Council hit with new ‘Sunshine Law’ suit
Weeks after a Hawaii Supreme Court ruling that Maui County Council members violated the state’s “Sunshine Law” by circulating written memoranda among themselves in 2008, Kaanapali time-share owners are making a similar claim in a legal challenge of their property tax rates.
In a lawsuit filed Monday in 2nd Circuit Court, the Ocean Resort Villas and Ocean Resort Villas North vacation owners associations and time-share owners from the associations’ Westin Kaanapali Ocean Resort Villas and Villas North complexes filed suit against Maui County, the Maui County Council and unnamed individual defendants.
County spokesman Rod Antone said the county does not comment on active lawsuits, and there was no immediate comment Wednesday from the County Council.
The lawsuit cites the state Supreme Court’s Aug. 8 decision in Kanahele v. Maui County. That ruling found council members violated the Sunshine, or open government, law in early 2008 when they were deliberating on land-use measures for the 1,150-home Honua’ula project. The councilors circulated 14 written memoranda proposing amendments to the development project bills and seeking support from each other.
The court’s Kanahele decision did not go further and void the County Council’s approval of the development formerly known as Wailea 670. The high court justices were critical of but did not find an open government violation when council members recessed and reconvened committee meetings a dozen times without allowing more public testimony on the project.
According to the lawsuit filed earlier this week by the Kaanapali time-share owners, a Sunshine Law violation occurred when council members considered property tax rates for fiscal 2014.
“Council members circulated memoranda or engaged in other improper interactions or discussions with the purpose of circumventing the spirit or requirements of the Sunshine Law,” the lawsuit says. “These memoranda and improper communications by council members undermined plaintiffs’ ability to witness and participate in the democratic process of setting the tax rate for time-share classifications.”
The lawsuit alleges that “through memoranda or other communications, council members sought to secure other council members’ commitment to vote on the time-share tax rate.”
As a result of the council’s alleged violations of the Sunshine Law, the plaintiffs claim that they are entitled to a judicial declaration that the time-share rate set by the council is void.
“Because the overwhelming majority of time-share owners in the County of Maui are nonresidents, the time-share tax classification and tax rate were designed so that the real property tax falls disproportionately on nonresidents who cannot vote in Maui County elections in order to rectify the disparate taxation,” the lawsuit says.
Now, time-share owners are assessed property taxes at a rate of $15.55 per $1,000 of assessed value. The rate went into effect July 1. The time-share rate is $6.15, or 65 percent, higher than the county’s second-highest tax rate of $9.40 per $1,000 for hotel and resort properties. The county’s lowest tax rate is for homeowners at $2.87 per $1,000 of assessed value.
The lawsuit reports that the County Council commissioned its own $75,000 time-share study by Hospitality Advisors LLC, which found with the University of Hawaii School of Travel Industry in June 2006 that “time-share use is no different than hotel and resort use.”
“Accordingly, time shares should not be taxed separately and should be taxed in the hotel and resort real property tax classification,” the lawsuit says.
The plaintiffs also allege that the County Council’s action violated the equal protection clauses of the U.S. and Hawaii constitutions. Those clauses prohibit government from denying anyone equal protection under the law.
The county’s adoption and implementation of the time-share property tax classification denies the plaintiffs equal protection of laws because “the time-share classification draws an arbitrary and irrational distinction between time-share properties and hotel and resort properties,” the lawsuit says.
Also, “the county knowingly and intentionally designed the time-share classification so that the highest tax burden would fall on nonresidents, who comprise the overwhelming majority of time-share owners,” the lawsuit says.
In addition to asking the court to throw out the county’s time-share property classification for being unjustifiably separate from hotels and resorts, the plaintiffs also want a declaration that the County Council’s action was in violation of the state’s Sunshine Law. And, they are seeking damages to be proved at trial and the award of the cost of their attorneys’ fees and costs.
Time-share properties had been included in the hotel-and-resort property tax category in Maui County until November 2004 when the County Council and mayor enacted a separate real property tax classification for time-share properties, according to the plaintiffs’ lawsuit. And from late 2004 until Aug. 7, the county was the only local government in the United States with a separate real property tax classification for time-share properties, because the county sought to make up for losses of transient accommodations tax revenue.
Then, earlier this month, the City and County of Honolulu created a separate property tax category for time-share properties, but it has not yet set a tax rate for the category, the lawsuit says.
* Brian Perry can be reached at email@example.com.