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 tasks had been constructed.  The inspectors famous that the land had been granted a super-duper low charge for agricultural use.  We’re undecided of the main points, however we do know that below 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 truthful market worth, however at one p.c of truthful market worth.

The inspectors didn’t assume that having a bunch of photo voltaic panels absorbing the solar, as a substitute of fruit and veggies, was an agricultural use.  So, they reclassified the property as industrial.  The proprietor within the earlier 12 months paid $30,154 in property tax and bought a invoice for $835,710, leading to a particularly sad proprietor.


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 found out a manner round this drawback.

It’s referred to as a “Fee in Lieu of Tax,” or PILOT, program.  Below such a program, an power operator pays a specific amount to the county that’s based mostly 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 glad – not less than in principle.

So, our state legislators are pushing payments akin to Home Invoice 348 that will “authorize” the counties to undertake PILOT applications.  However the applications want to satisfy sure circumstances, like they should exempt renewable power tasks in full in alternate for the PILOT funds.

Sadly, there are a number of wrinkles.

First, our state structure offers unique energy over the actual property tax to the counties.  The state has nothing to do with actual property tax.  Zero.  Due to this fact, the State doesn’t have to authorize counties to undertake PILOT applications with regard to actual property tax.  They’ve the facility to undertake the applications by themselves.  Moreover, for a similar causes, the State can’t power the counties to undertake PILOT applications, and that the State has no enterprise telling the counties what they will and might’t put in a PILOT program. 

Second, the nightmare state of affairs 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 might’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 shall be used for agriculture and gained’t be used for different issues.  If the proprietor makes the promise so as to get property tax that’s 1% of what others would pay, after which breaks the promise, then after all there are going to be dramatic penalties. 

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

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