PILOT for Actual Property Tax

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In late 2021, the Metropolis & County of Honolulu’s Actual Property Evaluation Division inspectors took a take a look at a number of parcels of land on which photo voltaic farms and different renewable power initiatives had been constructed.  The inspectors famous that the land had been granted a super-duper low price for agricultural use.  We’re undecided of the main points, however we do know that beneath part 8-7.3 of the Revised Ordinances of Honolulu, land that has been devoted to agricultural use for 10 years is assessed for property tax functions not at honest market worth, however at one p.c of honest market worth.

The inspectors didn’t assume that having a bunch of photo voltaic panels absorbing the solar, as a substitute of vegetables and fruit, was an agricultural use.  So, they reclassified the property as industrial.  The proprietor within the earlier yr paid $30,154 in property tax and bought a invoice for $835,710, leading to an especially sad proprietor.

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We within the Basis lined that story in “Tax Isn’t a Peanut Butter Cup.”

Now, our savvy legislators on the State Capitol assume they’ve discovered a approach round this downside.

It’s known as a “Fee in Lieu of Tax,” or PILOT, program.  Beneath such a program, an power operator will pay a certain quantity to the county that’s primarily based on some agreed metric, just like the nameplate capability of the photo voltaic farm that sits on the property.  The county accepts the cost as a substitute of the actual property tax in any other case due, and everybody’s completely satisfied – at the very least in idea.

So, our state legislators are pushing payments akin to Home Invoice 348 that may “authorize” the counties to undertake PILOT packages.  However the packages want to fulfill sure situations, like they should exempt renewable power initiatives in full in trade for the PILOT funds.

Sadly, there are a number of wrinkles.

First, our state structure provides unique energy over the actual property tax to the counties.  The state has nothing to do with actual property tax.  Zero.  Subsequently, the State doesn’t must authorize counties to undertake PILOT packages with regard to actual property tax.  They’ve the ability to undertake the packages by themselves.  Moreover, for a similar causes, the State can’t pressure the counties to undertake PILOT packages, and that the State has no enterprise telling the counties what they’ll and may’t put in a PILOT program. 

Second, the nightmare situation that seems to have motivated this invoice is 100% unaffected by the invoice.  Whether or not or not the Metropolis & County of Honolulu adopts a PILOT program doesn’t, and may’t, have an effect on their taxing authorities’ place {that a} papaya farm is an agricultural use however a photo voltaic farm isn’t.  When property is “devoted” to agricultural use, the proprietor has made a promise that the property might be used for agriculture and received’t be used for different issues.  If the proprietor makes the promise with a view to get property tax that’s 1% of what others would pay, after which breaks the promise, then in fact there are going to be dramatic penalties. 

Actually, the taxpayer’s plight right here can and did encourage Metropolis officers to consider some reduction, and the Metropolis enacted Ordinance 21-32 to create a partial exemption for renewable power initiatives.

In any occasion, our state legislators actually shouldn’t be mucking round on this space.  They should notice that they aren’t, in reality, omnipotent.  Their time is best spent elsewhere.

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