Monday, August 5, 2013

Musings: Tidying Up

The Kauai Planning Department is set to make its first progress report Wednesday on its tidy-up of the transient vacation rental (TVR) mess, in response to a threatened County Council investigation.

Planning committee chair Nadine Nakamura requested the presence of Planning Director Michael Dahilig to “provide a status report on the renewal of Transient Vacation Rental (TVR) Certificates and a briefing on any administrative or court proceeding(s) involving TVR applications, certificates, or operations."

It's timely, since most people were required to renew their TVR certificates by July 31, though some had different deadlines. Previously, as I've outlined in the Abuse Chronicles,  the department simply rubber-stamped renewals, even if they were a year late. But it's tightening up under intense scrutiny. 

"More than 70 letters have been issued since February for no or late renewals," county spokeswoman Beth Tokioka wrote in a July 12 email. "In these instances, the NCUC's [nonconforming use certificates] were forfeited and they were issued cease and desist letters.  Of those, at least 30 have appealed, and it's likely that number will grow."   People have 21 days to appeal. Despite the cease and desist order, they are allowed to continue operating pending their appeal, which could drag on for months.

With renewals on the front burner it's time to again raise the oh-so-thorny but fundamental question: how many of those TVR certificates were issued fraudulently or improperly from the get-go, and so shouldn't be renewed, because they shouldn't have been granted? The Abuse Chronicles series outlined 25 such certificates, and no doubt there are many more.

At one time, the idea that undeserving owners might be getting a valuable life-of-the-property   TVR certificate really stuck in the craw of Councilwoman JoAnn Yukimura. She attended a July 28, 2009 meeting of the planning commission, as it was preparing to issue a batch of previously-denied TVR certificates, and delivered this strong testimony (emphasis added):

The law says that the burden of proof is on the applicant to show that they were operating legally at the time that the law was passed. This is a grandfather status of vacation rentals. The law abhors grandfathering, they want to minimize it but you do want to allow those who were legally operating at the time of the law. They are entitled to a grandfather status.

But those who were not operating legally are not entitled to it and that is the job of the Planning Department to discern, in terms of a burden of proof is on the applicant. It is not on the citizens who are questioning the issuance. 

So I think the concern is has there been enough scrutiny? Has there been enough investigation? Once you [issue] a nonconforming status, that is a very strong statement and so it should not be done unless there has been good investigation of any claims, there has been a record of legal operation. So whether or not there is technically legal appeal from the citizens is almost irrelevant, it is your job to make sure that this job of the Planning Department was done correctly.

And I don't know the details but from what I have heard there hasn't been full investigation of some of the claims, there has been no clarification on the part of the Planning Department how they made their decisions, how they answered these different things. And if there hasn't then the certificates shouldn't be issued, never mind about revoking it later, it shouldn't be issued in the first place.

But they were, and here we are, four years later.

So does JoAnn still care enough to push the matter? Or will she and the others who shrank at the prospect of a Council investigation allow the department to keep sweeping this key critical issue under the rug?

Meanwhile, Koloa resident Tom Bartlett complained in a letter to the editor today first about property taxes increasing on his long-term rental in Princeville, which generates much his retirement income, before going on to claim: 

Second, for those owners who vacation rent, their taxes are really increasing. Most have a substantial negative cash flow. Will this be the tipping point where they just say sell, thus lowering the value of a significant portion of Kauai real estate having one of the highest tax rates?

If TVR owners are experiencing "a substantial negative cash flow," and now find it burdensome to be properly taxed as vacation rentals after years of sliding by at residential rates, the solution is simple: relinquish their TVR certificates. 

Then we'll finally start seeing the attrition that was always envisioned for this industry.

Because Tom certainly can't be suggesting that other taxpayers subsidize the TVR owners just to prop up a real estate market that was wildly inflated by treasure-hunters during the TVR gold rush. 

At least TVR owners will no longer be allowed to claim a permanent home use exemption  under Councilman Tim Bynum's property tax bill, which is set for a public hearing Wednesday morning. 

It's taken five years to close that loophole, but as we all know, the county moves slowly. And it never deep cleans.

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