The state may soon start subsidizing farmers and owners of agricultural land as part of a historic effort to curb the loss of Hawai'i farmland.

The program could cost taxpayers more than $300 million over six years.

Through several bills advancing at the Legislature this year, Hawai'i's agriculture industry could win tax exemptions, tax credits and loan guarantees if the businesses agree to use prime farmland only for agriculture. The state may also pay owners of prime agricultural land to give up future rights to develop their property.

The various proposed tax incentives and loan guarantees could cost the state $300 million over an initial six years, according to Department of Agriculture estimates. Purchasing deed restrictions would add significantly to the expense.

Agriculture has a rich history in Hawai'i. In modern times it built great wealth and power for several companies that dominated commerce for nearly a century.

In recent decades, plantation closures spawned new growth in diversified crops, but much farmland went fallow and continues to be lost to the slow march of suburban development.

Preserving farmland would contribute to Islands' food and energy supply, economic diversity and open space, but it will cost taxpayers. If most incentives proposed are granted, the cost works out to about $250 over the first six years for every Hawai'i resident.

Sen. Russell Kokubun, chairman of the Water, Land, Agriculture and Hawaiian Affairs Committee, said he believes the public is willing to accept the costs, which he said should be viewed as investments.

"The (incentives) really establish the future of agriculture in Hawai'i," he said.

Kokubun, D-2nd (S. Hilo, Puna, Ka'u), also said preserving farmland will allow Hawai'i to better sustain itself with locally produced food and energy derived from crops.

"We're vulnerable here in the middle of the Pacific," he said. "Essentially we're a cargo culture."

PROPOSAL'S ROOTS

The farming incentive proposals originated with a bill signed into law two years ago that committed the state to implementing a 1978 Constitutional Convention mandate to identify prime agricultural lands so they can be protected from development.

Since the constitutional amendment 29 years ago, close to 50,000 acres of Hawai'i farmland have been lost, largely as sugar and pineapple production shrank and urban areas expanded.

Still, 1.9 million acres of agricultural land exist, with about 1.3 million acres used by about 5,500 farm operations that employ roughly 39,000 people and add $2.4 billion to the state's $50 billion economy.

Under the 2005 law, known as Act 183, landowners can apply to designate their land as "important agricultural lands" in return for benefits. The state Land Use Commission also has the power to designate private agricultural land as "important" after receiving county government recommendations.

Once land is designated important, it essentially is precluded from residential development, and becomes extremely hard to redesignate for nonagricultural use.

Identifying productive agricultural land from less productive land ultimately could aid in identifying which lands should be developed or classified for other uses, and help reduce land-use controversies such as the proliferation of residential subdivisions on agricultural land.

The protection and incentive package is a sort of alternative to a more costly and controversial use of the government's eminent domain power to condemn and preserve land for public benefit.

Hardly any incentives were considered last year, principally because the Agriculture Department was producing a report in collaboration with other state agencies, county planning directors, landowner groups and farm industry representatives to explore and recommend incentives.

The final report was produced in January, helping to make agriculture incentives more of a priority this year for lawmakers. House Speaker Calvin Say, in his opening address to the Legislature in January, said considering the farming incentives would mark an important milestone in preserving important agricultural lands.

SUPPORT FOR INCENTIVES

Big Island farmer Richard Ha, who owns Hamakua Springs Country Farms and grows bananas and hydroponic vegetables, said he bought 600 acres three years ago with the intent to keep the land in agriculture. Incentives could help him overcome catastrophic events such as disease, flood or drought.

"As a farmer you're always worried about surviving events that could make you go up against a wall and cash out," he said. "Anything that will help us weather harmful events is helpful."

O'ahu papaya farmer Ken Kamiya believes incentives that get landlords to lock up property for long-term agricultural use will allow more tenant farmers to obtain longer leases and better invest in their operations.

"Then we can be stewards of the land," said Kamiya, who leases 25 acres in La'ie.

Anthony Ching, executive director of the Land Use Commission, said a more important aspect of the protection and incentive package is to diversify and expand Hawai'i's farm industry.

"It's not intended as just a subsidy or handout of support to farmers," he said. "The notion is you want to create new investment that creates new industry that creates new markets."

Such growth is more likely to happen if there is a critical mass of protected prime agricultural land along with incentives to invest in new operations.

Supporters of the incentives stress that the intent of the important agricultural lands program is not to protect fallow farmland, and that farming needs assistance to secure its future.

Some incentives, however, have drawn criticism as a form of government subsidy that would largely benefit wealthy landowners.

Local resident Jeff Kent, a third-year law student studying environmental law at the University of Hawai'i, criticized one tax credit incentive bill as "corporate welfare" in written testimony.

'STEP IN RIGHT DIRECTION'

But testimony on most incentive bills has by far been supportive, coming mainly from state agencies, farm trade organizations and big companies with farming operations such as Alexander & Baldwin Inc., Dole Food Co. and Maui Land & Pineapple Co.

Support also has come from Hawaiian Electric Co., which plans to use biofuels to produce electricity, and the Land Use Research Foundation, a research and trade organization representing large landowners and developers.

Alan Takemoto, executive director of the Farm Bureau, said it's likely that some incentives will pass this year, but that it will likely take another year or two to see if enough incentives were created for businesses to seek the restrictive "important agricultural land" designation.

Takemoto expects another round of incentive proposals next year, and noted that the counties also are supposed to create their own incentives to help make the program successful. But he said the crop of incentive proposals that seem likely to pass this year are a good start.

"This is a huge step in the right direction," he said. "With any historic legislation such as Act 183, it needs a little time to evolve."

Reach Andrew Gomes at agomes@honoluluadvertiser.com.