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THE SENATE                           S.C.R. NO.            S.D. 1
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                    SENATE  CONCURRENT
                        RESOLUTION

  REQUESTING THE COUNTIES TO ENACT ORDINANCES TO IMPLEMENT A
    SYSTEM OF LAND VALUE TAXATION IN EACH COUNTY.


 1        WHEREAS, under a system of land value taxation, land
 2   assessments are generally taxed at a higher rate than that of
 3   building assessments; and
 4   
 5        WHEREAS, a system of land value taxation provides a number
 6   of benefits over conventional property taxation; and
 7   
 8        WHEREAS, for example, a land value taxation system may
 9   preserve open space while discouraging urban sprawl, such as
10   strip malls and large lot subdivisions; and
11   
12        WHEREAS, the traditional single rate tax makes it cheaper
13   to develop undeveloped sites in remote locations where there is
14   little or no infrastructure, producing a "leap frog" pattern.
15   Developers seek cheaper sites since people who own vacant or
16   underutilized sites in urban areas are holding out for a price
17   that may exceed what developers are willing to pay; and
18   
19        WHEREAS, however, the cycle repeats itself once the sites
20   have been developed.  The new residents eventually pressure the
21   municipality for sewers and other amenities, which drives up
22   land costs to the point where they choke off further
23   development, thus causing developers to seek new undeveloped
24   sites in other remote areas; and
25   
26        WHEREAS, this logic is reversed by a two-rate land value
27   tax, which encourages developers to select sites in developed
28   areas where the roads, sewers, and other infrastructure are
29   already in place; and
30   
31        WHEREAS, a lower tax rate on buildings makes that
32   development more profitable and encourages compact, energy
33   efficient urban design; as a result, the greater use of land
34   adjacent to existing infrastructure reduces the demand for
35   developing outlying areas; and
36   
37        WHEREAS, inefficient land use causes the premature

 
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 1   disappearance of open space.  A tax on land values causes land
 2   to be used more efficiently as landowners seek to gain as much
 3   income or use as possible from their improvements in order to
 4   at least cover the higher land tax; and
 5   
 6        WHEREAS, with development taking place in the more
 7   urbanized areas, legitimate agricultural and open space lands
 8   will be freed from the speculation that is artificially
 9   inflating their price.  If the land price there is low, so will
10   be the land value tax.  Therefore, these lands will be
11   preserved and used for agriculture or open space; and
12   
13        WHEREAS, in addition to preserving open space and the
14   environment and deterring urban sprawl by discouraging
15   speculative land holding, land value taxation also encourages a
16   more efficient land market.  The necessity to pay the tax
17   obliges landowners to develop vacant and under-used land
18   properly or to make way for others who will; and
19   
20        WHEREAS, a system of land value taxation will also help to
21   finance environmental programs and is particularly apt for
22   establishing parks and playgrounds.  Since the tax lowers land
23   price, governments will find it easier to buy land with land
24   value taxation revenue; and
25   
26        WHEREAS, land value taxation will also help to strengthen
27   the economy.  A tax on labor, buildings, and machinery
28   discourages people from constructive and beneficial activities
29   and penalizes enterprise and efficiency.  The reverse is the
30   case with a tax on land values, which is payable regardless of
31   whether or how well the land is actually used; and
32   
33        WHEREAS, it is better for the economy to tax land sites
34   into use rather than to tax workers and building owners out of
35   production.  In the long run, land value taxation will help to
36   stimulate new business and new employment, with reductions in
37   the need for costly government welfare; and
38   
39        WHEREAS, a system of land value taxation also reduces
40   bureaucracy and prevents tax avoidance or evasion.  Land value
41   taxes are straightforward and will not require complicated
42   forms and demands for information.  Re-evaluation would become

 
 
 
 
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 1   relatively simple.  Moreover, land cannot be hidden, removed to
 2   a tax haven, or concealed in an electronic data system; and
 3   
 4        WHEREAS, during the 1960s, the State of Hawaii, which was
 5   suffering from a high demand for available land and from a high
 6   concentration of land ownership, experimented with land value
 7   taxation by imposing a slightly higher tax on land values; and
 8   
 9        WHEREAS, published studies by recognized property tax
10   experts indicated that the use of land value taxation
11   stimulated housing construction and that investments in
12   improvements increased by a maximum of twenty-five per cent;
13   and
14   
15        WHEREAS, a 1990 report on real property tax valuations
16   further found that the counties of Kauai and Hawaii taxed land
17   assessments at a slightly higher rate than building
18   assessments; and
19   
20        WHEREAS, other states have also considered land value
21   taxation.  The Virginia Legislature recently considered a bill
22   to study whether this type of taxation would benefit
23   municipalities; and
24   
25        WHEREAS, the City of Baltimore adopted a resolution in
26   1992 urging the Maryland State Legislature to amend the
27   Annotated Code of Maryland to permit that city to modernize its
28   property tax system and differentiate the tax rate placed on
29   land from that placed on buildings and improvements; and
30   
31        WHEREAS, in 1996, Maryland's attorney general found that
32   municipalities could levy land value taxes, although apparently
33   none have done so; and
34   
35        WHEREAS, Pennsylvania has also allowed specified
36   municipalities and school districts to levy land value taxes,
37   including the municipalities of Pittsburgh and Scranton, which
38   have levied land value taxes since 1913; and
39   
40        WHEREAS, in 1979 and 1980, Pittsburgh restructured its
41   property tax system by raising the rate on land to more than
42   five times the rate on structures; and

 
 
 
 
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 1   
 2        WHEREAS, in the 1980s, Pittsburgh experienced a dramatic
 3   increase in building activity, far in excess of other cities in
 4   the region.  A recent National Tax Journal study suggests that,
 5   while a shortage of commercial space was a primary driving
 6   force behind the expansion, the reliance on increased land
 7   taxation played an important role by enabling Pittsburgh to
 8   avoid rate increases in other taxes that could have impeded
 9   development; and
10   
11        WHEREAS, land value taxation has also been used
12   successfully in Australia.  For example, in Brisbane, state law
13   since 1896 has forbidden any taxes on improvements, but the
14   unimproved value of the land is subject, above a small
15   exemption, to a nine per cent annual tax, regardless of whether
16   one builds a fifty story building on the land or uses it as a
17   parking lot; and
18   
19        WHEREAS, according to Colin Clarke, the Oxford economist
20   who lived in Australia for twenty years, the City of Brisbane,
21   with a metropolitan population of almost three-quarters of a
22   million people, is "the only great city in the world without a
23   slum"; and
24   
25        WHEREAS, in addition to Australia, local government
26   variants of land value taxation, also known as site value
27   rating, are accepted practice in Denmark and South Africa; and
28   
29        WHEREAS, Article VIII, Section 6 of the Hawaii
30   Constitution provides that "all functions, powers and duties
31   relating to the taxation of real property shall be exercised
32   exclusively by the counties"; and
33   
34        WHEREAS, there is a need for Hawaii's counties to enact
35   ordinances to establish a system of land value taxation in each
36   county, including pilot programs in selected areas; now,
37   therefore,
38   
39        BE IT RESOLVED by the Senate of the Twentieth Legislature
40   of the State of Hawaii, Regular Session of 1999, the House of
41   Representatives concurring, that the counties are requested to
42   enact ordinances to implement a system of land value taxation

 
 
 
 
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 1   in each county; and
 2   
 3        BE IT FURTHER RESOLVED that the ordinances enacted by the
 4   counties are requested to be in the form of pilot programs to
 5   determine the feasibility of implementing land value taxation
 6   on a permanent basis in each county; and
 7   
 8        BE IT FURTHER RESOLVED that the City and County of
 9   Honolulu is specifically requested to establish a land value
10   taxation pilot program to revitalize Wahiawa; and
11   
12        BE IT FURTHER RESOLVED that certified copies of this
13   Concurrent Resolution be transmitted to the Governor and the
14   Mayor and Chairperson of the Council of each county.