Maui Resort Property Tax increase significantly?

[jerseygirl]

Would be stunned if Starwood had no idea it was coming. Certainly they should have someone on staff who stays on top of things like this. But, then again ....

 

[Fredm]

Would be stunned if Starwood had no idea it was coming. Certainly they should have someone on staff who stays on top of things like this. But, then again ....

Oh, perhaps they knew "something" was coming. But, not in the time frame mentioned, when Hole19 bought in 2008.

Besides, the assessed valuations are so off the charts as to leave anyone breathless.

My point being that this is not Starwood's doing. The villain is Maui County.

 

[jerseygirl]

I agree that Maui County is the villain. Perhaps a different animal ... but, didn't the article in which you were quoted talk about a "known increase" when the resort was sold out? Somehow, I'm not thinking that Starwood was very upfront about that when they were selling units.

Of course, I'm also completely cynical at this point. I think Starwood has, by a huge margin, the poorest excuse for a management team of any of the comparable hotel-based timeshare systems (Hilton, Hyatt, Disney, Marriott). So, I guess I just see evil everywhere I look.

 

[Hole19]

I agree jerseygirl...something just doesn't seem right here and we are left footing the bill with seemingly no recourse! It's such a frustrating and helpless feeling.
If MF's stayed where they are I could live with it. My biggest concern is that they will go through the roof and take away ANY benefit of time-share ownership. If fees go to 3 or 4 or 5 or $6,000 per year it will ruin the industry or atleast the desireability for Hawaii/Maui time-share. Many owners can't and won't absorb that increase and I hope that the "powers that be" realize this!
Can any TUG member share some advice to ease our concerns? Where does this money grab by Maui County end??

 

[rocky]

This article from the NYT provides some context about the difficulties HI is facing -- I'm not arguing that the tax increases are valid -- rather, just providing a bit of background on the dramatic budget problems the state is struggling with. So you know to pick your restaurants carefully.........

http://www.nytimes.com/2009/12/20/us/20hawaii.html

 

[Ågent99]

Well, it comes to a certain headway.

You may have to raise prices to offset increasing expenses but you'll reach a point of price increase that will cause your customer base to decrease such that you may be forced to LOWER prices to get them back.

One problem we have is that a lot of us are stuck but that is classical SHORT TERM thinking by the industry (meet the next quarter's bottom line). In the long term, one cannot continually increase prices. I'm sure a lot of us will simply walk away and never EVER come back. That is bad for the TS industry as a whole or at least for Starwood managed properties....

I know I've been soured for TS. I seriously doubt I will ever buy anything more. I love the vacations but the cost is only increasing and at cataclysmic rates.

 

[Fredm]

Thanks Fred, Are we SURE Starwood had no idea?? My contact at Maui County confirmed nothing was in writing but the understanding was clear that eventually the Ocean Resort Villas properties would be re-classified from "hotel" to "condo" valuations. I'm learning as I go here and still trying to make sense of it all. Just feeling a bit duped!!

No, I am not sure.

I do know that this entire mess is a contrivance by Maui County.

The re-classification was from taxing a single property ( the resort) to taxing the condos individually.

When the resort was taxed, the bill was distributed to the individual condos based on their size (just as HOA fees are).
What Maui County did was engage in alchemy.
The very same property was deemed to have an assessed valuation 300% + higher, overnight, when the condos were "valued" separately. The lame rationale is that there is more property on the books.

Never mind that the tax rate is 700% higher than that of a resident's assessed valuation.

Never mind, again, that Maui County conveniently ignored its own definition of "fair market value" when it established the new assessed value.

It was an outright ugly and shameful money grab on those who do not vote in the jurisdiction.

Worse, IMO its devious justification places it in direct contradiction of other taxes imposed by the State of Hawaii.
It is, therefore, arbitrary and discriminatory. No nexus exists as a basis for the tax.

To answer a question you posed in another post, this should be a matter for the courts. Maui County was careful to not raise residential taxes, so no ballot initiative to control taxation will succeed. But, a test of the legal basis for its taxation may. This will require the resources of an advocacy group, such as ARDA. Its members have the most to lose in the long run. Timeshare developers cannot sell new product with this tax structure in place.

While it may be a short term expediency, Maui County has abdicated responsible governance, IMO.

Think of what can happen. Timeshare owners do not vote in Maui County. But, they do vote in matters relating to their resort ownership.

What if......
- owners voted to take over the resort.
- owners decided to convert their intervals back to
individually owned condos, and sell them on the open
market. Take their share and run.

Under the taxation laws, the persons acquiring the condo will be taxed at resident rates. Also, there will no longer be a TAT on its occupancy. In fact, the entire resort is no longer a "resort". It is a private residential condo complex.
Under existing laws, the individual condo purchase price becomes the "fair market value".

So, what happens to the tax base in this scenario? Hawaii and Maui lose ~$32,000 per year, per 2 bedroom condo in taxes. While nothing else changes.

Far fetched? Maybe. But, if the governing documents permitted it my guess is that it would happen. The new condo owner pays for their share of common facilities. All else is their responsibility. Just like any other condo association. Down the beach, The Whaler is operated exactly like this. The property is a mix of privately owned and timesharing units.

Assuming the governing docs permitted it, how hard do you think it will be to convince 26 shares in a condo that they should sell out to an individual owner? It is near the point that they will have nothing to lose.

The real loser will be Maui County and the State of Hawaii. All because they are killing the goose that lays the golden eggs. This tax structure cuts both ways.

Of course, the ripple effect on the tourist economy will be huge.
Less weekly transient scum to support retailers, stimulate sales tax, and pay for services they do not use.

Yet, the mayor brags that tax revenues have actually increased without raising resident taxes by one cent.
Idiot!

 

[gregb]

Reading the NYT article, it does not mention any attempt by the state or counties to raise income to cover the losses. Well we know what Maui did. Raise the rate on TS. But what about the properties? Shouldn't they be paying "their fair share"?

Greg

 

[DavidnRobin]

Perhaps... WKORV puts the valuation of an OFD at >$100K (for example) in part to show that they were correct when they told Owners on how their VOIs would appreciate - when the true valuation is half of that. By doing this - WKORV has created a problem for taxes for the Owners upon conversion.

The true valuation for taxation should be what on average has been paid for these VOIs - not what WKORV claims as the value.

The question I have - is what Maui county is basing the valuation of WKORV VOIs - the average purchase price - or WKORV's inflated price?

 

[Fredm]

Perhaps... WKORV puts the valuation of an OFD at >$100K (for example) in part to show that they were correct when they told Owners on how their VOIs would appreciate - when the true valuation is half of that. By doing this - WKORV has created a problem for taxes for the Owners upon conversion.

The true valuation for taxation should be what on average has been paid for these VOIs - not what WKORV claims as the value.

The question I have - is what Maui county is basing the valuation of WKORV VOIs - the average purchase price - or WKORV's inflated price?

The units sold for whatever price.
The information is with the Country Clerk. It is what it is.
How Maui County arrived at the assessed value is the issue.

What Maui County is doing is arbitrarily selecting whatever it wishes to compute a tax.
For example, it chooses to tax the unit as a timeshare because 52 intervals are sold for a much larger aggregate price than a comparable residential condo. This is what most taxing authorities do. Timeshares always pay more tax than their residential equivalent.

However, all other taxing jurisdictions leave it at that.
What Maui County does is apply a tax rate 700% higher than the residential equivalent, to the inflated value of the timeshare. No basis exists for it.

They explain it away by noting that timeshare owners somehow consume more services which must be paid for.
But, that is what the TAT is supposed to be for (which btw is being raised by 1% in June). So, at the very least it is double dipping the issue. Adding insult to injury.

THEN, MC completely ignores its own definition of "fair market value" when determining the assessed value. It CHOOSES to invent the value. The invented value may be rationalized by stating that the last highest price sold was "x". But, that is not fair market, not even by their definition.

Further, it completely ignores the principal of taxable value.
Furnishings and services are non taxable items everywhere else in the USA. In California, for example, 35% of a timeshare purchase is subtracted before arriving at the assessed valuation, as this is the standard non taxable portion.

The bottom line: Maui is desperate. They need money and instructed staff to produce the necessary findings to support the rape.

Starwood has nothing to do with this. The actual details of sales are public record. What Maui has chosen to do with it is an abomination. And IMO illegal.

 

[gregb]

For example, it chooses to tax the unit as a timeshare because 52 intervals are sold for a much larger aggregate price than a comparable residential condo. This is what most taxing authorities do. Timeshares always pay more tax than their residential equivalent.

However, all other taxing jurisdictions leave it at that.
What Maui County does is apply a tax rate 700% higher than the residential equivalent, to the inflated value of the timeshare. No basis exists for it.

This is double dipping. First they tax at a higher rate, for whatever justification they can find. And secondly they apprise at a much higher value. Now I could see doing one or the other, but doing both is beyond the pale.

They explain it away by noting that timeshare owners somehow consume more services which must be paid for.
But, that is what the TAT is supposed to be for (which btw is being raised by 1% in June). So, at the very least it is double dipping the issue. Adding insult to injury.

I wonder exactly what services we consume more than other island visitors and even residents? We certainly don't use the schools, the hospitals, the dog catcher. Yes we drive rental cars on the roads, but the locals use the roads as well. And I don't see how TS owners use any more services that other resort visitors, yet our taxes are much higher.

I had been thinking of purchasing some more weeks on Maui, resale. But given the current uncertainty about the MF increases, I will not do that. So in the end Maui will lose the extra business I was planning on bringing to the island.

And don't even get me started on the extra taxes they levy on rental cars. My $228 car rental has over $100 added as taxes and fees. That is a 44% markup on the rental. Way more than I paid recently in Orlando.

Greg

 

[LisaRex]

I wonder exactly what services we consume more than other island visitors and even residents?

I believe this is how they justify themselves:
http://www.mauinews.com/page/content.detail/id/500583.html?nav=10

 

[Fredm]

I believe this is how they justify themselves:
http://www.mauinews.com/page/content.detail/id/500583.html?nav=10

Wow! That article is not a justification. It's an indictment of their stupidity and incompetence.

With elected officials such as these Maui's economy is hopeless.

The arrogance is unbelievable. First prize goes to this discriminatory comment:
Hokama told panelists that he does do not view time-share owners “as an equal to us” when it comes to residency and ownership. They do not vote here and do not live here full time, Hokama said.

I have previously opined that the new taxes imposed on timeshare owners are arbitrary and discriminatory. To have an elected official actually voice the discrimination takes my breath away.

Hokama is Chairman of the Maui County Council.

Very discouraging. OTOH, he may have just hanged himself.

 

[LisaRex]

Their conclusions also fly in the face of Maui County's own 2006 commissioned study on the impact of timeshare conversions. Definitely a case of politicians reaching conclusions before the data is presented, and the ignoring data when it contradicts their conclusion:

www.co.maui.hi.us/documents/Finance/timesharestudy.pdf

"Nonetheless, data from the State of Hawaii Department of Business, Economic Development & Tourism suggests that the impact specifically from timeshare conversions is likely minimal. Separate data provided by the County, our real property tax model and data from those hotels that underwent conversion also supports this conclusion." - page 7, Executive Summary

Also noted in the summary:

"We also note that Real property tax rates and methods vary among the Counties, with Maui’s timeshare rate the highest Statewide. As each County has a different method for categorizing and valuing timeshare properties, Maui may wish to consider further analysis into these alternative methods for any applicability for Maui." - page 7

 

[LisaRex]

Here's another good article from 2006, which confirms my suspicions that Maui is trying to discourage development of TSs by taxing them to death:

http://pacific.bizjournals.com/pacific/stories/2006/07/10/story1.html

"With nearly 2,300 new time-share units set to be built by 2010, Maui County officials are trying to discourage more development by imposing higher taxes, even though a new study they commissioned found that time-share owners weren't a drain in the economy."

"Despite the study's findings, some county officials say time-share development is out of control and threatening the direction of Maui's carefully tended upscale tourism industry."

And this is a gem of a quote:

"I don't see it being a need in our county to have time share," said G. Riki Hokama, Maui County Council chairman. "That's not the visitor I want here."

Aloha!

 

[jerseygirl]

Wow -- I'm speechless!

 

[Fredm]

Reading the NYT article, it does not mention any attempt by the state or counties to raise income to cover the losses. Well we know what Maui did. Raise the rate on TS. But what about the properties? Shouldn't they be paying "their fair share"?

Greg

Of course they should be paying their fair share.
But, fair share is an oxymoron in Hawaii (Maui).
Resident property taxes are heavily subsidized by timeshare owners.
Residents pay $2 per $1,000 of assessed value. And assessed value is understated. While timeshare owners pay $14 per $1,000 of artificially inflated assessed value.
Plus, pay a 9% transient occupancy tax for every night the unit is occupied. Plus, pay an excise tax of 4.8% on the entire HOA fees paid.

 

[LisaRex]

(T)imeshare owners pay $14 per $1,000 of artificially inflated assessed value.
Plus, pay a 9% transient occupancy tax for every night the unit is occupied. Plus, pay an excise tax of 4.8% on the entire HOA fees paid.

And when we rent cars (using a one-week midsize Alamo rental as an average), we pay:

Plus, $1/day facility fee to upkeep their airport $7.00
Plus, 11.11% concession recovery fee to upkeep their airport $36.88
Plus, a $3/day "rental motor vehicle surcharge" $21.00 to presumably pay for their highways
Plus, 4.166% sales tax $15.47

For a total of $82.80 in taxes on rental cars per week.

 

[jarta]

LisaRex, ... If WKORV-N on Maui is not where you want to own, you can sell a 2-br there on eBay and buy a platinum season 2-br at WKV (148,100 StarOptions) for about the same price. Recently, they both have been selling for about $17K on eBay. The lower MF at WKV in one year would let you recoup any difference in price or closing costs. Why wouldn't you (or anyone else) consider that?

And, for the amount of StarOptions you get at WKV (a mandatory resort) you can trade into WKORV or WKORV-N any time you want - based on availability. And, there should be plenty of availability given Maui's position on taxing visitors to support the lifestyle of the locals.

You are not without a key to your own jail. ... eom

 

[LisaRex]

LisaRex, ... If WKORV-N on Maui is not where you want to own, you can sell a 2-br there on eBay and buy a platinum season 2-br at WKV (148,100 StarOptions) for about the same price. Recently, they both have been selling for about $17K on eBay. The lower MF at WKV in one year would let you recoup any difference in price or closing costs. Why wouldn't you (or anyone else) consider that?

Because, as a trader, I'd lose my OF view.

If I sold, I wouldn't buy back into Starwood. I'd either buy a Marriott or go back to renting from VRBO.

I do realize that I have the option to sell, but in this economy I'm looking at a $25k loss, at a minimum. That's a pretty expensive key. I'm hoping the tax appeal will be successful and provide some relief from MFs and taxes.

 

[nodge]

Check out here how local Maui realtors describe property taxes in Maui.

-nodge

 

[Hole19]

The "contact" I have referred to at Maui County is Wes Yoshida. They transferred my call to him because he was aware of the property tax issue but he claimed he was a lower level employee. During one of our conversations he admitted that the "locals" DO NOT like the tourists and restaurant owners hate time-shares mainly due to the fact that kitchen facilities are available limiting the need to eat out all the time.
They love our money but not us. Kind of makes you want to bank those weeks and enjoy other destinations!!

 

[LisaRex]

During one of our conversations he admitted that the "locals" DO NOT like the tourists and restaurant owners hate time-shares mainly due to the fact that kitchen facilities are available limiting the need to eat out all the time. They love our money but not us. Kind of makes you want to bank those weeks and enjoy other destinations!!

There's virtually no difference between a condo renter and a timeshare owner. Both have kitchens and both invariably eat a lot of meals in. I can say that my spending patterns were exactly the same when I rented a condo via VRBO vs. staying in our TS. It would at least make a bit more sense to me if they targeted rental condos AND TSs.

BTW, even when we go to the grocery store, we are STILL helping the locals because there wouldn't even be a Costco, that the locals have incidentally flocked to instead of supporting their friendly neighborhood grocer, without us horrific tourists.

There are real issues in Hawaii. Tourism is almost always a love/hate relationship. But I've rarely witnessed the targeting of one particular class. Like I said before, they should have declined to permit TSs if they didn't want them. But taxing them to death afterward as a means of driving them out of business is a sadistic way to govern.

 

[DanCali]

LisaRex, ... If WKORV-N on Maui is not where you want to own, you can sell a 2-br there on eBay and buy a platinum season 2-br at WKV (148,100 StarOptions) for about the same price. Recently, they both have been selling for about $17K on eBay. The lower MF at WKV in one year would let you recoup any difference in price or closing costs. Why wouldn't you (or anyone else) consider that?

And, for the amount of StarOptions you get at WKV (a mandatory resort) you can trade into WKORV or WKORV-N any time you want - based on availability. And, there should be plenty of availability given Maui's position on taxing visitors to support the lifestyle of the locals.

You are not without a key to your own jail. ... eom

Why do you think nobody is considering that? It's definitely something I'm even more than considering And I'm probably not the only one...

Because, as a trader, I'd lose my OF view.

If I sold, I wouldn't buy back into Starwood. I'd either buy a Marriott or go back to renting from VRBO.

I do realize that I have the option to sell, but in this economy I'm looking at a $25k loss, at a minimum. That's a pretty expensive key. I'm hoping the tax appeal will be successful and provide some relief from MFs and taxes.

The loss is there, whether you sell or not... The only reason to hold on is if you think prices will appreciate or at least depreciate slower going forward than at other places (assuming the alternative investment has to be another timeshare). If MFs keep rising and you keep losing 10%-20% of your equity a year, is an OF unit worth the $5000+ annual cost (MFs + equity loss)?

Even if they win the appeal and the Maui tax goes away - do you think MFs will go down? Or will there be a new "excuse" to keep them high? 10%-30% increase a year is not sustainable. At some ponit MFs have to flatten out or the resort will implode. I think my threshold is probably a lower amount that SVO has in mind.

Ask yourself if you would buy the property today for $18K or whatever the current market value is. If the answer is that that price is too high, then that means it's a great price to sell it for...

 

[DeniseM]

Because, as a trader, I'd lose my OF view.

If I sold, I wouldn't buy back into Starwood. I'd either buy a Marriott or go back to renting from VRBO.

I do realize that I have the option to sell, but in this economy I'm looking at a $25k loss, at a minimum. That's a pretty expensive key. I'm hoping the tax appeal will be successful and provide some relief from MFs and taxes.

I agree Lisa - I don't know why anyone would sell their WKORV week, take a $25K loss, and then turn around and buy at WKV! Talk about throwing good money after bad! If/when I decide to get out, I will be done with Starwood!