For at least a decade, the Maui Land & PineappleCompany paid just $162 a year in property taxes on this weed-choked 40-acre parcel the county thought was growing pineapples. ML&P says the land was "fallow", while the county insists it was a "slip-
August 24, 2006
Until June 2005 the Maui Land & Pineapple Company owned a 40-acre triangular parcel of land in Pukalani near the Superette that exemplifies the imprecise, problematic way in which the County of Maui conducts property tax assessments. The land, popularly known as the "Pukalani Triangle," is zoned for agriculture. Since the county considered it part of ML&P's pineapple fields, it was willing to assess its value at just $2.3 million.
Yet the land hadn't seen any pineapple production since at least the early 1990s, according to a company spokesperson. Because construction of the Pukalani Bypass separated the parcel from the rest of the company's pineapple fields, making it difficult to move farm equipment over to it, Maui Land decided to stop farming it. Since then, a jungle of weeds and other plants took over the field, making it obvious to anyone driving by that the land wasn't part of any pineapple production.
Despite that, the company—which made $14.6 million in profits last year on $186.7 million in sales—paid just $162 a year in property taxes on the parcel. Assuming ML&P owned the parcel for at least a decade after it stopped farming pineapples there, the company's property taxes on the parcel came to about $1,620 from the time it stopped pineapple farming to the date of sale.
That's a substantial savings over what Maui Land would have paid had the county Department of Finance assessed the parcel at its "highest and best use," which in this case would probably be something closer to commercial or residential development. Had the land been zoned that way, Maui Land would have had to pay $10,813 a year in property taxes on the parcel. Over a decade, that comes to more than $100,000—money that could have gone to county human services, the fire department or who knows what.
The reason Maui Land paid such a low tax rate is simple: county officials say they had no idea the company had stopped growing pineapples there. County property tax officials thought the land was still a big pineapple patch, so they didn't inspect it.
"I'm always curious as to how there are slip-throughs," County Director of Finance Kalbert Young told me. "It's a prominent location. Our last records show it was in ag production. I spoke to our appraiser last week on this. We don't see any active ag [there]. We don't know how long it's not been in ag."
County law requires property owners to notify the Department of Finance if they stop doing agriculture on ag parcels, but Maui Land & Pine apparently never said anything to the county when it stopped growing pineapples on the parcel. In fact, the only reason we know about this parcel and its peculiar tax issue is because a private citizen researched the property and then wrote a letter to the county about it.
"They're supposed to tell the county when they take property out of ag," said Kuau resident Robert Karpovich, who wrote a letter to County Councilwoman Michele Anderson back on March 28, 2006 about the Pukalani Triangle and other problems he had with county tax policy. "I have a problem with the ag use system, but even with the system it should be administered properly."
Nearly a month later, in an April 24, 2006 letter to the County Council Budget Committee, Finance Director Young tried to explain what had happened after he read Karpovich's letter.
"Upon field check on April 21, 2006 by the appraisal supervisor, it was confirmed that Mr. Karpovich's claim of non-use for this parcel is totally correct," Young wrote. "The RPTD [Real Property Tax Division] was not notified of any intent to discontinue the agriculture uses, and therefore was not able to reassess the parcel for highest and best use. This situation underscores the potential for properties to circumvent requirements in the Code (inadvertently or intentionally)."
For its part, Maui Land & Pineapple denies that it did anything wrong. In fact, it says it was proper for the company to pay the ag tax rate because they always used the Pukalani Triangle for agriculture. According to a Maui Land spokesperson, the company always considered the land part of its agricultural holdings and was just keeping the parcel "fallow." In addition, the company also leased "a few acres" of the parcel to a private stable.
"We do allow our fields to go fallow for some time," said Teri Freitas Gorman, Maui Land & Pineapple's Director of Corporate Communications "It's still being used for ag purposes."
Young said his office is currently reevaluating the property. But when I asked him why Maui Land & Pine never said they'd stopped growing pineapples on their Pukalani Triangle, Young said he didn't know.
There's no way to tell how many "Pukalani Triangles" exist elsewhere in Maui County. And that's a big problem because the County of Maui's whole system of collecting taxes rests on proper property assessments.
Since the county taxes landowners on what they own, officials need to know what it is exactly that the owners own. Otherwise, the county can't be sure it's getting the right amount of tax revenue for a given piece of property—a rate too high is unfair, while a rate that's too low risks starving the government of needed services. The whole system also needs to be equitable, or other nearby property owners will feel cheated.
"While no properties are exactly alike, tax assessment values of similar properties should be done on an equitable basis," Young wrote to the County Council Budget Committee back on April 24. "The Maui County Code currently mandates appraisals through techniques that allow for mass appraisal, and this allows for efficient distribution of resources and operations within the RPTD."
Put simply, "mass appraisals" are a poor substitute for actual individual inspections and assessments. Young admitted as much, but added that it's not realistic for any jurisdiction to physically visit every piece of property every year.
Nonetheless, county law is very clear on property tax assessments: the Department of Finance needs to do them every year on every parcel of land. On paper, this looks great. In practice, it's a nightmare.
"We have nine appraisers and 66,000 parcels of land," said Young. "As a result we're only able to physically inspect property once every five or six years." Young added that his office has wanted to hire another compliance officer, one whose job would be to inspect questionable property tax situations exactly like the Pukalani Triangle, but no recruiting has been done since the job itself is still being reviewed by the county Department of Personnel Services.
Karpovich, who says he's watched his own property taxes climb while those of his neighbors—who live in identical houses—stays constant, finds these explanations unacceptable.
"The county needs to send guys out with computers and spreadsheets and do assessments," said Karpovich. "They say they can't do it here because there are too many properties. If the county wants to pay me a 10 percent commission, I could collect them millions of dollars."
In fact, Maui Land & Pineapple's Pukalani Triangle wasn't the only example of questionable tax assessment that Karpovich included in his letter to Anderson. Most notably, Karpovich pointed to the popular Kuau restaurant Mama's Fish House—with an apparent assessed value of just $133,500—as something the county might want to investigate.
"The assessors apparently do not care to look at this property in spite of its significant expansion and upgrading," Karpovich wrote. "[E]ven though I have questioned them for several years on the fairness of this extremely low assessment, when comparing it to my house assessment."
In response to Karpovich's letter, Young sent an apppraisal supervisor to Mama's Fish House on April 21—the same day he had the Pukalani Triangle checked out.
"[I]t was confirmed that there have been changes made that are not reflected on the real property tax records," Karpovich told the Council Budget Committee in his April 24 letter. "According to the [appraisal] supervisor, the Division has no records of building permits issued for any construction work done on this parcel that would have initiated a site inspection by an appraiser."
Young told me that copies of all new building permits get sent to the Real Property Tax Division. At that point an assessor goes out and reappraises the property. In a case where the owner doesn't file for a new building permit, there's not much his office can do, though Young said he has asked for a new assessment of Mama's based on Karpovich's letter.
"As far as we know, we've filed permits for all our improvements," said Karen Christenson Marshall, head of marketing for Mama's Fish House. Marshall added that, to her knowledge, no one from the county had contacted them about their alleged failure to file permits for improvements or any new property appraisal.
"This is the first we've heard of this," she said, referring to my faxing copies of Karpovich's and Young's letters to her office on Aug. 17—four months after the letters were written. "None of us are aware of any investigation."
Karpovich also included instances of adjoining lots that seemed to have wildly different land values. The first dealt with a lot in Kuau holding a $96 per square foot land value that's next to a lot valued at $208 per square foot.
According to Young's April 24 letter to the Budget Committee, the difference was due to shoreline erosion at the more expensive lot, which caused assessors to value it as "oceanfront" property. But Young said his office would carry out an additional review to see if further erosion has given it oceanfront status as well.
In Huelo, Karpovich wrote that he found six adjoining two-acre lots with land values ranging from $109,500 to $1 million. Young told the Budget Committee that since those parcels carried ag as well as conservation designations, "some parcels may have incorrect use rates applied to their parcels or may have an error in the application of the agricultural use rate, highest and best use rate, and conservation rate." Once again, he told the committee that his office would conduct "a more detailed review."
"It really is a lottery as to what your tax assessment is going to be," Karpovich told me. "They can't just decide to tax some people and not others." MTW
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