April 15, 2026, 8:30 a.m.
Historic County Building
To: Kaua’i County Council Finance and Economic Development Committee
Arryl Kaneshiro, Chair
KipuKai Kuali’i, Vice Chair
From: Grassroot Institute of Hawaii
Jonathan Helton, Policy Analyst
RE: Bill 2987 — RELATING TO REAL PROPERTY TAX
Aloha Chair Kaneshiro, Vice Chair Kuali’i and other Committee members,
The Grassroot Institute of Hawaii supports Bill 2987, which would amend the definitions of “agricultural use” and “commercial structure” to broaden eligibility for the county’s real property tax agricultural-use dedication and allow separate taxation of commercial structures in certain situations.
Specifically, the bill would allow farmers and ranchers to sell, refine, process and distribute agricultural products on lands dedicated for agricultural use, so long as at least 50% were grown or raised on a dedicated parcel owned or leased by the same farmer or rancher.
The bill would also require that any commercial or industrial structure used for such refining, processing or distributing agricultural products must be assessed and classified based on its use as a commercial structure.
This legislation would help island farmers and ranchers expand their businesses. Right now, a farmer or rancher cannot access the substantial tax benefit associated with the agricultural-use dedication if they use any portion of the parcel to sell, refine or distribute any produce grown or raised off site.
Likewise, a parcel dedicated to agricultural use that has any commercial or industrial structure on it must pay the commercial or industrial property tax rate for the entire parcel. At current rates, parcels in these property tax classes pay $8.10 per $1,000 in assessed value, while properties in the agricultural class pay $6.75 per $1,000.
Currently, about 125 of the county’s 1,500 or so parcels in the county’s agriculture or open zones — where agricultural uses are common — are classified as industrial or commercial for tax purposes.[1]
The owners of those parcels are likely engaged in farming or ranching to some degree but paying much more in property taxes than they would otherwise if the portion of the land without any commercial or industrial structures were taxed at the agricultural rate.
The opportunities from such changes are significant. If this bill were to pass, Kauai farmers and ranchers would be able to more easily make and sell value-added products on their ag lands. The state already imports 85-90% of its food supply,[2] so any ways in which the county can reduce barriers to producing more local food are welcome.
However, Grassroot recommends amending section 3 of the bill to simply delete the word “dedicated” that is bolded below.
“‘Agricultural use’ means the active use of the land for the production of agricultural products with the primary purpose of obtaining a monetary profit from income received from the sales of agricultural products. Agricultural use [excludes] includes selling, refining, processing, or distributing agricultural products [when] on the dedicated parcel provided that greater than fifty percent (50%) of the vegetation [from which such products are derived was not grown on the parcel and when the] or animals from which such products are derived [were not] were grown or raised on the [parcel.] dedicated parcel or another dedicated parcel of the same owner or tenant. Agricultural use also includes meat packing or processing operations [occurring on the same parcel the animals were raised on,], provided that the packing or processing structure will be assessed and taxed based on its fair market value.”
This minor change would allow a farmer or rancher who owns both dedicated and non-dedicated land to use a commercial structure on the dedicated land to sell, refine, process or distribute products grown on their non-dedicated land.
Thank you again for the opportunity to testify.
Jonathan Helton
Policy Analyst
Grassroot Institute of Hawaii
1050 Bishop St. #508 | Honolulu, HI 96813 | 808-864-1776 | info@grassrootinstitute.org
[1] Grassroot analysis of data from the Hawaii Information Service’s Multiple Listing Service. Subscription required for access.
[2] Hannah Leto, Jordan Mitkowski and Katie Hogan et al., “Agricultural Labor on Hawaiʻi Island,” Swette Center for Sustainable Food Systems at Arizona State University, May 2025, p. 1.
