Enjoying Your Maui Resort Condo? Now Pay Up!
Some taxpayers on Maui are getting a nasty surprise this year because they didn’t do anything, and their real property tax rate doubled. What happened? The Maui County Council passed a pair of bills, known as Bills 129 and 130. They were introduced on November 20, 2020, passed the Council on December 4, 2020, and were signed into law the very next day by Mayor Michael Victorino. They became Ordinance 5159 and Ordinance 5160. They say that if you have real property in an area in which the zoning laws permit short-term rental, and that real property isn’t your home, then it doesn’t matter if you live in it, or if no one lives in it. It will be subject to Maui real property tax as a short-term rental. On Maui, property tax rates are very modest for people living in their own homes. There is a three-tiered system, with rates going from $2.51 to $2.61 per $1,000 of net taxable valuation (the value of the property after any applicable exemptions are subtracted). For people in second homes or renting their units, there is a classification called “Non-Owner-Occupied” in which the rates go from $5.45 to $6.90 per $1,000. But for short-term rentals, the rate is a flat $11.08 per $1,000. That rate is slightly higher than Hotel and Resort ($10.70). The only classification with a higher rate is Time Share, at $14.40. Thus, for a unit valued at $800,000, an owner may see the real property tax bill for the year jump from $4,360 to $8,864, an increase of more than 100%. If there is a long-term renter actually living in the unit, the owner gets a break, but only for 2021. The short-term rental rate will kick in for 2022 regardless. The County explains, in a FAQ page, that this change is based upon “highest and best use” and uses allowed by zoning. Normally in the real property tax world, the tax classification of real property depends not on the actual use that is made of it, but on the highest and best use (generally this means the most expensive) that could be made of the property under the zoning laws. So, if I decided to build a farm in the middle of an industrial zoned area, I can expect my property to be classified as industrial, not agricultural. The County’s website goes on to give an example of Puamana, which is a community in Lahaina, a known resort area. “Starting this year,” the FAQ says, “properties in Puamana are classified as Short-Term Rental, even if they are not rented short term.” This, they say, is just another example of the highest and best use principle at work. To explain why long-term rentals are getting a temporary break, the County explains: “In an effort to address the County’s housing shortage, the County Council has created real property tax incentives to encourage property owners to rent long term to residents. Next year, condominium classification is being rescinded altogether and will be replaced with a long-term rental exemption program.” So, it seems that more comprehensive property tax changes are in the works for next year. We can’t help but wonder why these two ordinances were passed at warp speed. The interval between bill introduction and enactment was just over two weeks. Was adequate time allowed for public input and consideration? Was it just a knee-jerk reaction to the Transient Accommodations Tax aid to the counties being shut off in Gov. Ige’s emergency proclamations and with the prospect, in House Bill 862, of that revenue source being permanently cut off? Look out, folks. The fiscal fallout from the pandemic and the State’s response to it is starting to bite at the county level, and this is one of several responses to that. Let’s keep our eyes peeled, for more is yet to come!
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A Government of (Suspended) Laws, Not Men
John Adams, later to become the second President of the United States, enshrined the concept of “a government of laws, not of men,” in the Massachusetts state constitution of 1780. Those words were supposed to convey a fundamental idea: Government should be based on clearly written laws, and not on the unpredictable will of one or even a few people. In Hawaii, we are indeed a government of laws and not men. We have three branches of government, as most of the States and the federal government do. Power is divided among them. But for over a year now, one thing has thrown off the balance in dizzying and unpredictable ways: the pandemic. It’s allowed our governor to invoke “emergency powers,” which are in chapter 127A, Hawaii Revised Statutes. Emergency powers are meant to deal with a dangerous but isolated event like a tsunami, earthquake, or flood. But our Governor and his staff have figured out a way to extend emergency powers continuously, for more than a whole year now, by daisy-chaining emergency proclamations together. We are now on the twentieth one. Every so often, most recently in the nineteenth proclamation, the Governor publishes a list of laws that are suspended by virtue of his emergency powers. This list has been consistently around twenty pages long. A twenty-page list can suspend a large number of laws, especially since it takes only one sentence to freeze an entire chapter of the HRS, such as “Chapter 89, HRS, collective bargaining in public employment.” Notable suspensions we have written about before, and which still are in effect, are the suspension of all distributions of transient accommodations tax money to the counties, the Hawaii tourism authority, and other beneficiaries of TAT earmarks; and the suspension of tax clearances as a requirement for doing business with the government. Other notable suspensions, where the government backed off a little after pressure from us and other good government groups, were of the public procurement code and government transparency laws. With all of these suspensions, it’s very tough to figure out which laws still apply and which don’t. It’s then left to the bureaucrats, the government officials, to tell us that oh, yes, they are still enforcing Law A administratively, even though the proclamation has suspended the law; or that they have made an administrative decision not to enforce Law B even though it’s not in any proclamation (but certainly could be included in the next one that comes out). The enforcement could be arbitrary; it could simply depend on what a particular bureaucrat who is making the call that day had for breakfast that morning. Furthermore, it’s tough to understand why multiple whole chapters of the HRS can be suspended using these few sections of the HRS and with virtually zero oversight from the other branches of government. Our Legislature had a chance to rein in some of this arbitrariness. Both the House and the Senate passed versions of House Bill 103. The House and Senate conferees agreed on a Conference Draft to recommend to both houses. The Senate passed its version. The House recommitted it in its floor vote. That killed the bill. Too bad, so sad. So where does that leave us? If we believe in the idea that government should be one of laws and not of men, as John Adams taught us all, then we had better prevent further erosion of the laws and restore the integrity of those we already have. Teacher Payments and the “Me Too” Syndrome
This week, we focus on House Bill 613, another bill that has undergone radical metamorphosis while in our Legislature. As introduced, the bill was a “short form” bill. Its operative language was simply: “The Hawaii Revised Statutes is amended to conform to the purpose of this act.” Subsequent drafts of the bill in the House were all variations on the theme of appropriating federal funds that Hawaii was getting for education. The bill wanted to ensure that federal “maintenance of effort” requirements as applied to the Department of Education were complied with and were spent according to the collective bargaining agreement with those employed at the school level. When the bill crossed over into the Senate, “those employed at the school level” was changed to “those employed at the school level in the classroom,” namely teachers who, for the most part, are members of HSTA, the teachers’ union. At that point HGEA, another large public worker union whose members include administrators, custodial staff, cafeteria staff, and office support workers, cried foul. But the Ways and Means Committee let the language stand and sent the bill to a House-Senate conference. The first Conference Draft of the bill was much more detailed. It appropriated money for educators, staff, administrators, and others. It funded all manner of programs, including learning loss, charter schools, facilities for safe reopening, software subscriptions and licenses, and an automated greenhouse pilot program (Kohala, Molokai, Lahainaluna, Kauai, Waialua, and Mililani high schools each received a little more than $1 million for this). But then came the clincher, section 3(13) of the conference draft. That language appropriated $29.7 million for the purpose of educator workforce stabilization to retain teachers, “provided that moneys appropriated shall be used for a one-time stabilization payment of $2,200 for each teacher.” So here we had a stimulus payment of sorts, but only for teachers (i.e., HSTA) and not for staff and principals (i.e., HGEA). Worse, “each teacher” was vague. A substitute who taught for only one day conceivably would get the payment under that description. Lawmakers recognized this possibility at the last minute and rushed through a floor amendment in both houses to change the wording to “$2,200 for each full-time and half-time teacher.” The bill went to the Governor in that form. This may be a bill where the Governor whips out his veto pen. Hawaii News Now reported that the Governor thought the Legislature had no authority to mandate the payments, noting that the Administration, not the Legislature, negotiates with the unions and signs collective bargaining agreements with them. And, of course, the HGEA is still fuming over this development, calling it an outrage, and may be encouraging Gov. Ige to bring the hammer down. The Governor now has until June 21 to decide whether he has an intent to veto a bill or line-item veto an appropriations bill. Bills not so identified by that date will become law with or without the Governor’s signature. Bills that make the intent-to-veto list would need to be vetoed by July 6, 2021 and could still become law if the Legislature votes to override the veto. Finally, even if the bill does become law, the Governor can restrict, or refuse to spend, the appropriated money. There is still much distance between the $2,200 payments and teachers’ pockets, and hard feelings are likely to be created. Perhaps many of the issues that are now seen as problems, including the “me too” position in which HGEA finds itself, could have been worked out if there had been a bit more transparency and a bit less last-minute scrambling. |
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