area up to 805 acres for future bio-energy corps and corn expansion,\u201d the petition states.<\/p>\n
About 45 acres is under lease to Aque Engineers, Inc., which uses sewage sludge to grow forage for cattle.<\/p>\n
The area is part of the Koloa-Po`ipu sector that was the subject of a University of Hawai`i pilot study, done with funds provided by the state when Act 183 was passed in 2005. Results of that work, plus an ongoing, diligent effort by Kaua`i County to identify all IALs on the island, suggest the Maha`ulepu petition will sail through to approval by the Land Use Commission.\u00a0<\/p>\n
Yet as non-controversial as the Maha`ulepu petition may be, it raises an issue about the way in which the law may be used to advantage by landowners with designated IAL. Each year, under Act 233, the state Department of Taxation can issue up to $7.5 million in tax credits against the cost of improvements made to enhance important agricultural lands. Landowners are allowed up to three years of tax credits. The maximum that may be claimed in the first year is 25 percent of actual costs incurred after July 1, 2008 or $156,250, whichever is lower. In the second year, a landowner may claim the lesser of 15 percent of costs or $37,500. The third year, the maximum is 10 percent of the costs or $12,500, whichever is lower. The total over three years could reach as high as $206,250. The credits do not have to be claimed in consecutive years. And, if the credits are more than what a landowner owes in taxes, the balance is paid outright to the taxpayer as a refund.<\/p>\n
In January, the land that is the subject of the IAL petition was transferred to a newly created business entity, Maha`ulepu Farm, LLC, registered in Delaware. The previous owner was Visionary, LLC, registered in Virginia, an entity whose sole member is Ka Po`e Hana. All three companies are tied to Stephen Case, who purchased Grove Farm in 2000 and additional lands near Lihu`e a year later. Altogether, the Case holdings, collectively still known as Grove Farm, include some 40,000 acres on Kaua`i.<\/p>\n
Does Grove Farm get one bite at the tax-cred
\nit apple, or can it receive as many nibbles as the different entities it establishes to hold various pieces of the 40,000 acres?<\/p>\n
Act 233 states that the cost on which the tax credit is to be based \u201cshall be determined at the entity level,\u201d and goes on to say for partnerships, estates, and the like, the \u201cdistribution and share of the credit shall be determined\u201d under a section of the Hawai`i tax code, Section 235-110.7(a). But that section only repeats the same language: \u201cThe cost upon which the tax credit is computed shall be determined at the entity level,\u201d adding that \u201cdistribution and share of credit shall be determined by rule.\u201d The rule (18-235-110.7-11(e)) adds little, and neither the statute nor the rule speak to the issue of tax credits for subsidiaries of a larger entity.<\/p>\n
— Patricia Tummons<\/i><\/p>\n
Volume 21, Number 11 May 2011<\/i><\/p>\n","protected":false},"excerpt":{"rendered":"
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