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Jeopardizing the Property Tax Base

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By Lowell L. Kalapa

For those of us who have seen our state develop over the last forty plus years of statehood, we have the feeling sometimes that there is just too much concrete and the beauty of our island paradise is being overrun by concrete.
Certainly, no one wants to see our island paved over with concrete and asphalt. On the other hand, that truly is not a reality as long as our state is dependent on the visitor industry. Visitors come to Hawaii for its natural beauty, its verdant mountains and its pristine white sand beaches. For years, part of that scenery was maintained by the sugar and pineapple industry which “greened” our state’s finest agricultural lands. However, with the withdrawal of those industries from the island landscape, acres of what was waving fields of cane and uniform rows of pineapple plants have been left fallow.
While many would like to keep these acres in agriculture, not all of it is of prime agricultural quality. On the other hand, as the population of the state and each county grows, the demand for housing and commercial use of property brings pressure on officials to reclassify the use of various acres of land or property within the county. Those who see this up-zoning of property out of agricultural or preservation to urban use as a threat to the beauty have tried to block this change in use.
While there is much to be said for the preservation of the natural beauty of our islands, elected officials need to strive for a proper balance between the preservation of the agricultural and natural landscape and the need for urbanized acreage.
One of the reasons for the lack of affordable housing beginning in the 1970’s all the way through the 1990’s and even today is the lack of enough land to build additional housing units. In fact, it was the stranglehold of the state land use commission which bucked the tide as sugar and pineapple were closing their doors and plantations that refused to open up former marginal agricultural lands to other uses. As a result, there was very little land on which to build new housing units. With the limited number of housing units in inventory, it was only natural that the housing situation was a seller’s market.
Efforts to block future upzoning of lands for urban use will have a direct impact on the future inventory of affordable housing. As long as the supply of property that is available for development is constricted, housing costs will continue to spiral upwards. Efforts to block development of Central Oahu by Castle & Cooke is a case in point or for that matter the mayor’s proposal to freeze all agricultural land in that use.
Similarly, if the available inventory of commercial development is constricted by the amount of property that is available for development, the cost of locating a business in Hawaii will be high. Implicit in an attractive business climate is the reasonable cost of site or a place to do business. If there isn’t a reasonable supply of urbanized property, then what is available will increase in cost as demand increases faster than supply.
More importantly, if supply is limited and values grow because the inventory of both residential and commercial property is limited, then it is almost certain the property tax burden will be borne by what urban land is available. This is what happened in the early 1990’s when values were bid up by foreign investors as they purchased what limited supply of urbanized property was available.
Similarly, blocking development of what lands are already zoned as urban doesn’t make a lot of sense either. Each day that county officials battle over whether a building permit or other license is issued for what urban land is available is another day, month or year that property taxes are lost. Other taxpayers should be concerned as well as the burden of paying for county services through the property tax continues to weigh heavily on those properties that are developed. A case in point is the development of the “superblock” in Honolulu by the Wal Mart people. If opponents are successful in blocking that development for whatever reason, the City & County of Honolulu will be poorer by the amount of real property taxes that could have been realized by the development. Will the opponents be willing to make up the lost revenue by paying more in real property taxes on their homes and businesses?
Judicious development of property is critical to the economic health of our community as well as to the revenue picture of our counties. Without further development, the economy will stagnate and families will again be faced with the lack of affordable housing and county officials will be faced with the dilemma of rising taxes.

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