MOC Property Taxes

[GregT]

All,

There is a (discouraging) thread over in the Starwood forum on the dramatically
higher property taxes at WKORV and WKORV-N. Maui County has changed the
way they determine property taxes and its caused at 3-4X increase in property
taxes retroactive to mid-2009. It looks like approx 300 annual increase in property taxes
With a retroactive charge for 2009 (6 months).

I assume we'll be subject to the same, has anybody heard specifics if MOC has been
able to mitigate the cost (older hotel that converted, etc)? I would think Lahaina
and Napili Villas certainly don't help the argument.

High MFs have always been the criticism of Hawaii TS, but this is a huge, recurring
jump that is going to hurt the owners a lot.

Any info to share?

 

[MLC]

Why would any management company contest property taxes if they get paid a management based on 10% of the property taxes. Most developers get 10 to 15% of the MF(including property taxes) as part of their management. I am sure a lot on this broad would disagree with me on that. That is why I believe our board members need to look out for the interest of the members not the developers. I wished they were paid based on MF minus the property taxes



That is why California timeshares I always contest my value. I just want to be taxed on by what I paid for it. All other timeshares put the propety tax in with the MF. If you look into how the county appraises these properties you would be appalled.

 

[LisaRex]

Why would any management company contest property taxes if they get paid a management based on 10% of the property taxes. Most developers get 10 to 15% of the MF(including property taxes) as part of their management.

Because as the MFs increase, more and more owners will become delinquent or simply walk away from their TSs altogether.

15% of 0 = 0

Also, as MFs increase, it becomes far more difficult for salesmen to sell the property. $1500 (which is what the MFs were when I bought in 2007) is a far cry from $2500, which is what my MFs may be in 2010 with the increased property taxes. There is no amount of MaiTais that would have induced me to sign up for those kind of MFs.

 

[taffy19]

I called the sales department and asked them what this is about. The salesman didn't know anything about it but they had received several calls already from Starwood owners too to find out if the Marriott also had the increase in taxes. I hope that they will look into it and let us know as I am going to call back to find out more.

We own another timeshare on Maui (Maui Sunset) and our resort went to the meetings when the last tax hike came about. There was only one other resort manager who took the time to be there to fight these taxes but two resorts only is not enough to make a difference. I may call our President of our HOA here too as he knows very well what is going on in Maui.

 

[LisaRex]

Here's an article describing the 75% increase in property taxes when Maui County increased the tax from $8 per $1000 in valuation to $14 back in 2006. (This is compared to a $2 per $1000 on a private residence.)

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

Now they are trying to hurt TSs even more by using "highest and best use" as a cost basis for that tax. What I believe this means is that they are using full developer price as a cost basis despite the fact that there are thousands of resales which go for far less than full developer price.

http://www.maui411.com/mauitaxrates.html

Believe it or not, but they don't believe we are paying our fair share of taxes because we stay longer and are almost always occupied vs. hotels that have fluxuating occupancies.

I'm not even touching that logic or I fear Maui County will pass another tax in retaliation.

 

[dioxide45]

Why would any management company contest property taxes if they get paid a management based on 10% of the property taxes. Most developers get 10 to 15% of the MF(including property taxes) as part of their management. I am sure a lot on this broad would disagree with me on that. That is why I believe our board members need to look out for the interest of the members not the developers. I wished they were paid based on MF minus the property taxes

They might not care on a sold out resort, but a resort that is still in active sales will take a big sales hit if they don't fight it. This is why you should have all been contributing the extra $10 in your MF to contribute to the ARDA

 

[GaryDouglas]

Moc/mmo

There are the tax issues from a thread earlier this year, and now there is this new disturbance in the force. I've talked to past and present GMs of MOC (aka MMO) and they (Marriott) along with the board (Owners) are fighting this. In the mean time, the property tax portion of our MFs will progressively increase, unless any of these are overturned. Is the government in the process of killing the goose that laid the golden egg?

 

[GaryDouglas]

Death and Taxes...

From Mark Neumann's (President, Board of Directors) recent letter to owners:

... ""First and foremost, as stated below by the attorney David Wong of Carlsmith Ball LLD, representing the Maui Ocean Club Vacation Owners Association and Association of Apartment Owners of Maui Ocean Club, in concert with the associations from the Marriott’s Kauai Beach Club, Marriott’s Ko’ Olina Beach Club and Marriott’s Waiohai Beach Club.

“Following an audit of the Maui Ocean Club Association’s returns, the State of Hawaii Department of Taxation made assessments of additional general excise tax against the Association for the years ended December 2004, 2005, and 2006. Including penalties and interest to date, the amount at issue for the three years is approximately $970,000. The tax assessments do not identify the specific income items at issue, but appears to be principally attributable to “Tidy Fees” and “AOAO Dues” collected by the Association from its members. Tidy Fees are for additional “cleans” of members units. AOAO Dues are maintenance fees assessed by the Maui Ocean Club Association of Apartment owners {“AOAO”} against its Owners who are also Association members {historically, the Association has collected the AOAO Dues from its member on behalf of the AOAO instead of having the AOAO bill the members directly}. The Department of Taxation has taken the position that both the Tidy Fees and the AOAO Dues collected by the Association are subject to the 4% Hawaii excise tax.

The assessments have been appealed to the Hawaii Tax Appeal Court {Case No. 08-0075} and the Association has made a deposit of the contested amounts into the litigated claims fund to stop the further accrual of interest in the event the case is decided adversely to the Association. The Association was initially represented by Marriott’s tax counsel, who subsequently withdrew because of conflict of interest concerns. The Association has retained Carlsmith Ball LLP to pursue the appeal of the assessments. The Carlsmith firm is also representing three other Marriott Hawaii Vacation Owners Associations, all of which have similar tax appeals relating to Tidy Fees and two of which {Kauai and Waiohai} also have similar tax issues with respect to the maintenance fees for their respective AOAOs. The Association has entered into joint defense agreements with these other Vacation Owners Associations {VOA} which enable us to share information and expenses.

Trial on the appeal is scheduled for the last week of April 2010, but we are expecting that court filings to narrow the outstanding issues will be made before the end of the year.”

My only comment at this point in time as your Board President, is that we have no control of this situation. This was not an issue based on the interpretations of the original documents between the State and Marriott International. Now the State like all government agencies is looking for tax dollars to fund whatever wets their whistle. We, unfortunately look to be easy pickings although our attorney believes we have a strong case in our favor."" ...

 

[Clemson Fan]

The Department of Taxation has taken the position that both the Tidy Fees and the AOAO Dues collected by the Association are subject to the 4% Hawaii excise tax.

Ah yes, Hawaii's infamous GET (general excise tax) which is actually 4.7%. Hawaii is a very heavily taxed state and is anti business. The GET is charged on literally every dime an organization/company collects whether that organization makes money or not.

I was watching the movie Goodfellas a couple of years ago and they had a restaurant owner who needed money who got it from the mob boss who got part ownership of the restaurant as part of the deal. It didn’t matter to the mob boss whether the place was making money or not, it was always, “FU, pay me.” They eventually had to torch the place to correct the insurance money.

This is my analogy to Hawaii’s GET. I call the GET the “FU, pay me” tax. It doesn’t matter if as a business you actually lost money for the year, “FU pay me.” When I opened up my practice from scratch I was in the red for about the first 9 months and certainly for the first full year as a whole. That didn’t matter, “FU, pay me.”

The GET gets charged on everything including medical collections including Medicare and Medicaid. No other state charges a tax like this on medical collections. Medicare could care less about it so we have an extra 4.7% shaved off our Medicare and other medical insurance collections that no other state in the country has. It doesn’t matter, “FU, pay me.” One of the hospitals I work at is in bankruptcy thanks in large part to this GET. I know several of the board members and I know they could've avoided bankruptcy if not for this GET. They actually approached/begged the state legislature asking them for some sort of relief from this GET. You know what the state legislature told them, that's right, "FU, pay me." So the hospital went into bankruptcy costing hundreds of jobs.

http://the.honoluluadvertiser.com/article/2008/Mar/06/bz/hawaii803060319.html

Best wishes if you get really sick on one of the outer islands including Maui b/c there is a big physician shortage there.

I guess that’s what happens when one group holds a super majority in the state legislature for decades.

 

[Clemson Fan]

our attorney believes we have a strong case in our favor." ...

I would take this statement with a strong grain of salt. They're representing a multimillion dollar case if you include all the Marriott's that I'm sure will be a nice gravy train for them. So, I doubt they're going to say you have no chance and to just pay the tax which IMO knowing this state is probably the case.

 

[MOXJO7282]

The did the Westin start charging the extra taxes and the Marriott not yet?, because my MFs only went up minimally this year.

And could this result in a double hit, where we pay a fee for back taxes and then our taxes shoot up significantly into the future?

 

[sdtugger]

Two Potential Tax Increases

As I read the press clippings and postings around the web, I understand that we have two potential tax increases:
1. The GET tax which Marriott has appealed and for which they have made a deposit.
2. A massive increase in property taxes.

I've seen the GET tax and appeal addressed by the Board of Directors. But, if my understanding about the property taxes being a separate issue is correct, I don't believe that I've seen that topic addressed by Marriott.

Am I missing the issue here?

 

[GregT]

I believe our current MF's reflect the GET tax and TIDY tax as I understand MOC has decided to pay these while on appeal.

However, I don't believe that our MFs include property taxes at the same level as WKORV (who is appealing the tax increase) therefore we may have an increase in property taxes in the future.

Will be interesting to monitor.

Thanks!

 

[Clemson Fan]

I believe our current MF's reflect the GET tax and TIDY tax as I understand MOC has decided to pay these while on appeal.

However, weren't they taken out of the refurbishment fund causing the planned refurbishment to be delayed by at least a year?