Maui Resort Property Tax increase significantly?

[spuppy]

I think the expression is biting the hand that feeds you.

I wonder how Maui County justifies the difference of $8.50 per $1000 for hotels, and $14 per $1000 for Time Shares, but only $4.55 per $1000 for apartments and $2.00 per $1000 for homeowners. I have heard justifications that transient visitors use more services than locals and so should pay more. But thinking about it, I cannot identify any county services that a TS visitor would use more than an apartment dweller. In fact, TS users don't use some services that apartment dwellers do, such as schools and social services. So how does the county justify the more than three times higher rate for TS over apartments?

And compare TS to hotel rates. Both service transient visitors. If one could find a justification that transient visitors cost the county more than locals residents, I would expect Hotels to have a higher tax rate than TS. I expect that hotels have a shorter average length of stay than a TS, so a hotel room would contribute more cost to the county than a TS unit. Does any of this make sense??

Greg

 

[rickandcindy23]

A Million Dollar house would only cost $2,000 in taxes. That's way too low for real estate. So Oprah's huge mansion and acreage, I guess she is just charged $2.00 per 1,000, too.

We all ought to just move to Maui! My property taxes are $2,400 on my measly house.

 

[rickandcindy23]

Hotels charge sales tax, so they add to the economy that way.

 

[thinze3]

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.

The oceanfront units were selling for over $100K when we were there in July. That's over $5M each.

 

[LisaRex]

The oceanfront units were selling for over $100K when we were there in July. That's over $5M each.

I paid $50k for my OF, so if the county uses only developer purchases to assess it, they are way overstating their worth.

And by that reasoning, the IV folks should be paying quite a bit less in property taxes than OV or OF owners.

 

[Troopers]

FWIW, the timeshare tax rate did not increase. The $14 per $1k was in place back in FY 2005-2006.

 

[Darwin]

So true

I hate to pour salt on your wounds, but I suspect Starwood will also add to your MF its costs for attorneys, accountants and lobbyists to fight the tax increase. Will your HOA require Starwood to pay those fees? I doubt it.

I take no pleasure in reading this thread. I'm sure Marriott will be passing on this same tax and related fees to those of us who bought at MOC.

I wonder if Marriott would give me a discount on the MF if I painted my unit the next time I stay there. I love to paint and it wouldn't take me long to paint the unit. I'll even buy the paint.

Costs get passed on to the lowest denominator.
Darwin

 

[Darwin]

Maui Timeshare Analysis

Here is a link to a study of the conversion of hotels to timeshares in Maui County. http://www.co.maui.hi.us/documents/Finance/timesharestudy.pdf.

Darwin



Thanks Dewnay for the correction.

 

[LisaRex]

Your link didn't work for me, Darwin.

 

[Dewnay]

This link works: http://www.co.maui.hi.us/documents/Finance/Timesharestudy.pdf

D.

 

[Fredm]

FWIW, the timeshare tax rate did not increase. The $14 per $1k was in place back in FY 2005-2006.

Troopers, two points to be made here.

First, The BOD advised owners of the dramatic tax increases in August of this year. In doing so, the Boards stated :
"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....."

Nowhere has a change in "tax rate" been attributed to the increase.
The culprit is "assessed valuation".
This discussion has, for the most part, been focused on the tax rate. My comments included.

While $14 per $1k can be argued to be excessive and unjustifiable, the real issue is valuing the units far higher than "fair market value".

What is currently unknown is the unit valuation prior to, and after the increase. Without these figures it is not possible to know what is being contested.

Second, the tax rate is a separate, though relevant conversation.
Maui County has determined that the rate is elastic enough to impose it disproportionately on timeshare owners, however unjustified.

Both components to the tax calculation are not specific to Starwood resorts. Relief will not be granted in appeal to KOR & KORN only.
Maui property tax policy can only be effectively appealed by property type. All timeshare resorts are effected, and should file a joint appeal.
Perhaps this is what is intended by the BOD approval of funds to address the matter. But, it is not clear.

 

[Troopers]

Troopers, two points to be made here.

First, The BOD advised owners of the dramatic tax increases in August of this year. In doing so, the Boards stated :
"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....."

Nowhere has a change in "tax rate" been attributed to the increase.
The culprit is "assessed valuation".
This discussion has, for the most part, been focused on the tax rate. My comments included.

I concur. Thus, my posting.

While $14 per $1k can be argued to be excessive and unjustifiable, the real issue is valuing the units far higher than "fair market value".

What is currently unknown is the unit valuation prior to, and after the increase. Without these figures it is not possible to know what is being contested.

Follow my math here for WKORV and I hope my numbers are right…

There are 26,832 total unit weeks (86 units/floor per map here on TUG x 6 floors x 52 weeks = 26,832 unit weeks).

Proposed 2009/2010 taxes is $6,385,981. At $14 tax rate per $1000 valuation, total resort valuation is $456,141,500 ($6,385,981 x $1,000 / $14)

Thus, a single unit week is valued at $17,000 ($456,141,500 / 26,832 total unit weeks). For 2008/2009 tax, valuation for a single week is $6,021.

If my calcs are correct, a 2 bdrm unit (which consists of two units) is valued at $34,000 for a week. Certainly not the developer sales price nor the price I paid for my resale weeks but fair.


Also, If the tax office recognizes resale pricing (which I doubt), it’s worth noting that a resale of a single unit week unit barely reduces the overall valuation as there is 26,832 unit weeks. Thousands of resale weeks are needed to significantly impact the overall valuation.

Second, the tax rate is a separate, though relevant conversation.
Maui County has determined that the rate is elastic enough to impose it disproportionately on timeshare owners, however unjustified.

Both components to the tax calculation are not specific to Starwood resorts. Relief will not be granted in appeal to KOR & KORN only.
Maui property tax policy can only be effectively appealed by property type. All timeshare resorts are effected, and should file a joint appeal.
Perhaps this is what is intended by the BOD approval of funds to address the matter. But, it is not clear.

Agreed.

 

[Fredm]

Follow my math here for WKORV and I hope my numbers are right…

There are 26,832 total unit weeks (86 units/floor per map here on TUG x 6 floors x 52 weeks = 26,832 unit weeks).

Proposed 2009/2010 taxes is $6,385,981. At $14 tax rate per $1000 valuation, total resort valuation is $456,141,500 ($6,385,981 x $1,000 / $14)

Thus, a single unit week is valued at $17,000 ($456,141,500 / 26,832 total unit weeks). For 2008/2009 tax, valuation for a single week is $6,021.

If my calcs are correct, a 2 bdrm unit (which consists of two units) is valued at $34,000 for a week. Certainly not the developer sales price nor the price I paid for my resale weeks but fair.

Troopers.

I understand your view of the tax as a timeshare owner. A couple of hundred bucks in not enough to upset the applecart. It is what it is. Vacations are important, and not about to be spoiled over this.

I like to keep it simple. Assessed valuation can only be computed on the value of the real estate. Not the furnishings or services presumed in the price paid (whatever price). Industry standard is 65% real estate, 35% furnishings & services.

There are 516 condo units, total.
Total tax burden for 09/10 is ~$6,386,000.
$6,386,000/516 = $12,376 tax per condo unit., or $24,772 per two bedroom condo. That is annual property tax per condo.
, or $476 per deeded week. Just about what the new bill will be.

Yes, about $200 per deeded week more than previous tax assessment. That is quite a tax bite.
It puts the dis-proportionality in some context. $24,772 tax per condo.

The property valuation per 2 bedroom condo is then $2,444,000.
For every unit; ocean front, ocean view, and Island view.

"Fair market value" is not some average of original sale prices and some relatively small number of resales. It is current market price, averaged across a corresponding tax year. A tax rate of $14 per 1k is stiff. But, on a valuation of 2.44 million it is government gone wild.

 

[Ken555]

A tax rate of $14 per 1k is stiff. But, on a valuation of 2.44 million it is government gone wild.

Well said. I'm very glad I don't own in Maui, and those who do have my sympathy.

 

[vacationtime1]

This link works: http://www.co.maui.hi.us/documents/Finance/Timesharestudy.pdf

The property valuation per 2 bedroom condo is then $2,444,000.
For every unit; ocean front, ocean view, and Island view.

"Fair market value" is not some average of original sale prices and some relatively small number of resales. It is current market price, averaged across a corresponding tax year. A tax rate of $14 per 1k is stiff. But, on a valuation of 2.44 million it is government gone wild.

Go to the above link Dewnay provided; check page 12 of Appendix E. The assessor tells us exactly how they get to these numbers:

"According to the Maui County Real Property Tax Division, the
resort condominiums are assessed based on its per unit market
value. Resort condominiums tend to have more current sales
activities, therefore, it is easier to assess the market value of
resort condominium properties.

Hotel properties do not have as frequent of sales activities as
individual condominium units, therefore the cost of replacement
less depreciation for the hotel properties are taken into
consideration when assessing hotel properties for tax purposes.

Timeshare properties are assessed using the same methodology
as the hotel properties (cost of replacement less depreciation).
Interval sales are not considered in determining the market value
for the timeshare properties."
​

The county assessor proposes to use developer prices ("cost of replacement"), which explains how they get to the values FredM quotes above. This creates at least two questions:

First, why is "cost of replacement" an appropriate appraisal methodology when it includes the developer's 100% mark-up which is paid only once (when the unit was originally sold) and is no longer reflected in the "market value" of the property being appraised?

Second, how can the assessor legitimately claim there are insufficient comparable sales for timeshares, but there are comparable sales for resort condos, when there are undoubtedly many times more resale timeshares than resale condos? Hotels may not sell frequently, but timeshares certainly do.

 

[Fredm]

Troopers.


There are 516 condo units, total.
Total tax burden for 09/10 is ~$6,386,000.
$6,386,000/516 = $12,376 tax per condo unit., or $24,772 per two bedroom condo. That is annual property tax per condo.
, or $476 per deeded week. Just about what the new bill will be.

Yes, about $200 per deeded week more than previous tax assessment. That is quite a tax bite.
It puts the dis-proportionality in some context. $24,772 tax per condo.

Oh, I neglected to mention that in addition to a property tax of almost 25k per condo, a transient occupancy tax of $4 to $14 per night is charged by the State of Hawaii. Assuming a 70% occupancy rate with a TOT average of $12/night (per same 2 bedroom unit) , that is an additional $3,066 in tax on the unit annually.
This is the tax whose purpose for being is to mitigate the impacts of transients.
When combined with a $14 per 1k, talk about double dipping the issue. It is obscene.

 

[Troopers]

Troopers.

I understand your view of the tax as a timeshare owner. A couple of hundred bucks in not enough to upset the applecart. It is what it is. Vacations are important, and not about to be spoiled over this.

I like to keep it simple. Assessed valuation can only be computed on the value of the real estate. Not the furnishings or services presumed in the price paid (whatever price). Industry standard is 65% real estate, 35% furnishings & services.

There are 516 condo units, total.
Total tax burden for 09/10 is ~$6,386,000.
$6,386,000/516 = $12,376 tax per condo unit., or $24,772 per two bedroom condo. That is annual property tax per condo.
, or $476 per deeded week. Just about what the new bill will be.

Yes, about $200 per deeded week more than previous tax assessment. That is quite a tax bite.
It puts the dis-proportionality in some context. $24,772 tax per condo.

The property valuation per 2 bedroom condo is then $2,444,000.
For every unit; ocean front, ocean view, and Island view.

"Fair market value" is not some average of original sale prices and some relatively small number of resales. It is current market price, averaged across a corresponding tax year. A tax rate of $14 per 1k is stiff. But, on a valuation of 2.44 million it is government gone wild.

Thanks Fred, and you are right that a couple of hundred is what it is.

Phew, I'm glad our numbers jive.

FWIW, the property valuation per 2 bedroom condo is $1,768,000, not $2,444,000.

 

[Fredm]

Thanks Fred, and you are right that a couple of hundred is what it is.

Phew, I'm glad our numbers jive.

FWIW, the property valuation per 2 bedroom condo is $1,768,000, not $2,444,000.

Actually, its higher. Your 1,768,000 value is the taxable base excluding the non-taxable portion for furnishings and services. If the standard 35% is applied to 2.444 mil, the assessed value would be $1,588,600. To arrive at your 1,768,000 the appraised value would have to be 2,720,000, not 2,444,000. I just rounded in my head.

Irrespective of the 'real' amount, the tax remains almost 25k per condo, plus another few thousand in TOT.

Fortunately, this is not one of those "Starwood is the evil empire" discussions.
Hawaii and Maui County should be ashamed of themselves.

 

[DavidnRobin]

...and we will be spending less money eating out and such - this only hurts the business owners who can vote in Maui (unlike us). Typical - taxation w/o representation. I can only assume that Kauai will soon follow suit.

Is there a way for Owners to challenge their appraised amount - and not base it on the 'paper' amount that WKORV claims which is much more than the actual value.

 

[rickandcindy23]

So Fred, your numbers make sense, and it is almost $500 per owned week in property taxes, not even taking into account the TAT, an additional tax they get from anyone staying there, including the owners who already paid $500.

Westin ought to think of some new ways to save money, or they should consider ways to get more cash out of exchangers. :ignore: Did I just say that? Heavens! I must be crazy to say it, but consider that an exchanger into Kahana Falls has to pay a huge energy fee of $150 on a 2 bedroom unit, and the Kaanpali Beach Resort charges high parking fees.

Of course, Westin mgmt. would probably just keep wahtever fees they collect, anyway, and it won't even help owners. :annoyed:

 

[wannagotoo]

I am at WKORV-N right now. I called the General Manager to see about an appointment and was referred to a fellow in Florida. Notes:
1.There is an increase of $15.4 MILLION (7%) in tax revenue from hotel/timeshare reevaluations/assessments. The elected officials realize timeshare owners do not vote so their jobs are not on the line when increases are directed to timeshare owners. Economy is flat and timeshare owners are easy pickin's.
2. 75% of the economy comes from visitors
3. Starwood has paid an additional $7mil for taxes that is now in an escrow account and cannot be used until the litigation is resolved. The hearing is scheduled for next summer, and if not resolved a law suit will follow
4. Marriot, ARDA, etc., are all considering litigation but don't seem to be united at this time.
5. Two Board members for WKORVN are owners, Steve Ward and Craig McFarland
6. http://www.co.maui.hi.us/index.aspx?NID=66 this will get you to the list of councilmen who we can write to express our concern.

 

[SDKath]

I am at WKORV-N right now. I called the General Manager to see about an appointment and was referred to a fellow in Florida. Notes:
1.There is an increase of $15.4 MILLION (7%) in tax revenue from hotel/timeshare reevaluations/assessments. The elected officials realize timeshare owners do not vote so their jobs are not on the line when increases are directed to timeshare owners. Economy is flat and timeshare owners are easy pickin's.
2. 75% of the economy comes from visitors.

You know the expression "biting the hand that feeds you." That is what the Hawaiian government is doing to non-residents right now. BAD idea in the long run, even if it is an easy solution for today's troubled times....

Katherine

 

[Fredm]

You know the expression "biting the hand that feeds you." That is what the Hawaiian government is doing to non-residents right now. BAD idea in the long run, even if it is an easy solution for today's troubled times....

Katherine

VERY BAD idea, indeed.

Those who think this increased tax is the real additional cost are sadly mistaken.

It is straw that is breaking the back of many owners.
If you have not looked lately, resale prices are down at least 10% in the past month alone. The cherry on top of an already hammered market.

 

[Darwin]

Good discussion. Writting to the council members can help. By disappropriately taxing us I will be spending less on eating out, attractions, shopping, etc. I will be pointing this out to them. In this case where units are sold on a regular bases, replacement cost should not be used.

The sales comparison analysis should be used.

There are three approaches to value. Sales comparison, Cost, & Income.

Cost of replacement = The primary use of the cost approach is to obtain a value estimate that may be compared with value estimates determined by the sales comparison and income approaches to value. For example, government buildings, schools, hospitals, and churches are considered special-purpose property that rarely sell or produce income. The cost approach usually provides a more accurate estimate of market value when the improvement is new and available for use at its highest and best use.

The cost approach is based on the principle of substitution which states that "a prudent or wise person would not pay more to buy a property that it would cost to construct new an equally desirable substitute property assuming no costly delay is encountered in making the substitution."

Cost does not necessarily equal value.

Sales Comparison = approach is a method by which the market value of a property is based upon the prices paid for similar properties in the market. It involves comparing properties similar to the subject property for which market data such as sales prices, asking prices and offers to purchase are available.

The sales comparison approach relies on the economic principles of substitution, change and contribution. The principle of substitution is the underlying principle that applies to this approach. This provides that if two similar properties are available for sale, a wise person will purchase the property that could be purchased at a lower asking price. The principle of change provides that "market value is never constant because of environmental, economic, social and governmental forces are at work to change the property and its environment." Property values need to change to reflect this. The third basic principle (contribution) provides that the "value of a component of property depends upon its contribution to the whole property." Example, a property owner spends $10,000 to erect a garage; however, a typical buyer is willing to pay only $8,500 for the garage. The contributory value of the garage is $8,500 instead of the $10,000 cost.

Enough

 

[Ken555]

On a related note, I just recalled that Riverside County lowered assessment values on WMH in the last year. Quite a difference between their actions and those on Maui.