NARS, Precious Lands Poised For Windfall With Legacy Act’s Conveyance Tax Increase

posted in: August 2005 | 0

Kahauale‘a, Kipahoehoe, Laupahoehoe, Manuka, Mauna Kea Ice Age, Pu‘u Maka‘ala, Pu‘u O ‘Umi, Waiakea, ‘Ahihi-Kina‘u, Hanawi, Kanaio, West Maui, Oloku‘i, Pu‘u Ali‘i, Ka‘ala, Ka‘ena Point, Pahole, Hono O Na Pali and Ku‘ia….get ready for the royal treatment.

Finally, the state’s 19 most precious coastal, forest, and geologic treasures – the Natural Area Reserves – have a permanent, dedicated source of funding.

Since its establishment in the 1970s by then-Governor John Burns, the NAR System has lived off of scraps from scraps fed to the Department of Land and Natural Resources by the Legislature, despite the exist ence of a Natural Area Reserve System special fund that receives 25 percent of collected conveyance taxes and accumulates millions of dollars a year. For years, the state’s NARS funding has hovered around $10 an acre for the system’s 109,000 acres, far below what the Army, the National Park Service, the Fish and Wildlife Service, and The Nature Conservancy spend to manage native ecosystems on their properties.

Until Governor Linda Lingle signed the Legacy Lands Act – Act 156 – on June 23, the NARS special fund could be used only for the DLNR’s Youth Conservation Corps, and Forest Stewardship, Natural Area Partnership and watershed programs, which provide matching funds to private land owners doing conservation work on their land. The NARS was not a beneficiary of the fund bearing its name.

The act – which was embraced by most legislators and was widely supported by the farming, social service, business, and environmental communities – adds “management of the Natural Area Reserves System” to the list of activities the NARSspecial fund can support.

But it does much more than that. The act, which went into effect July 1, also:

  • Establishes a new special fund — the Land Conservation Fund — for the purpose of acquiring land for watershed and habitat protection, or the preservation of coastal areas, ocean access, cultural and historic sites, recreational and public hunting areas, parks, natural areas, agricultural production, and open spaces or scenic resources. Ten percent of the state’s conveyance tax will be deposited into this fund.
  • Increases the state conveyance tax on locally owned primary residences from $0.10 per $100 to $0.20 for properties selling for more than $600,000, and to $0.30 per $100 for properties selling for more than $1 million. For investment properties, the conveyance tax is higher: $0.15 per $100 for properties less than $600,000, $0.25 per $100 for those between $600,000 and $1 million, and $0.35 per $100 for properties selling for more than $1 million.
  • Increases the amount of conveyance taxes collected going into the rental housing trust fund from 25 percent to 30 percent. Since 1993, the conveyance tax had been a flat 10 cents per $100. Twenty-five percent of conveyance taxes collected went into the Natural Area Reserve System special fund, another 25 percent went into the rental housing fund, and the rest went to the state general fund.

A Long Road

During the last few legislative sessions, the conservation community had pushed for increased NARS funding through what was called the Kokua Bill, which proposed raising the conveyance tax on high-end properties and allowing a portion of that money to be used on NARS management. The tax increase would also increase funding for affordable housing. Last session, cruise ship legislation, the Kokua Bill, and a new bill aimed at establishing a land acquisition fund were the top three priorities of the Common Sense Conservation Coalition, a new lobbying group that includes the Sierra Club’s Hawai‘i Chapter; Conservation Council for Hawai‘i, the Trust for Public Land, and KAHEA, among others.

Joshua Stanbro of the Trust for Public Land, says House Representative Calvin Say had visited Ka‘u and Miloli‘i on the Big Island in the off-term and came back wanting to “do something about coastal land protection.” Say, along with about 40 co-signers, introduced the Legacy Lands bill (House Bill 1308), which proposed to set aside 25 percent of the conveyance tax for land acquisitions, as part of the House majority package.

For roughly a decade, Stanbro says, various efforts have been made to establish dedicated funding for the acquisition and management of lands with some kind of resource value to the state.

The Trust for Public Land and the Sierra Club lobbied last year to get a percentage of the Capitol Improvement Projects budget dedicated for such a purpose, but that idea was “axed right away,” Stanbro says. A couple of years ago, former Maui Rep. Sol Kaho‘ohalahala tried to get some portion of the conveyance tax to do the same. Others had tried to get money for it through the Hawai‘i Tourism Authority.

“The reality is the closest nexus is the conveyance tax. Most other states use it as a land conservation tool,” Stanbro says.

Say’s effort to protect the state’s valuable lands was championed in the Senate by Big Island senator and former Land Board member Russell Kokubun. Stanbro says Kokubun “smushed together” the Kokua and Legacy bills: the conveyance tax would be raised, the NARS special fund would allow for spending on NARS, and a land conservation fund would receive 10 percent (instead of the 25 percent originally proposed by Say) of conveyance taxes collected.

On the House side, Rep. Brian Schatz also lumped the two bills together.

Conservation Council for Hawai‘i’s executive director Marjorie Ziegler says before, during and after these bills were being merged, her organization “made sure people never lost sight of the NARS funding.”

Cha Smith, executive director of KAHEA: The Hawaiian Environmental Alliance, says merging the two bills meant that “a broader number of people could support it – farmers, the social services community, housing activist…and those who knew what the heck NARS were.”

‘The X Factor’

Although the act took effect July 1, most of the money to be reaped from this tax increase won’t be available until next July, after a spending cap has been set for the Land Conservation Fund and the spending cap raised on the NARS fund. The DLNR’s Bureau of Conveyances suspended the tax increase for any property transfers signed before July 1, so as not to “penalize property owners who had begun their transactions prior to the adoption of the new law and are awaiting finalization of their property trans fers,” DLNR director Peter Young said in a June 29 press release.

Young told Environment Hawai‘i, “We’re having mixed reactions” to the tax increase. The Bureau of Conveyances has received a number of calls from people saying it’s not fair, he said. “We respond by saying the law is the law. If the documents are not signed by July 1, they’re subject to the tax. Many people have paid the tax without incident,” Young says.

How much money is the tax increase expected to generate over the next year? That’s hard to tell, says Stanbro. Estimating how the two-tiered system – where investors pay a higher tax rate than residents – will play out, is difficult, “so that’s the X factor,” he says. But for the NARS fund, he estimates the amount will double. Last year it received $3.8 million and should receive between $8 million and $9 million in the coming year, both Young and Stanbro say. Young says the Land Conservation Fund will probably get between $3.5 million and $4 million. Stanbro estimates the affordable housing fund should get about $10 million, while the general fund should re ceive about $12 million in conveyance tax receipts, up from $8 million last year.

With the increase in available funds, Stanbro and state botanist Vickie Caraway say it’s vitally important that the spending cap of $3.3 million imposed by the Legislature on the Natural Area Reserve Fund be raised. In the case of the Land Conservation Fund, no spending cap can be imposed – and no properties acquired – until after the next, 2006, legislative session. Until a cap is in place, only $1.1 million of the fund can be used, pursuant to 2005 legislative action, to purchase development rights from working farmers and ranchers who don’t want to develop or subdivide their lands. Selling those rights effectively creates an agricul tural conservation easement that remains if the property is ever sold.

Recent articles and editorials in the press have called out land in Pupukea on O‘ahu’s North Shore as a good candidate for acqui sition using the Land Conservation Fund. The land is owned by the Japan-based Obayashi Corporation, which has not been able to develop it for years. Charlene Unoki, assistant administrator for the DLNR’s Land Division, says her division is still working on the application form that other state, county and non-profit agencies will need to fill out to apply for Land Conservation Fund money. (When the applicant is a county or non-profit agency, the act states that the Land Board will require matching funds of at least 25 percent of the total costs.) Her division will process the applications, and bring them to the Land Board for approval. Although the application form was still being drafted, Unoki did say that the de partment will require an “environmental baseline” study to make sure that the lands being purchased don’t contain under ground storage tanks or fuel tanks and have not been contaminated by oil or other hazardous materials.

Young says his department has not yet received proposals for land acquisitions un der the new fund, but he is aware of longstanding interest in certain properties, such as park land at Moanalua currently owned by Damon Estate, and land at Honu‘apo on the Hilo side of the Ka‘u coast, where the county has a park that could be expanded.

As for the NARS, Caraway says the new law should allow the program to hire additional people to aid the sorely understaffed NARS managers. Any new permanent DLNR hires would have to be approved by the Legislature, but the extra funds might allow for contract workers or emergency help.

“We would love to not have a cap,” Caraway says. Under the existing cap, $1 million will immediately be spent on natu ral area partnerships, $600,000 will go to ward forest stewardship programs, $200,000-$300,000 on the Youth Conser vation Corps, and $300,000 for administra tive overhead, Caraway says. “That just leaves under $1 million for watershed and NARS projects.”

— Teresa Dawson

Volume 16, Number 2 August 2005

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