Wednesday, March 6, 2013

Musings: Abuse Chronicles 7

[Owner update at end of post.] Though the phrase Kauai-grown usually refers to plants, it could as easily apply to the process that grows humble little beach cottages into luxury vacation rentals. All it takes is a load of manure, and the signature of county building division chief Doug Haigh.

To illustrate, let's look at Hale Haena, which began life in 1967 as a 720-square-foot, one-story, three-room home — the last house on the makai side of the road before Hanalei Colony Resort. Locals might recall it as the Nishimoto house.

In 1972, the downstairs was partially enclosed to create a little carport, with a washing machine and toilet. And so it remained until March 2004, when it was sold for $550,000, primarily because of its large, oceanfront lot. The house, according to county tax records, was valued at just $64,500 that year.

Within a month, the owner applied for a building permit to perform construction work estimated at $106,000. Under FEMA flood regulations, any project that exceeds 50 percent of the building's value is considered "substantial improvements,” which means the structure must be brought into compliance with flood standards. As the flood hazard certificate states:

All new construction and substantial improvements will have the space below the lowest floor free of obstructions. Such space will not be used for human habitation.”

The trick, some folks have learned, is to put a high value on the building, and a low value on the construction, so as to fall below the 50 percent threshold. In this instance, Tom Hegerty submitted an “opinion of value,” in which he claimed the house's value was actually four times its assessed value, or $252,975. He based that number on the replacement cost of the house, which he figured using construction costs of $225 per square foot. To justify those square-footage costs, Hegerty wrote:

The cost of construction in the Wainiha/ Haena area greatly increases because the five single lane bridges on Kuhio Highway have weight restrictions causing the cost of concrete and lumber to increase. I trust this satisfies your concerns.”

But in figuring the cost of adding 465 sq. feet to the house, construction costs of just $50 per sq. ft. were used. This resulted in a total of $89,563, which thus rendered the alterations “unsubstantial.” Doug Haigh signed off on this scenario (scroll to the end of the PDF) and the “unsubstantial” work began. 

 You can see the original ground floor utility room in this picture.

By the time the “unsubstantial improvements” were completed, the house had grown by 672 square feet, and the downstairs had been enclosed, within the flood zone. The carport and laundry room had been converted into two bedrooms and two and a quarter baths.
Upstairs, a new roof was added, along with a new bath. The former kitchenette was remodeled into a “fully-equipped gourmet kitchen with top-of-the-line appliances, custom cabinetry and granite countertops.” The floors were refinished with “beautifully aged zebrawood floors and natural slate, “ while “oversized sliding doors” were installed leading to the new to “ipe wood lanai.” 

At the end of the day, it looked like this. All for under $89,563. 
County flood inspector Don Lutao signed the certificate of occupancy, despite a provision in the county zoning ordinance that states:

Any non-conforming structure [i.e., a house built before the flood law]... may be repaired, maintained or altered in any manner which does not increase non-conformity.

Wouldn't it seem that enclosing the downstairs to make bedrooms would be increasing its non-conformance with the flood law, which is intended to minimize property damage and keep people out of harm's way?

On March 12, 2009, the owners applied for a non-conforming use certificate to operate the Hale Haena transient vacation rental (TVR). Thirteen days later, the planning department granted the certificate, even though the application lacked the documentation of prior use required by law, including a reservation log and proof that transient occupancy and general excise taxes had been paid.

The house was placed on the market in 2009, with a listing that described it thusly (emphasis added):

Hale Haena is a newly remodeled 3-bedroom, 3.5-bath tropical retreat steps from a golden sand beach in the heart of Haena. Private Remarks: County of Kauai (TV-1057-NCU) approved vacation rental. 2008 gross revenues approximately $100K+/-.

The house was sold for $1.1 million cash on Dec. 24, 2009. In just five years, the owners had doubled their money, thanks to $89,563 worth of construction and the vacation rental certificate.

The new owner renewed the certificate on April 29, 2010. Though no subsequent renewal applications were included in the file, the county's on-line TVR log showed it as renewed for 2011 and 2012. The log, as you may recall, was created as a way for citizens to monitor TVR activity and report possible violations. But if it doesn't jive with the planning department file, is it a valid tool? [Update: The owner of Hale Haena has advised me that she is current with all her county TVR renewals and is also up-to-date on payment of her state general excise and transient accommodation taxes. She also uses an on-island property management company. She further contends that she had no knowledge of the property's history until she read it here.]


Anonymous said...

That is sooooo irritating!!! Thanks for reporting Joan. I hope something is done about this lying, cheating and stealing!

Anonymous said...

Thank you for your series Joan! FRAUD is against the law. It amazes me how blatant these FRAUD continue to happen. These liars must be put into jail.

These TVR's puts people's lives at risk by being in the flood zone. Where are the taxes on that TVR income? I bet they weren't declared.

Meanwhile, these TVR's are STEALING OUR BEACHES, taking away public parking, and putting our groundwater at risk with multiple people using those outdated septic tanks. They are also CRIME MAGNETS because the criminals know where the TVR's are.

In addition, these TVR's take away jobs at our hotels and raise the prices of homes that locals can no longer afford. STOP these TVR's. We should have all of these TVR's deemed illegal and demolished.

Anonymous said...

The permits need to be revoked for providing false information to obtain them.

This is just classic Kauai style criminals.

Doug Haigh...grand pooh-bah of poop.

Anonymous said...

not to get too upset, there will be a big wave that will take all these illegals down---only bad thing is that the ocean will have all the trash in it! Greed and deceit will not win---may take a while, but it will happen! Akua sabe!!!! know what i mean?! And for all you people who get paid for not doing your jobs, i don't know what to say!

Anonymous said...

Here is an idea.

Can we ask Justin Kollar to file charges against Monsanto for MASS POISONING?


Anonymous said...

Monsanto isn't even on Kauai

Dawson said...

> Monsanto isn't even on Kauai <

No, just tons of their poisonous chemicals and genetically modified seeds.

Anonymous said...

Kollar needs to have proof or evidence first to file anything. Until then don't expect him to do anything. Sad to say, I don't see an end without something more than allegations.

Anonymous said...

How can they get away with this? Bernard, your planning and building depts are out of control!

Anonymous said...

Looks like more than allegations. Can't submit false information to get a government permit. Two ways to calculate per square foot values? Yikes!

Anonymous said...

Incompetence or corruption. You decide.

Anonymous said...

March 7, 2013 at 7:58 PM

nailed it!

Anonymous said...

Unfortunately the GMO can only be really and truly dealt with at a Federal level because it involves Interstate Commerce, it is one of the powers of the federal government, not a county one nor a state one. Wish and hope and call your local prosecutor and state representives all you want but until the US government deals with it we are all unfortunately stuck with it.

Anonymous said...


You can ask but 10:13 PM comment is correct. Let's hope Justin can deal with our local criminals and let's call our US representatives on the GMO issue.

Anonymous said...

It might be difficult to,prosecute the homeowners, but it should be easy to,prosecute the officials and inspectors who sighed off on this sh*t.
Joan is spelling it all out for the lazy law enforcement, who would rather chase marijuana smoke.

Anonymous said...

And the realtors who signed the falsified applications. Hegerty and Haigh are haoles! It's not just the locals, for you white folk keeping score.

Anonymous said...

@ 1:17PM

Another comment that underscores the racial bias of many of the posts on this blog, and the fact that a small group on both sides like to throw the racial card into the ring at every turn.

Anonymous said...

@ 1:41PM, yeah, the anti-local comments really rubbed you raw, too. Or is it your white sensibilities that were offended when it was pointed out that haoles are gaming the system?

Anonymous said...

I want to clear some things up about Hale Haena. I am the owner and I am in compliance since I purchased the home in 2009 with the TVR permits. I renew and produce all the required documentation to the state every year. I pay TAT GET taxes to the state of Hawaii every year. I have a management company on island. I continue to alert my potential vacation renters of the abuse, see my VRBO advertisement for the notification to my guests of the abuse. I also notify my potential guests that I am in compliance and have been doing this for a very long time. Here is what I tell them:
FYI… Make sure you rent from someone who has a TVR permit and from a reputable company (licensed management company).
We are one of only a few of licensed/permitted and established vacation rentals in Haena that pay taxes to the state of Hawaii. Our TVR permit is proudly displayed in our window as mandated and on our web sites. Others do not have the TVR permit or someone on island managing their home, but will tell you they do. Many are renting w/o complying with these laws and “you” maybe at risk if they are discovered with extremely large fines, etc.
Read Hawaii Act 326 which became law effective July 1, 2012. It requires operators of transient accommodations (vacation rentals) to do the following:
• Designate a local contact residing on the same island as the transient accommodation
• Provide the local contact’s contact information to any entity with covenants, bylaws, or administrative provisions operational with respect to the property on which the transient accommodations exists (an association of owners).
• Include the local contact’s name and phone number in any contract or written rental agreement.
• Provide on a website or by online link and display in all advertisements and solicitations on websites the registration identification number issued under HRS 237 D-4. (The TAT license number and GET).

I love Kauai and plan on retiring there and contributing to the community in many beneficial ways.