Maui Resort Property Tax increase significantly?

It would make the Maui resort the most expensive resort in terms of maintenance fee within Starwood.

Dear Owner:

Your Board of Directors and the Starwood Management Team would like to update you on two important issues. As many of you may remember, your Board included a short note with the 2009 maintenance fee statements explaining the effect of increased utility expenses and Hawaii taxes on our maintenance fees.

Despite our efforts and arguments to the contrary, Maui County has determined it will begin to assess the vacation units at the resort separately using residential condominium valuations. As a result of this change, the 2009/2010 real property taxes for our resort will increase by approximately $4,124,162 (from 2008/2009 real property taxes of $2,261,819 to 2009/2010 real property taxes of $6,385,981). Your Board has authorized the expenditure of funds necessary for the Starwood Management Team to appeal both the valuation methodology and millage rate of this proposed assessment increase. Your Board and Management Team are fully engaged in the effort to mitigate the effect of this proposed increase and have submitted tax protests to Maui County. In addition, the Starwood Management Team is working with the American Resort Development Association, Resort Owners Coalition (ARDA-ROC) toward a coordinated Owner response, as Maui County's actions will impac! t other resorts. We plan to communicate with you in the near future on specific actions you can take to ensure Maui County representatives understand the negative consequences their decisions will have on individual Owners, such as yourself. During the course of the tax appeal, the tax assessments we remit to Maui County will remain in a claims litigation account which neither the association nor Maui County may access until the conflict is resolved. Unfortunately, this will require the Board to consider securing a loan, levying a special assessment and/or increasing the 2010 assessments to cover these tax payments.

To illustrate the impact of the unanticipated tax changes, the below chart details estimated increases in your Vacation Owners Association's 2010 assessments to cover the higher tax amounts. These amounts are broken down by unit type and whether ownership is on an annual or bi-annual basis. The first group of figures represents the funds necessary to cover the unanticipated increase in the real property taxes due in 2009. In addition to covering the 2009 shortfall, the second group of figures represents the funds necessary to cover that portion of the 2010 taxes which exceeds what was budgeted for in 2009. As you can see, the unanticipated increase for 2009 is less than the increase for 2010. This is because the tax year for Maui County commences on July 1, and thus the increase only impacts half of 2009.

Ocean Resort Villas Vacation Owners Association - Real Property Tax

Estimated Amount to Recover in 2010 for 2009 Real Property Tax Shortfall:
Annual Bi-Annual
2-Bedroom Lockoff $125.28 $62.64
2-Bedroom Lockoff Deluxe $172.63 $86.31
1-Bedroom $105.70 $52.85

Estimated 2010 Real Property Tax Increase Over 2009 Budget:
Annual Bi-Annual
2-Bedroom Lockoff $263.57 $131.78
2-Bedroom Lockoff Deluxe $363.18 $181.59
1-Bedroom $222.38 $111.19

Letter to North owners:

Dear Owner:

Your Board of Directors and the Starwood Management Team would like to update you on two important issues. As many of you may remember, your Board included a short note with the 2009 maintenance fee statements explaining the effect of increased utility expenses and Hawaii taxes on our maintenance fees.

Despite our efforts and arguments to the contrary, Maui County has determined it will begin to assess the vacation units at the resort separately using residential condominium valuations. As a result of this change, the 2009/2010 real property taxes for our resort will increase by approximately $5,170,204 (from 2008/2009 real property taxes of $1,218,266 to 2009/2010 real property taxes of $6,388,470). Your Board has authorized the expenditure of funds necessary for the Starwood Management Team to appeal both the valuation methodology and millage rate of this proposed assessment increase. Your Board and Management Team are fully engaged in the effort to mitigate the effect of this proposed increase and have submitted tax protests to Maui County. In addition, the Starwood Management Team is working with the American Resort Development Association, Resort Owners Coalition (ARDA-ROC) toward a coordinated Owner response, as Maui County's actions will impac! t other resorts. We plan to communicate with you in the near future on specific actions you can take to ensure Maui County representatives understand the negative consequences their decisions will have on individual Owners, such as yourself. During the course of the tax appeal, the tax assessments we remit to Maui County will remain in a claims litigation account which neither the association nor Maui County may access until the conflict is resolved. Unfortunately, this will require the Board to consider securing a loan, levying a special assessment and/or increasing the 2010 assessments to cover these tax payments.

To illustrate the impact of the unanticipated tax changes, the below chart details estimated increases in your Vacation Owners Association's 2010 assessments to cover the higher tax amounts. These amounts are broken down by unit type and whether ownership is on an annual or bi-annual basis. The first group of figures represents the funds necessary to cover the unanticipated increase in the real property taxes due in 2009. In addition to covering the 2009 shortfall, the second group of figures represents the funds necessary to cover that portion of the 2010 taxes which exceeds what was budgeted for in 2009. As you can see, the unanticipated increase for 2009 is less than the increase for 2010. This is because the tax year for Maui County commences on July 1, and thus the increase only impacts half of 2009.

Ocean Resort Villas North Vacation Owners Association - Real Property Tax

Estimated Amount to Recover in 2010 for 2009 Real Property Tax Shortfall:
Annual Bi-Annual
2-Bedroom Lockoff $112.37 $56.19

Estimated 2010 Real Property Tax Increase Over 2009 Budget:
Annual Bi-Annual
2-Bedroom Lockoff $307.63 $153.81

On a more positive note, we are happy to report that we have been successful in implementing several strategies for effecting energy utilization reductions. This, coupled with your efforts to conserve energy usage while vacationing at our resort and a 2009 reduction in energy rates, has resulted in a significant cost savings to the Association of approximately $1,347,055.

We thank you for the opportunity to serve and will update you as these events continue to unfold. Should you have any questions, our Association Management team is available to assist you at 800-729-8246.

Sincerely,

Ocean Resort Master Association Board of Directors

Johnathan Ho, President Gerald Bodzy, Vice President

Craig McFarland, Treasurer Bruce McNish, Secretary Teri Castleberry, Director

How much are your property taxes, with this increase, Lisa?

I'm interpreting this as meaning that I'll be assessed another $450 during the next round of MFs to cover 2009/2010, and the $300 increase will be permanent unless they can convince Maui county to have mercy on the TS owners who bolster Maui's economy.

$2300 MFs per year would mean they are charging $328 per night or $119,720 per year per apartment. Taking out the taxes, the MFs still seem staggeringly high. So much for the notion of "pre-paying for fabulous vacations." We've pre-paid (dearly in some cases) AND we're paying darn close to what current rental prices are for equivalent condos in the area. We Owners simply cannot continue to absorb these kind of MF increases and Starwood is going to have to step up to the plate and work out a more equitable management contract. They/we won't be able to give away these units because of the financial burden of owning.

I realize that this is a Maui county decision and not a Starwood decision. However, $2k was already too high to begin with for what they do, so this is merely salt on the wound. Starwood going to have to cut costs and/or kick back money to the HOA for rentals if they want the resort to remain solvent. This, of course, doesn't even begin to address the issue of delinquent MFs that are plaguing other resorts.

My only consolation is that I own OF and will have a leg up on trying to recoup the MFs should I rent my unit out. I feel for the IV owners who may not be able to recoup just their annual MFs with rentals. I can see the resale prices dropping as I type.

This news certainly couldn't have come at a worse time. Mauians seem to loathe TS owners even as they enjoy the benefits of the tourism dollars we consistently bring to their area.

It's the high sales price that is killing you on taxes, if it works anything like regular real estate.

If Maui officials are multiplying the sales price of a unit X 52 weeks, and then determine the value of a unit to be $2.5 Million or something like that, then the high tax would be logical to them.

If it is anything like real estate, the values and resulting taxes should be going down, not up.

Snail mail letter or email?

This is definitely disturbing.

WKORV owner here and TUG newbie. Been lurking for a few months now and have learned a lot - thanks to all, esp. the moderators. Can't help but feel a bit disenchanted tho with all the negative news re: Starwood mgmt , ever-rising MFs, and decreasing TS resale values but I find solace that knowledge is power so will make the best of my ownership thanks to TUG. And the fact that I'm happy with my ownership at WKORV and am planning to take my family to Maui regularly for many many years.

Was this letter received in the mail or was this an email? I did not receive either yet so just curious what to expect. If paper letter - props to the original poster for typing all that in!

KECH said:

Was this letter received in the mail or was this an email? I did not receive either yet so just curious what to expect. If paper letter - props to the original poster for typing all that in!

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Welcome aboard! Glad to have you here.

FYI, the communication came via email.

If Maui County gets away with this, it's only a matter of time before the other islands attempt the same thing. The federal government is practically insolvent and the states are dealing with massive budget deficits, so the easy answer for the bureaucrats and politicians is to squeeze more water out of the rock by raising taxes--especially on non-residents.

It's fair to say that all of us who are owners of Hawaii TS's have zero political leverage in Hawaii.

But we DO have--collectively--leverage with Starwood. I agree with LisaRex: if MF's continue to climb at rates similar to the rates of increase of college tuition and healthcare costs (both of which seem to defy gravity) then we need to organize a large, vocal, and organized group of Starwood owners to air our grievances and pressure Starwood to become a much more cost-efficient organization. Starwood views us as their cash cow while their hotel division suffers. That view most decidedly must be changed.

Not good news. Fighting MF increases on so many fronts.

I am disappointed - to say the least - to have gotten this e-mail. Raising property taxes so significiantly (almost 200%) in a recession is bad policy. Not to mention the impact this will have on re-sale for current owners.

And they aren't raising the taxes on their constitutents - so not much we can do to protest or enact lagislative changes.

Any WPORV owners get a similar letter?

Something is very wrong with how these taxes fall out.

In every situation I can think of, timeshares have always been a tax boon to the County they are located in.
Taxes are computed at the assessed value, (or average thereof) determined at time of sale, or approval of the final public report.

Tax rate notwithstanding, timeshares pay taxes that in aggregate are much higher than the taxes paid on a wholly owned condo of the same type and location. Reason being that the price of 52 intervals is higher than the price of a wholly owned condo in the same real estate market. If this were not so, developers would be crazy to go through the hoops to sell a condo in 52 slices. They would just sell the condo.

52 intervals sold at say an average of 45k each results in a valuation of $2,340,000 per 1400 sf condo. Probably closer to 55k each, or $2,860,000.
Is Maui County saying that this understates the value of a KOR condo?
OR, are they saying that the assessed value was grossly understated when filed by Starwood (thereby minimizing the obligation when Starwood was paying a large portion of the tax themselves)?

Hard to tell based on the information thus far provided.

Property Tax Rates in Maui County

This link shows the tax rates for Maui county property types. I'm not suprised timeshares are taxed so much more than some property types, but I do find it suprising the difference between hotel/resorts and timeshare properties.

http://www.co.maui.hi.us/index.aspx?NID=755

I don't understand the animosity towards TS owners. I have x amount of disposable dollars to commit toward vacation. What I don't spend on lodging, I spend doing activities, shopping, and going to restaurants. A study that the Maui zoning board conducted showed very little difference in spending patterns between a hotel tourist and a TS tourist. And when hotel occupancy is down, we TS owners come back to spur on the local economy because we have to pay to maintain the place whether we show up or not.

badpelican said:

This link shows the tax rates for Maui county property types. I'm not suprised timeshares are taxed so much more than some property types, but I do find it suprising the difference between hotel/resorts and timeshare properties.

http://www.co.maui.hi.us/index.aspx?NID=755

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Thanks for the link. Very helpful.

OK, Maui County just juiced the tax rate on timeshares.
What they did not do was adjust the second component of tax calculation, i.e., "Fair Market Value".

Fair Market Value
Per MCC 3.48.290 the fair
market value of your property is
determined. Fair market value is
the most probable price (in terms
of money) a property should bring in a competitive
and open market under all conditions requisite to a
fair sale, with the buyer and seller each acting
prudently and knowledgeably. Locating, identifying,
and appraising your property at fair market value is
the responsibility of the Real Property Tax Division of
the Department of Finance.
Over the years, great strides have been made to
improve the methods used to assess property in a
uniform and fair manner. Visit our website at
www.mauipropertytax.com to view our records or
call our office regarding your assessment.


It appears that pains were taken to stick it to timeshare owners big time. Not satisfied with disproportionate assessed value, they actually increased the tax rate on the disproportionate value.

Given fair market value being defined as it is, I will bet that the valuation used does not reflect "the most probable price (in terms
of money) a property should bring in a competitive
and open market under all conditions requisite to a
fair sale, with the buyer and seller each acting
prudently and knowledgeably."

I will also assume (perhaps incorrectly) that neither Starwood nor ARDA ROC will challenge the taxes based on that measure. They will challenge it based on the unfairness of the tax rate alone.

This bears watching, and perhaps filing a separate owner appeal.
This is government exercising its taxing authority at its very worst.

Got the same email. Ugh...

SDKath said:

Any WPORV owners get a similar letter?

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I got the WKORV but not one for WPORV. This is just a Maui county issue so the island of Kauai should not be affected. I would agree with a previous post that suggested other counties / states might follow suite.

Troopers said:

Got the same email. Ugh...

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Troopers: If you aren't happy with your ownership, just remember that, "You have options!"

Do you STILL wonder why Starwood owners aren't happy these days??? It's just one piece of bad news after the other! :annoyed:

Fredm said:

OK, Maui County just juiced the tax rate on timeshares. What they did not do was adjust the second component of tax calculation, i.e., "Fair Market Value".

Fair Market Value
Per MCC 3.48.290 the fair
market value of your property is
determined. Fair market value is
the most probable price (in terms
of money) a property should bring in a competitive
and open market under all conditions requisite to a
fair sale, with the buyer and seller each acting
prudently and knowledgeably. Locating, identifying,
and appraising your property at fair market value is
the responsibility of the Real Property Tax Division of
the Department of Finance.
Over the years, great strides have been made to
improve the methods used to assess property in a
uniform and fair manner. Visit our website at
www.mauipropertytax.com to view our records or
call our office regarding your assessment.


It appears that pains were taken to stick it to timeshare owners big time. Not satisfied with disproportionate assessed value, they actually increased the tax rate on the disproportionate value.

Given fair market value being defined as it is, I will bet that the valuation used does not reflect "the most probable price (in terms
of money) a property should bring in a competitive
and open market under all conditions requisite to a
fair sale, with the buyer and seller each acting
prudently and knowledgeably."

I will also assume (perhaps incorrectly) that neither Starwood nor ARDA ROC will challenge the taxes based on that measure. They will challenge it based on the unfairness of the tax rate alone.

This bears watching, and perhaps filing a separate owner appeal.
This is government exercising its taxing authority at its very worst.

Click to expand...

FredM's point is especially significant because Starwood has a conflict of interest.

It is in the interest of the owners to have a low assessed value because that will result in lower property taxes. Starwood, in its capacity as the controlling interest on the HOA Board, should represent the owners' collective interest in seeking a lower assessed value before the county or the courts.

However, Starwood has a contrary interest -- maintaining the perception of the value of its product, both for any remaining developer sales and for any resales it may do. It is not in Starwood's interest to make a big point of the fact that the units have lost over half of their value since Starwood sold them; Starwood is better served by the (mis)perception that timeshares increase in value. Further, property taxes are a cost for the HOA and to the extent the HOA budget increases as a result of the increase in property taxes, Starwood may profit if its fee is a percentage of the budget.

How are we to insure Starwood will represent our interests in fighting this tax assessment rather than its own interest in acquiescing to it?

vacationtime1 said:

FredM's point is especially significant because Starwood has a conflict of interest.

It is in the interest of the owners to have a low assessed value because that will result in lower property taxes. Starwood, in its capacity as the controlling interest on the HOA Board, should represent the owners' collective interest in seeking a lower assessed value before the county or the courts.

However, Starwood has a contrary interest -- maintaining the perception of the value of its product, both for any remaining developer sales and for any resales it may do. It is not in Starwood's interest to make a big point of the fact that the units have lost over half of their value since Starwood sold them; Starwood is better served by the (mis)perception that timeshares increase in value. Further, property taxes are a cost for the HOA and to the extent the HOA budget increases as a result of the increase in property taxes, Starwood may profit if its fee is a percentage of the budget.

How are we to insure Starwood will represent our interests in fighting this tax assessment rather than its own interest in acquiescing to it?

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To some extent, that's true. But the more Maui sticks it to TS owners, the lower the resale amounts get and the less new TS interests Starwood can sell. Additionally, the higher the taxes, the higher the annual MFs are - and that was a big factor in our sales' presentation.

They should be interested in having the units assessed at as low a rate as possible.

zeke013 said:

To some extent, that's true. But the more Maui sticks it to TS owners, the lower the resale amounts get and the less new TS interests Starwood can sell. Additionally, the higher the taxes, the higher the annual MFs are - and that was a big factor in our sales' presentation.

They should be interested in having the units assessed at as low a rate as possible.

Click to expand...

I'm afraid Starwood is a lot more interested in impressing their investors, and the stock market, than they are in TS owners.

DeniseM said:

Troopers: If you aren't happy with your ownership, just remember that, "You have options!"

Do you STILL wonder why Starwood owners aren't happy these days??? It's just one piece of bad news after the other! :annoyed:

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Denise, yup you're right, I do have options.

Just so you know...I do deeply understand why some owners aren't happy these days. Do you think I enjoy paying increasing MF? Of course, you don't, right? Every dollar increase you pay, I pay. I just don't assume that Starwood is the evil empire.

This is another one of those "easy" tax hikes for local politicians to make. Like huge taxes on hotels and rental cars it effects NON-RESIDENTS and thus does not impact their reelection chances. They can also claim that they FOUGHT to keep LOCAL taxes down so they often see it as a WIN WIN - more money in the budget and no increase to the people who elect me!

Unfortunately, I don't see this having a negative impact on taxes revenue in the long run - although I agree with Lisa's comments (re: fixed amount to spend) I don't think this will drop occupancy rates etc. so most people will just end up absorbing it into their budget for travel to "paradise". Some might eat cheaper while there, but most won't. I hope this doesn't stick but I have a bad feeling that it will.

Tax Increase

I'm reading these posts and thinking it's just like home....I live in a seasonal resort area (Cape Cod) and our newspaper editorials are filled with comments like these by second home and seasonal condo owners. Yes, you do add to the economy, but...it is also expensive to have guests every week!! The summer visitors (here on the cape) use lots of services while they are here and we have a lot to do when you are not here, the same as Maui County. One of the largest expenses is road maintenance, there are lots of cars on our little roads that were never designed for the volume traveling over them. I won't detail all of the expenses, they are numerous. Another complaint is that our second home owners don't get to vote at town meeting because they are not residents, but no one gets 2 votes, one at home and one at vacation!! And the seasonal residents always think they pay more for less, after all they don't send their kids to OUR schools.

I don't like to pay more, but lets get real...these are tough times for everyone, if you aren't feeling it, then you are lucky.....if it costs a bit more for paradise, so be it. I don't live or work in the tourist economy here, but I am responsible to help make a Cape Cod vacation enjoyable for our visitors and I know the Hawaiian residents feel the same way. I sit in traffic for 12 weeks out of the year, I drive carefully so that the visitor in front of me or trying to enter the road, who is confused about what direction he's driving in doesn't have a head on collision with the bike riders or the walkers, or the kids going to the beach. People who live in vacation and resort areas do hundreds of kind and thoughtful gestures for the visitors that generally are not appreciated or noticed and that's the way it should be, you are here for vacation. I know my taxes will go up to fix the roads, maintain the bridges, keep the ponds clean, educate the children, care for the elderly and make this a wonderful place to visit or live. I'm willing to do it for my second home as well, and so far I am able to.

Maui is the best!! Aloha