Agricultural Dedication: Save on Taxes & Help Local Farmers

Jim Karlovsky, RB | (808) 282-7981 Real Estate Leave a Comment

agricultural dedicationAs explained in the Kauai Real Estate Zoning article, approximately 47% of all real estate in Hawaii is zoned Agricultural, where the primary use of the lands is intended to be some form of ranching, forestry and/or farming. However, Kauai General Plan Section 5.2.1(e) identifies a secondary intent of Agricultural lands: To provide an opportunity for Kauai citizens to reside in an agricultural community. Interestingly, despite the use falling under the purview of the secondary intent, the County estimates that at least 90% of the existing dwellings found on Agricultural lands on Kauai are primarily used as single-family residences, and that they do not support income-producing agriculture.

This trend of converting the historically agricultural, rural landscape of Kauai into a quasi-suburban landscape filled with “agricultural subdivisions” greatly increases the financial value of the real estate, but the modern-day prices for many of these Agricultural-zoned lots/CPR’s often times makes commercial enterprise on them infeasible.

In recognition of market momentum away from utilizing the Agricultural-zoned lands of Kauai for commercial agricultural activities, the County has derived an incentive program called Agricultural Dedication, which is aimed specifically at fostering agricultural uses on these lands by means of providing financial incentives for owners willing to commit some portion of their property for agricultural practices.

Agricultural Dedication vs. Agricultural Zoning

It is important to point out that the terms Agricultural Dedication and Agricultural Zoning are not synonymous.

The term Agricultural Zoning is a reference to the land-use planning practice used as a tool by the local government to control how land is used and to set development standards for building on the land.   As discussed above, Agricultural zoning on Kauai primarily supports uses related to ranching, forestry and/or farming, and secondarily supports use of the property for a single-family residence. It is worth noting that the County of Kauai does require any developer of a single-family residence on Agricultural land to demonstrate the intention to use some amount of the property to derive income from farming activities before they will issue final building permits. This requirement, however, is unrelated to the rights and obligations set forth under an Agricultural Dedication agreement.

An Agricultural Dedication is an express contract with the County of Kauai, whereby the property owner “dedicates” a portion of their property to be used for commercial agricultural activities for a specific period of time, such as 10 or 20 years, in exchange for a significant reduction in their property taxes. The contract agreement is recorded with the Bureau of Conveyances and remains binding on the current owner and all subsequent owners of the property.

Agricultural Dedication Details

Applications for Agricultural Dedication are accepted on an annual basis.  The submitted farm plan must demonstrate an effort to produce a profit from the agricultural practices on the land, however no specific amount of financial profit is required.  Currently, 10-year and 20-year plans are available, and the Agricultural Dedication can apply to either raw land or developed land.  Applications are handled by the Kauai Real Property Assessment Division, located at 4444 Rice St., Suite 454, Lihue, HI 96766.  The learn more specifics about the program, you can download a copy of the official program rules here:  Agricultural Dedication Program Rules.

Lease the Land – Help Local Farmers

If you think you may be interested in receiving the tax benefits offered by the Agricultural Dedication program, but have concerns about managing the requisite agricultural practices yourself, it is important to know that the program allows property owners to lease their land to local farmers, whose business operations on the land will satisfy the terms of the agreement.  In doing this, the property owner can benefit from receiving both the tax savings and the lease income, plus the local farmer may benefit by being afforded the opportunity to engage in agricultural activities on land that they otherwise may not have had the resources to purchase.

Contact Jim Karlovsky for assistance with all of your Kauai real estate needs.
About the Author

Jim Karlovsky, RB | (808) 282-7981

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Having worked as a licensed Real Estate Broker in 3 states (HI, CA & IL), with $6.7 Billion in real estate sold, leased, advised upon and/or formally valued for clients, and with the experience of more than 150 completed transactions involving luxury residential, vacant land, retail, office and industrial property types, I bring a wealth of knowledge and experience to the real estate advisory and sales services I provide to my clients here on Kauai. I hold myself to the highest ethical standards and always place my clients’ interests above my own. With an unwavering and unsurpassed work ethic, I work to advance the objectives of my clients with integrity and in a manner that fosters a sense of trust and respect.