Tax rate for short-term rentals created

Permitted operators are worried the higher rates will penalize law-abiding owners

WAILUKU — The Maui County Council on Monday passed a bill that will establish a new property tax category for short-term rentals. Currently, short-term rental permit holders fall in the commercial classification.

In a meeting that picked up where the council left off Friday, members voted on a pair of tax bills, deferred a decision on a sand-mining moratorium bill and set a Friday deadline for landowners seeking an exemption to the moratorium.

The bill that will create a new tax category for short-term rentals passed on second and final reading by a 5-4 vote, with Council Members Bob Carroll, Elle Cochran, Stacy Crivello, Riki Hokama and Yuki Lei Sugimura in favor and Council Members Alika Atay, Don Guzman, Kelly King and Mike White opposed.

Maui County Real Property Tax Administrator Scott Teruya has said that the establishment of a short-term rental category is aimed at cleaning up the County Code and to increase fairness. Short-term rentals are not commercial entities, like a McDonald’s, nor are they hotels.

But those who run short-term permitted rentals have said that they do not want to be lumped into the same category with condominium units allowed to do short-term rentals by zoning that do not need to obtain special permits, which are costly and impose stringent requirements.

If the new tax category translates into higher rates, permitted short-term rental owners have said it would penalize those who have followed the law while illegal short-term rental owners continue to get away with lower tax rates.

The measure now heads to Mayor Alan Arakawa’s desk.

The full council also voted down on second and final reading a measure that would have assessed condominium units at their “highest and best use,” which is the typical method used to assess property. Condo units are currently assessed on actual use.

The bill was defeated by a 5-4 vote, with Atay, Cochran, Guzman, King and White opposing it and Carroll, Crivello, Hokama and Sugimura in favor.

“I think there could be a better way to go about doing this without putting so much onus onto the condominium owners,” Council Member Don Guzman said. “A lot of them are elderly, and I suspect by doing this additional process it may possibly create more short-term rentals, because people don’t want to go through the humbug of having to put their property in dedication.”

The proposed change would have affected units being placed into the now approved short-term rental classification because many condo units are built on hotel-zoned land, are grandfathered in for short-term rental purposes or have received conditional permits to operate short-term rentals, the county administration has said.

Those who use their units as their primary residence would have been able to claim the homeowners exemption and would not have been affected. The condo bill did have an option for unit owners who run long-term rentals to continue to be placed under the apartment classification.

The county administration has said that assessment by highest and best use would bring this classification in conformance with all other property classes.

In addition to the tax bills, the council also deferred a decision again on a bill that would establish a six-month moratorium on mining of Central Maui inland sand.

The moratorium would allow for a further sand inventory study, initially done in 2006, and provide time to establish regulations to protect limited natural resources and prevent the disturbance of Hawaiian historical, cultural and unmarked human burial sites, according to the bill introduced by Cochran.

“We reviewed several versions and have had much discussion about how to strike a balance about protecting this precious finite resource and the environment . . . while also acknowledging the potential impacts the legislation may have on our landowners for the short period of time,” Cochran said. “I feel confident that this bill strikes that balance.”

Since the council deferred the matter at its Nov. 17 meeting, Cochran said her office has been getting feedback from a number of landowners who believe their projects don’t involve dune sand and wouldn’t impact a burial site. The council gave landowners until Friday to turn in applications to allow Cochran’s staff time to review the documents before the Dec. 15 council meeting.

The bill identified 59 large property owners that may have all or part of their properties affected by the moratorium. Central Maui inland sand areas are identified from Waihee, through Wailuku and Kahului, and stretching just past Waikapu, according to the bill.

The ordinance defines sand-mining as extraction and removal of sand from a lot. It will not apply to activities required to comply with county, state or federal regulations, nor will it apply to activities related to land management for agriculture, landscaping and related uses that do not involve inland sand transported outside the same lot.

Work that received a permit prior to the effective date of the ordinance would be exempted.

Violators could be subject to a fine not to exceed $1,000 per day. Those who violate the law would be liable for any costs incurred by the county to correct the violation.

On Monday the council also:

• Referred a resolution from the mayor that would remove Dave Taylor as water director to the Policy, Economic Development and Agriculture Committee.

• Filed a bill that would allow the council to vote to remove an individual member’s staffer, but decided to have further discussion on the issue in the Policy, Economic Development and Agriculture Committee.

• Passed a resolution urging the governor and the state Legislature to support affordable housing at the Front Street Apartments, where residents are facing a rent increase to market rates in 2019.

• Passed a resolution approving a proposed state bill in the 2018 Maui County Legislative Package that would seek more stringent enforcement of the Basic Bill of Rights for Victims and Witnesses.

* Melissa Tanji can be reached at mtanji@mauinews.com. Colleen Uechi can be reached at cuechi@mauinews.com.

* Correction

• Short-term rentals. The Maui County Council passed a bill on second and final reading Monday to establish a new property tax category for short-term rentals. If approved by the mayor, the tax rate for that category would be set in the spring during the council’s budget deliberations. A story headline published on Page A1 Tuesday was incorrect.

The Maui News apologizes for the error.

* The Maui News promptly corrects factual errors and clarifies published information. To report an error or clarification, call 242-6343 or send email to citydesk@mauinews.com.

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