RE: Phasing Out TVRs in the Apartment District (PSLU-34)

Aloha,  October 29, 2021

On Wednesday, November 3, 2021, at 9 a.m., the Maui County Council’s Planning and Sustainable Land Use Committee will be looking at the TVR Phase Out legislation for the first time. This will be our first real opportunity to share our reasons for opposing this legislation, and I need your help. Please reach out to the Maui County Council and let them know that you also oppose this legislation, and that moving forward with it is a bad idea. I’ve shared our reasons for opposing the bill, as well as the contact info for all the County Council members below.

As a practical matter, these properties are allowed to conduct TVR use by virtue of the comprehensive zoning ordinance and the express language of Chapter 19.12.020, Maui County Code, which outlines the permitted uses in the A-1 and A-2 districts. TVR use is not an accessory use, or a nonconforming use, but an expressly permitted use that has been conducted in the A-1 and A-2 districts for decades by thousands of property owners. State law grants the county some authority to eliminate “nonconforming uses,” but based on history and the plain language of the law, TVR use for these subject properties is a vested property right that is far from a “nonconforming” use.

Aside from whether or not the County of Maui can eliminate TVR use in these subject condominiums, RAM would also like to address whether the county should eliminate the use. RAM has identified several reasons why the County of Maui should not eliminate TVR use for these subject condominiums:

1. Economic Benefit: The County of Maui has identified approximately 7,302
condominium units that have the ability to conduct TVR use under the comprehensive zoning ordinance’s permitted uses for the A-1 and A-2 districts. Based on recent changes to our real property tax laws, these properties are generally placed in the short-term rental tax classification by default. On 10/21/2021, the Director of the Department of Finance publicly stated that eliminating TVR use in these properties “would possibly lead to a
negative revenue change at about $23 million per year.” According to data provided by the Selected Real Property Statistics for Budget Consideration: FY 2021-2022, the average amount of revenue expected to be provided by each property in the STR tax class in 2022 is $10,241.00. Therefore, these 7,302 condominiums represent approximately $74.7 million in annual RPT revenue overall. According to Moody’s, “the county's reliance on generally stable and predictable property taxes that are paid primarily by out-of-state owners of timeshares, vacation rentals and second homes'' is a significant factor related to our excellent bond rating. It makes no financial sense to eliminate such a reliable and substantial source of revenue for the county, especially at the risk of jeopardizing our bond rating.

2. Funding the Comprehensive Affordable Housing Plan: The Comprehensive
Affordable Housing Plan calls for the County of Maui to “increase funding into the Affordable Housing Fund to $58 million annually.” Similarly, the plan calls for the County of Maui to use its excellent bond rating to borrow against the Affordable Housing Fund in order to fund other components of the plan. As discussed above, eliminating TVR use from these subject condominiums would result in a possible loss of $23 million in revenue annually, and upwards of $74 million in annual revenue lost overall. Such a loss in revenue and reduction in our tax base would make it impossible to fully fund the Comprehensive Affordable Housing Plan, and it would jeopardize our ability to borrow enough money to fund various components of the plan. Please, do not defund the Comprehensive Affordable Housing Plan before any housing is even made available.  These impacted condominiums will not provide the housing our community needs, but they can fund the development of the housing our community needs.

3. Eliminating TVR Use May Actually Jeopardize Long-Term Affordable Housing Opportunities for Residents: TVR use in the subject condominiums is an incentive for investment purchasers to seek out and purchase these aging condominiums instead of other residential properties on the island. If there is no difference between the permitted uses allowed in an aging 1 bedroom condominium in Kihei or a 3 bedroom home in Waihee or Makawao, but the prices are comparable, an investment purchaser might as well buy the 3 bedroom home that would have been more suitable for one of our residents. Also, even if these properties lose TVR use, they are generally not the type of housing our residents need, and they will likely not sell at rates many of our residents can afford. The subject properties are all 30+ years old, primarily built and designed as TVRs, largely located in the sea level rise exposure area, and have aged infrastructure that has been used hard for many years. That means they have minimal parking, minimal storage, high maintenance fees, high special assessments, high tax assessments, and are in the areas most susceptible to climate change. Given the current prices of comparable non-TVR units and the average monthly maintenance fees of these units, few (if any) can be expected to sell at “affordable” or even “workforce” rates.

4. Empowering the Hotels and Maximizing Advertising Dollars: Eliminating TVR use in the subject condominiums only benefits the hotel industry, as it will be eliminating their only real competition while negatively impacting county revenue and affordable housing development. With no competition, the hotels will maximize their capacity and realize huge gains in revenue. Naturally, much of this revenue will go back into advertising Maui as a destination, thereby increasing the numbers of tourists visiting the islands. Throughout the pandemic period, the County of Maui already demonstrated great preference for the hotels and resorts, and this further gift of eliminating their competition almost entirely is alarming and arguably inappropriate.

5. Legal Challenges: Many property owners have already contacted RAM and expressed their intent to take legal action against the County of Maui if their property rights are abridged. Though HRS Section 46-4 ostensibly provides the counties authority to phase out “nonconforming” uses in the Apartment zoning districts, it is difficult to classify TVR use as “nonconforming” for these subject properties. TVR use is expressly permitted in the language of the comprehensive zoning ordinance, and has been stated as expressly permitted in several pieces of legislation over the past 7 years. TVR use has been conducted in the A-1 and A-2 districts by thousands of property owners, throughout hundreds of buildings, over the course of decades. I don’t know if impacted property owners would win a legal challenge against the County of Maui, but I have a feeling it will cost our county a lot of money and time to find out.

If you agree with RAM’s reasoning and don’t want to see the County Council make a big mistake that would jeopardize our economy, devastate county revenue, and defund the affordable housing plan outright, please reach out to all the County Council members and let them know that you OPPOSE the TVR Phase Out legislation in PSLU-34:

● Alice Lee, Council Chair: Alice.Lee@mauicounty.us, Phone: (808) 270-7760;
● Keani Rawlins-Fernandez, Council Vice Chair: Keani.Rawlins@mauicounty.us, Phone: (808) 270-7678;
● Tasha Kama, Presiding Officer Pro Tempore of the Maui County Council:
Tasha.Kama@mauicounty.us, Phone: (808) 270-5501;
● Gabe Johnson, Councilmember: Gabe.Johnson@mauicounty.us, Phone: (808) 270-7768;
● Kelly King, Councilmember: Kelly.King@mauicounty.us, Phone: (808) 270-7108;
● Mike Molina, Councilmember: Mike.Molina@mauicounty.us, Phone: (808) 270-5507;
● Tamara Paltin, Councilmember: Tamara.Paltin@mauicounty.us, Phone: (808) 270-5504;
● Shane Sinenci, Councilmember: Shane.Sinenci@mauicounty.us, Phone: (808) 270-7246;
● Yuki Lei Sugimura, Councilmember: Yukilei.Sugimura@mauicounty.us, Phone: (808) 270-7939

Mahalo,
Jason A. Economou
Government Affairs Director
REALTORS Association of Maui

Agenda: Nov 3, 2021

PSLU-34: Text, Status