Musings: Forbidden Fruit II

Following the Forbidden Fruit I post, several commenters asked why Kauai County allows the illegal vacation rental trade to flourish. Others questioned whether corruption or graft is at play.

Though I've been regaled with tales of applicants plying planners with food and liquor, paper sacks of cash changing hands, and county workers demanding that applicants use certain contractors in order to gain permits, I haven't been able to verify any of it, or get anyone to go on the record.

What seems more likely is that Kauai County allows illegal vacation rentals to continue because it directly profits in the form of higher real property taxes paid by landowners who are claiming a TVR use, even though they lack permits.

A limited review of county tax records shows that in Wainiha-Haena alone, 11 property owners are currently claiming a vacation rental use, or have recently switched from such a use to “commercial home business,” even though they lack valid TVR or homestay permits.

Another six are operating blatantly in the state conservation district, even though such uses are prohibited in that district and they lack county permits.

This is in addition to the 87 active and licensed TVRs in Wainiha-Haena, including four that were issued cease and desist notices for violations, though they continue operating pending their appeal.

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And how many more, do you suppose, are running completely under the county's radar? Well, that's easy enough to find out. Just take a gander at the AirBnB site.

This is how a rural North Shore community — one with no services and serious flood exposure — turned into a de-facto visitor destination area and lost nearly all of its longterm rental housing, as the county deliberately looks the other way.

It's gotta be deliberate, an intentional inertia of political will. Because surely at least a few of these properties are sufficiently easy-pickings to catch the eye of the planning department. Especially when the County Council ordered it to go forth and harvest the low-hanging fruit.

The 11 property owners include: Patricia McConnell's Song of the Jungle; Lindon Keeler's Affordable North Shore Cottage; the Stocksdale 2000 Trust's River House; Bomun Bock-Chung's multiple TVRs, known variously as Pinao (currently on the market for $1.29 million), Rainbow Views, Lily Pad, Dawn and Moon; Martha Fritsch Trust's Halehanu Studio; Marcus Pettini's Hale Haena Vacations, with two B&Bs in the same house; Andrea Smith's TVR; David Rees' The Cottage; Steven “Esteban” Rogers, who rents Haena Hideaway, Haena Hale and one advertised as “New! Haena Haven,” and the Guyer-Searles' Revocable Trust's Hale Ho'o Maha.

Even though they have declared themselves as TVRs for tax purposes, many play coy or lie outright on their websites to avoid obvious detection. Take Halehanu:

Taxes & Cleaning are included in the nightly rate. Payment information is detailed in the initial quote given to our perspective guest from their inquiry here on VRBO. This studio is 'permitted' with a Transient Accommodation Registration Certificate Hawaii Tax ID#. Our Tax ID # is posted by law is: W91663365-0. This is a "Transient Accommodation Certified Registration".

Perfect for a couple, for long term not less than 180 days. If you're staying for less time as a guest of the owner, and have been invited to this site, welcome!!

Yeah, right. Because people always direct their personal guests to commercial websites.

Or the Lily Pad, Dawn and Moon studios, whose website with PayPal buttons reads:

Natural Kauai by private invitation only

Not for public use You are Booked :)

Others that previously claimed a TVR use switched to “commercial home use” to remain under the radar or to begin preparations for seeking approval as a homestay.

So why do people voluntarily pay far more taxes when they're already running an un-permitted visitor accommodation? If they're ultimately busted, will they claim they thought it was legit because they were paying taxes all along? This seems to be an attitude the county tacitly endorses.

How else to explain why Hale Ono remains in operation? As I reported back on March 18, 2013, in part six of the Abuse Chronicles, it has an illegal ground floor bedroom in the flood zone. Its first application for a TVR permit was denied, and the second was withdrawn. But all this time it's made like it did get a permit: paying TVR taxes, openly advertising on-line, renting for an average of $471 per night.

Isn't that rather ripe — a low-hanging morsel just waiting to be plucked? Especially since it was pointed out to planning two and a half years ago. Heck, it must be rotten by now.

Or Hale Ho'o Maha, which has been operating an illegal multifamily TVR since 2004, and only last year got DOH approval of its septic system. It's never ever had a permit. Yet it continues to operate as area residents and the county contest its bogus application for a homestay permit. But even if the contesters win, the owners' attorney, Jonathan Chun, can appeal, dragging citizens with no resources into court while he gets paid and his clients continue to generate income from their unpermitted use.

It's a dispiriting fight, let me tell you.

To put the property taxes in perspective, Nick Michaels — whose Blue Lagoon TVR was also featured in the Abuse Chronicles — can pay his half-year tax assessment in just 10 days with his $1,500-per-night rental fee. Though he never bothered to renew his TVR permit for several years, and the county recently sent out a cease and desist notice, he'll be allowed to keep operating while the appeals process drags on. 

In short, there are few to no serious consequences for either permitted or illegal TVR operators who flout the ordinance — perhaps because the county allowed so many of them to improperly obtain their lifetime permits in the first place.

There's another force, besides filling its own coffers, that compels the county to ignore all these illegal TVRs. It's called the high-end real estate market. Take, for example, that little cluster-fuck known as Haena Cove. It comprises three vacation rentals — Hale Kamani, Lihi Kai and Hale Mahana — on one oceanfront lot.

As I reported in part 11 of the Abuse Chronicles, the county initially denied applications for Lihi Kai and Hale Mahana because of zoning violations. Two years later, after the new owner hired Jonathan, the county approved the TVR permits, even as it re-issued the zoning violations. Meanwhile, the property had sold for $7.5 million. Now, despite receiving just two very questionable TVR permits, all three houses are listed as vacation rentals on their real property taxes.

I don't hold out much hope that Kauai County will get serious about TVR enforcement. As one commenter admonished:

Everybody should know by now especially Joan that THEY DON'T WANT IT!

But still, it's important to keep shining a light on this issue. 

I mean, just in case you were wondering why the county was able to strong-arm some of the mom-and-pop B&Bs into shutting down, even as the well-heeled illegal guys keep operating like it's business as usual.

Because it is.