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Senator Baker Comments on ‘Vacation Rental Bills’ Controversy

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   April 4th, 2012 · 84 Comments · Comments Via Facebook (3) · Maui Discussion

We invited Senator Roz Baker to comment on the ongoing controversy over the proposed ‘vacation rental bills’ that have upset some property owners.  Senator Baker was personally identified in the previously published “LETTER: Condo Owner Objects to Vacation Rental Bills.”

roz-baker-explains-w-shan-tsutsui

Senator Rosalyn H. Baker, South and West Maui. Courtesy photo.

By Senator Rosalyn H. Baker, 5th District, South and West Maui

Mahalo to MauiNow.com for providing me an opportunity to comment on the vacation rental bills that have been reviewed by the Legislature this session.

They have certainly been among the most hotly contested this year. As Chair of the Senate Committee on Commerce and Consumer Protection (CPN), I have reviewed hundreds of pages of testimony, almost all from out of state. The opposition to these measures has been passionate and outspoken, but supporters have also raised some troubling issues in the vacation rental industry. The reason the committee advanced the most recent bill, HB2078, is twofold: to protect the consumers who are renting these accommodations and to assist the Department of Taxation in enforcing the tax laws that are already on the books.

In determining whether to move HB2078 forward, the opposition’s testimony was given much consideration and ultimately resulted in the bill being significantly amended. Some of the amendments were suggested by an email testifier.

Last Friday, CPN passed out HB2078 with amendments that make it clear that existing laws like the Landlord-Tenant Code apply to these vacation rentals. This version HB2078, SD2 gets rid of the requirement that owners living out of state or on another island use a licensed rental agent to manage their properties. However, any owner that does not reside on the same island as the rental property must designate someone on-island to act as a local point of contact. This requirement already exists in the Landlord-Tenant Code but there has been some uncertainty regarding its applicability to these rental properties. Including this provision in the bill is important to ensure that our visitors have someone they can call in case of an emergency or if they need any kind of assistance. This bill would also require that the contact information for the local contact person be provided to the appropriate condominium, apartment or planned community association. Often times, these associations are left with the burden of dealing with unhappy visitors in need of assistance when it is the owner’s obligation to provide that assistance. This provision will help remedy that situation.

The vacation rentals, subject to this legislation, present a particularly difficult GET/TAT enforcement problem for the Department of Taxation. Amendments made to HB2078 help to remedy that problem. For instance, homeowner associations and the counties will be required to submit an owner’s relevant information to the Department of Taxation. This applies to all owners of these transient accommodations, even owners residing on the same island as their property. Again, this bill is intended to reinforce existing laws to make sure these businesses are in compliance. Our intention never has been to put them out of business.

I am sympathetic with the honest business owners who are providing these accommodations legally and in compliance with the law and tax requirements. However, the state needs the ability to pursue those that are not in compliance or who underreport revenue. Over the last few years, the growth of this industry through the internet has made it even harder to identify those who are not complying with the applicable provisions of the Hawaii Tax Code and the Landlord-Tenant Code. This difficulty and the problems associated with it needed to be addressed. The previous versions of these bills were, perhaps, too onerous an approach. The amendments made to HB2078 by the Senate Committee on Commerce and Consumer Protection will go a long way to remedying these problems while allowing owners to manage their own businesses.

Indeed, my legislative colleagues and I want people to come visit Hawaii. We want small businesses owners to thrive and make good use of their investments. But we also want people to comply with the laws that are in place. Unfortunately, there are those that willfully disregard the law and even some who mistakenly believe certain provisions do not apply to them. This bill will foster compliance and allow renters visiting our beautiful state to trust that they are dealing with legitimate businesses. HB2078, SD2, the committee report and testimony has been posted on the legislature’s website.

A hui hou,

Senator Rosalyn H. Baker, Chair, Senate Committee on Commerce and Consumer Protection, 5th District, South and West Maui

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  • Tashook

    The supposition that there may or may not be a problem enforcing current state law (and taxation) is debatable. One thing is obvious. If existing laws need additional laws in order for them to work perhaps the problem lies within the original law. The focus needs to be placed on finding those not in compliance (those not paying the tax) instead of adding burden to everyone because the state can’t enforce the current legislation without extra effort.

  • Pat

    I completely agree with Tashook. We still have seen no proof that there is a problem enforcing the current tax laws, but if there is, a new law is probably not the solution. This law also will require that non-residents post on their internet ads the names of their contact on the island. This is unnecessary and has nothing to do with tax compliance. It is only an invasion of privacy and can also be confusing to renters. Owners supply the names and numbers of their on-island help when a reservation is made (usually a part of the rental agreement.) This serves no purpose.

  • GeoJuggler

    Like many of the owners of vacation rentals following these bills, I like nearly all the amendments to these bills, and commend the Senator’s committee for listening to the testimony of the public and small business.  But I still
    have a few problems which I believe the Senator needs to address:

    1.
    The requirement of putting the ID numbers and agent’s name and contact
    info on all advertisements.  The State cannot dictate what we put on an ad. This is a freedom of
    speech issue. I believe this information does not have to be legally
    given until the agreement is provided to the prospective guest……only
    then does an official, regulated transaction occurring. Anyone has a
    legal right to put up an ad, for nearly anything (again freedom of speech). But when
    you actually send the agreement and
    money is exchanged, that’s when it becomes regulated. The State is
    jumping the gun here. They are trying to require things that they have
    no legal right to regulate. The State cannot regulate an internet ad.  Especially ads directly primarily to individuals that live in other states or other countries, outside of Hawaii.  This is not only a freedom of speech issue, this is also an interstate commerce issue.  The Senator should have considered this.
    2. As discussed above, the new language also requires the names and contact information of
    agents who work for those out-of-state or off-island owners to be displayed on all advertisements.  But the bill has no such requirement to display the names and
    contact information of those owners who live on-island and act as their
    own agent. This is a double standard. Why is it reasonable (according
    to the Senator) to require that off-island owners provide the names of
    agents, but not on-island owners? Is somehow the public better served
    for not knowing who the on-island owners are? I believe that this is
    also a major flaw that the Senator will have to address.

    3. The new language also requires that the names and contact numbers of the owner’s agents be provided to the State.  This, I agree, is good in theory.  But only if the State uses the information to verify that the owners have agents, and not to cross
    reference the names to see which agents are working for more than one
    owner at a time. This can very easily turn into a witch hunt for
    unlicensed managers/agents. This is one of the things the corporate Project Management companies have been
    after, to get rid of all the one-man, unlicensed managers who work for the owners. If they can’t get
    rid of the Vacation Rental By Owners, then they will get rid of the people who work for
    them.

  • Mauipropertyowner

    I appreciate the fact that the legislation realized that the proposed bill was far reaching and the DoTax is incapable of doing their lawful job.  They did leave two measures in that are unacceptable.  The need to post the on island contact and a Tax ID Number on a web page for the whole world to see.  There are multiple search engines that scan sites to pull from the websites just such contact numbers and personal information to be used is a number of criminal activities.  This just adds more information for them to obtain and not accomplishing the real goals of tax compliance and on island emergency numbers without putting the land owner in jeopardy from this criminals.

  • MauiM

    I agree with all of the posted comments.  While Senator Baker makes a reasonable sounding case for this new revision of the four bills, there remain several issues that are extremely problematic and discriminatory.  And as with the other bills, the effect on the small non-resident business owners is not being considered in a productive and helpful manner.

  • konagirl

    I appreciate the intent of these laws: to protect the consumer (and thus ensure the visitor has a good experience) and to assist the DOT in enforcing tax laws. However the bill is still problematic as Mauipropertyowner and Geojuggler have pointed out. It’s unclear as to how a designated agent can serve the “small business owner” and to what extent.

    And, this bill does nothing to enforce tax laws. It creates new reporting requirements that are bound to increase personal HOA fees and taxes by requiring HOAs to report to the County the name of the “designated agent” and the County must then report it to the Department of Taxation. The Department of Taxation still needs to figure out who is compliant and not with all this additional information. The DOT has testified over the years their problems with determining compliant and non-compliant owners based on privacy restrictions. Maybe a bill to expand the ability of the DOT is more appropriate, or to expand their budget so that they can use the information that they already have to determine non-compliant taxpayers.

  • Baitken

    I thank the Senator’s committee for listening to the vacation rental owners points of view. We all care about Hawaii and want to do our part to make the financial situation better for this beautiful state. That is why we all purchased here. We are all one and need to come together to solve the problems.
    My suggestion is for zoning to tabulate all properties zoned for vacation rental. Then, the zoning department should ask  each owner that owns property zoned for rental whether or not they are using their property for rental. If no, then no further response from them is needed. If yes, then request these owners  provide their tax license number to the zoning department and then zoning could send this list to the tax department. If the owner doesn’t have a license, let them know they are in violation of the law and have them apply for their license. Don’t fine them, warn them.

    With the whistleblower system, anyone found non compliant after they claimed they were not renting their property would deserve a fine. There is no need to distinguish between resident and non resident owner of transient vacation rental property.

    There is also no need to advertise tax numbers on the internet. I just had an attempt by a travel agent supposedly from Bali to use me in a fraudulent transaction with a supposeded Japanese client. I am an experienced credit card merchant and did not fall for the scheme. I don’t want the world to have access to my identification numbers. The tax department and my customers are the only people that need my tax numbers. There are people that will use my information for their illegal enterprises and I don’t want to make it easier for these crooks. I have no problem with the tax department and my clients knowing my tax numbers but I want these numbers kept off the internet. I need protected from fraud too!

    I als do not agree that my on island contact should have their identity put on the internet. This is information needed by my clients and by my  condo association. I already do this. It is commom sense to  do this. No one in their right mind would run a business without providing for their customers saftey or they wouldn’t remain in business for long. Good reputations take work to develop. Advertizing my staff’s names on the internet isn’t helping anything. What possibly is the reason for this?

    Remember, we need to work together. I am proud to say I feel I contribute my share to Hawaii’s taxes. I don’t want forced out of business by these bills.

  • Concerned

    I don’t think Senator Baker has thought about the devastating effects these bills will have on thousands of local cleaners, handymen, plumbers, electricians, other independent repair and small business people whose living depends on these independent vacation rentals. They are her constituents too. Don’t their voices matter?

  • Kiheiowner

    I applaud Senator Baker and her colleagues for listening to and responding to the various concerns raised both by off-island owners, on-island property managers and Hawai’i residents.  Great progress has been made in achieving the goals and objectives set forth by Senator Baker above.

    However, there are still unintended consequences arising out of the bill as it is currently proposed.  The proposed bill, through the one agent – one unit provision still requires all non resident owners to use property management companies which will put the industry of Hawaiian entrepreneurs currently serving as on-island representatives and caretakers out of business.

    As others have noted, the requirement to put additional personal information on our websites exposes us, as owners and managers, to fraud.  Therefore we will be working with the government to build additional privacy protection into the system.

    As off-island owners, we have just as much interest in protecting the beauty and culture of the Hawaiian islands as the residents do, not just because we love the land, but because we have a large investment there. 

  • Blackburied

    Sen. Roz needs a reality check.  She may have read our objections, but she does not understand them.  Her points are twofold:

    1) Owners that rent aren’t paying taxes.

    There is no evidence to suggest owners handling rentals are any more or less likely to be tax cheats as any other payer category.  In fact, the Property Managers (PM) and real-estate agents do have an abnormally high level of tax cheating… so the surrogates she promotes contradict her reasoning.

    2) Off-island owners don’t provide the needed local emergency contacts.

    How could we survive if that were true?  I have a building engineer whose office is 20′ from my front door, and whose contact information I provide to each guest, and who has been there promptly if a problem arises.  I have a housekeeper who is an absolute treasure, making sure guests are more than impressed with the condition of my property.  This was a huge concern; I wouldn’t have bought a property so far away unless I knew I had folks locally I could trust.  We couldn’t run our businesses if what Sen. Roz states was true.  If there are incidents of this, they are anecdotal, and the owner doesn’t stay in business long without correcting this.

    The implication is that somehow PM’s do this better.  They do not.  You can compare guest’s ratings of individual owners versus PM’s at TripAdvisor… we outclass them in quality and service.  How can they compete with us?  

    1) If I renter calls and asks “where’s the linens for the fold-out couch”, I know exactly where they are, and can tell them then-and-there… while a property manager would need to contact the owner and get back to the guest.

    2) PM’s, in keeping their expenses low, hire less than desirable housekeepers with very high turnover.  I’ve heard stories like: they throw-away dirty small appliances, because they’d rather not clean them,  steal from the property, use the property for parties, and in general do a less than acceptable job.  I have a neighbor whose guests were robbed by their PM’s maid (a transient, that was caught sleeping in another managed property, he knew was vacant).  

    To my housekeeper, I’m not some nebulous owner: she knows me and my family very well, and knows how much I value her, and I trust her implicitly.  How could an owner who uses a PM ever have such a relationship with their PM’s housekeepers?

    3) PM’s have lots of properties and deal with lots of guests… the property is just a commodity.  I converse extensively with each guest, we get to know each other.  This gives them a respect for my property that an owner using a PM could never accomplish.  My guests have added value to my property!  Guests that rent through PM’s have little respect for the property.

    This direct-connection between me and my guests, and between me and my housekeeper and building engineer would not be possible without the Internet.  The PM has turned out to be an unnecessary middle-man in a business model that is not as efficient or effective as a direct rental-by-owner.  Their business model no longer makes sense.

    When I bought my condo, the previous owner used a property manager… and I respected all their bookings… for which they charged me 50% of the revenue.  I knew that business model wouldn’t be feasible from the get-go; I’d never be able to afford a PM to do what I could do much better.  In the past, only wealthy folks could buy property in Hawai’i, and if they had a PM run it, it wasn’t to make money… just “icing on the cake”.  I’ve talked to these sorts of folks before, and they are happy to see a check every once-in-a-while… as this was not a money-making opportunity for them in the first place.  This is the business model Sen. Roz wants to resurrect.

    I’ve talked to many folks who handle their rentals, and it’s a pretty common story: we’re middle-class and looking towards retirement, and if we handle this business ourselves, we should come close enough to break-even and achieve our end goal.  This is the business model Sen. Roz wants to ruin.

    The true motivation behind this bill (and the entire session) is to raise more tax revenue.  That’s the theme in this session, and in one of the hearings, the representative from the tax commission said that by requiring an on-island manager, you get more in-state employment and thereby more employment taxes.  A seeming win-win.  This is the root motivation.

    Fess-up Sen. Rozz: that’s your real intention.  The problem is: it will backfire.  It will put me out of business.  I will go into foreclosure and bankruptcy.  I will lose my retirement.  I will lose my property.  I will lose my savings.  My housekeeper will lose her income from me.  property values will plummet.  That’s what you will do if you keep pushing this.

    The newly revised bill (HB2078 SD2) states that if we don’t use a PM:

    1) We have to hire an employee to be manager who cannot be hired by any other rental owner.

    … if they can’t have another job, then this will be a full-time employee.  I have less than 900 Square feet in my condo.  How much sense does it make to hire a full-time employee to manage that?  I’m already not breaking even… the cash flow is already flowing from me to the state… this requirement (or the PM alternative) will put me out of business.

    2) We will have to put our employee’s name and contact information on all our advertising.

    What other business must publish employee personal information on the Internet?  Think of all the problems posting this information publicly will cause… from minor issues like being called to book a rental (where that’s my job), to identity theft.  This is an emergency number… it should only go to guests, and not every hacker in Eastern Europe.

    Worse, anybody wanting to assault/rob my guests can simply find the name of my “manager” online, and pose as them to gain entry.

    Sen. Roz: please just raise our taxes, and quit trying to destroy our businesses outright!

  • Concerned

    I agree with Blackburied. Pushing these bills will not have the intended consequence of higher tax revenue, precisely the opposite.  Thousands of tax compliant owners will sell. No one with any sense will want to buy under these circumstances. Property  values will plummet and property tax revenue will go down. Contrary to expectation, property managers will not get new business. Why?  Because savvy visitors will choose other destinations rather than pay the extra 50% the PMs charge.  Then there are the voices nobody seems to care about – all the local cleaners and support people who deliver such superb care to this sector and reliably pay taxes – they will also go under.   

  • Ken

    Senator Baker has been very sincere in trying to make this a good bill. I highly commend her for this as the vacation rental issue easily stirs up emotions left and right. 

    There still is some work left to be done to make this bill all it can be.The requirement to post a privacy-invading Tax ID can easily be replaced by another ID the Tax Department can provide when it receives the annual return form. That ID would shield our privacy from burglars, marketers and other scam artists, while exposing those who are not paying the taxes.  The bill can easily be amended to give the Director of Taxation this leverage.While the issue of tax cheating has been greatly overstated by the proponents of the bill, some cheating is going on and with this bill, Hawaii could collect millions of dollars in back taxes and penalties from those who will now have to get a tax license.  Not having to compete any longer with owners who don’t pay the 15% TA/GE taxes will also be a welcome relief for those of us who do pay the tax.Having to publish your local contact, however,  is over-the-top government micro-management. You could never operate a vacation rental remotely without a local contact and those are always provided to the guests. It is in my contracts and it is posted on the living room wall.  My local contact is my next door neighbor who is also my housekeeper. I don’t think she needs to have her privacy invaded like this.  Most vacation rentals use neighbors who appreciate the extra income from the housekeeping work. This stipulation is clearly the result of people not knowing how this business works or trying to throw the large property management companies a bone. You wouldn’t think …Finally, any treatment of non-resident owners that is different from resident owners will likely result in litigation because it is blatantly unconstitutional to give preferential treatment to local investors. So I hope they will amend this out of the bill because it would jeopardize what may otherwise be a much needed tool to catch tax cheats.

  • MauiM

    Very good comments blackburied and others.  This bill, to my mind is just a revised and more hidden version of SB2089.  The one EMPLOYED AGENT per one non-resident owner is unfeasible.  There are not enough qualified workers to do this type of  one-on-one  employment.  So, since I will not be able to use my housekeeper because she is an EMPLOYEE of another non-resident owner, I will have to find someone else…hmmm, who could that be?  A property management company, maybe?  This bill puts into law that I would have to have an EMPLOYEE instead of a designated local contact.  My designated local contact does NOT get paid by me unless I need them for something.  How could I employ someone with those stipulations?  And then fill out a W-2 for them, taking federal and FICA taxes out of the small amount I would pay them for these minimal services.  Who would bother to do that, with the paperwork and tax complications?  So, we are back to being forced (covertly, imho) to EMPLOYEE property managers.  None of the reasonable language in Roz Baker’s rebuttal proves this to be otherwise.

    And then there’s the discrimination part – why am I being forced to have an EMPLOYEE when resident owners do not have to hire anyone else?  This also implies, as the other bills did, that all resident owners are paying their taxes and providing excellent customer service.  I’m not saying they are not but there is no data saying that non-resident are not as well.

  • Ken

    I need to amend my comments.  It now appears that the bill no longer requires your TAT/GET tax ID but the registration number you are given when you apply for the tax accounts.  This number would not seem to cause any security/privacy invasion issues.   Again, Senator Baker needs to be applauded for listening to our legitimate concerns and resolving this problem.

    • MauiM

      More than ready to applaud Senator Baker when she listens to ALL of our concerns.  As your post above mentions there are still several more that are not being listened to.

  • Lindafinearts

    Senator Baker states we, ” want  people to comply with the laws that are in place”.  I have wondered why this tax issue was not approached from the stand point of the laws that are in place instead of making up new laws that would restrict and be discriminatory to those who very well may be abiding by current laws. It seems that some actual studies are needed to see where the tax problem is originating instead of just assuming that off-island people are the root of the problem. Many major rental agencies have backed these bills, and I believe that it is  suspect that they are trying to push the clock back to a time when the business model did not have the current competition. It is curious that more is not being done to pursue illegal rentals who would not only be avoiding GET and TAT, but also the almost three times the property tax that we legal landlords  pay.
    I have no problem giving my AOAO the contact information of my on-island contact. It only makes sense to do so, and the two associations I deal with wisely require that information.  I would question how many associations would not already require the contact information. I post the information in the condos, and I give it to my confirmed renters. I see no reason that this information should be in an advertisement for the world to see, and it becomes even more non-sensical to expect only non-residents to post this information. It is extremely seldom that our on-island person is contacted, and I do not see why that person cannot be on call for more than one place, especially considering this last year,out of two places, I only needed the on-contact person to address one issue. Is this new amendment another way of insuring that the real estate people get the job?
    I have been pleased that some of the language has changed as the bills proceed through the process, and I continue to hope that eventually all parties will be satisfied that improvements have been made.
     

  • JWE

    Aloha Senator Baker

    Mahalo for your comments.

    I agree, these bills have been and are being hotly contested.  They strike at the very heart of the rights of property owners and should be hotly contested.  Even after amendments they do very little, if anything, to protect consumers or assist the DoTax. 

    You admitted that the bills were originally too onerous.   Many opposed to the bills also say they were also unconstitutional and contrary to NAFTA.  I am baffled as to how bills so onerous could have even been presented to the legislature.  Is there not peer review and peer pressue in the legislature so that senators and representatives do not just throw anything on the wall to see what sticks?

    The legislature started with bills which were terrible, and  ammended  them to the point where they are merely very very bad.  What other part of society would tolerate such standards?   What would you say to a building contractor who took such an approach on a project on YOUR Home?   He may have made a mess on your kitchen rennovation but agreed to try to patch it up.  But even after the patch work, the kitchen was still a disaster.  How understanding or tolerant would you be? 

    The state of the Bills curently before the legislature is the same as a botched kitchen rennovation – they are a disaster. 

    News media across the US and Canada are carrying the story that Hawai’i is unfriendly to out of state property owners.  These bills will only hurt the Hawaiian real estate market and  economy.  Hawaiian voters, Hawaian visitors and Hawaiian property owners should be not be any more understanding or tolerant of these bills or the legislatures role in creating them than you would be of a botched kitchen rennovation. 

    At this point, the best course of action is to try to work together with property owners to solve the real problem.  This may take time, and you may have to wait until next year for a final product, but if you truly want to do what is best for the State and the people, rather than what is best for legislators and special interests, that is the only course you should take.  You are in the position to be a true leader for the State by doing what is best, rather than what is most expeditious.  Please be a true leader.

    Mahalo

  • Dakine

    It always strikes me as odd that if the state has trouble enforcing the existing laws, then how is more laws going to solve their problem.  There are reasons why the existing laws aren’t working.  They need to address that first.  Then they need to make a plan on how they are going to enforce them.

    Remember, when you create laws to go after the law breakers, only the people who were following the laws to begin with will be affected, and the law breakers will continue to break the law.  There are many TVRs off the grid, and are fully booked, and will continue to be fully booked, and off the grid, and no new law will bring them into compliance.  Never.

    The county and state are relying so heavily on the internet to bust offenders that they are missing a bigger picture of how these illegal businesses work.  They dont need the internet.  They dont need to create ads.  Word of mouth throughout the sporting communities will keep these rentals full until the end of time.  The owners of these business will just shrug any new laws like they dont exist.  It will be business as usual for them, and all the law abiding businesses who are in compliance will have to jump through more and more hoops to stay in business, and either will adapt or will cease to exist, creating unemployment for those who service these businesses.

    New laws are not the answer.  If the existing laws arent working, fix them once and for all, and actually enforce them.  If this is REALLY about money and loss of revenue for the state, and I am pretty sure they will get their monies worth by funding enforcement first and foremost than any new laws will ever recover.

    • Marshavaughn

      To Dakine – Someone forwarded a blog to me from last year that had this comment related to the illegal TVRs and places that are rented in areas that are not zoned for transient vacation rentals:   

      “The frustrating part is that the state can very easily find these people and enforce policy already in place. Rob Dalton of Waikoloa Vacation Rental Management stated, “The state of Hawaii could hire one employee to enforce the policy and make the state $30-$50 million a year. Letters have been sent to the governor’s office on several occasions by several professionals and the state is not acting. What are we missing?” With the current economic state in Hawaii the state cannot afford to overlook issues such as this. If the state would take a couple of simple steps to enforce existing policies Hawaii could generate a substantial amount of tax dollars to use towards abolishing furlough Fridays.”

      What are we missing?

      • Dakine

        We are missing that bureaucrats in Hawaii are lazy to their core, but they want the money, but they dont want to do the work required to get it. They need to look busy for the constituents, and so they create new fancy legislation that does nothing in reality.  This new legislation is more of the same, and will not accomplish their goals.  Not even remotely.  The scofflaws will stay scofflaws.  This is called, “Make Work Legislation”.  Hawaii is full of it.

        • Rhood151

          Perhaps the state isn’t interested in shutting down these illegal rentals, they want to collect the taxes from them.  Shutting them down will eliminate those that pay the taxes but are in violation of the zoning laws.  There are surely some rentals in all categories, legal and paying taxes, illegal but paying taxes, illegal and not paying taxes.  The trick is to catch the right ones without hurting the others.

      • WhoNos

        I have read that article to.  Looks like they may have heard PMs such as Waikoloa Vacation Rental Management.  The way I read this is that Senator Baker is making existing rules more clear as Rob Dalton states in his blog and then adding in a ton of levels of enforcement.  Not only will the state have access to the information, but everyone and their dogs will too.  That will gives the PMs etc the ability to help in enforcement. 
        Baker states the specific laws that state that you have to 1) have an on island contact and 2) that person can not be the on island contact for other owners unless they are a PM.   The thing that is blowing my mind are the amount of people unwilling to accept that that has been the law for as far back as I can search those laws on the internet and people are acting like it is new news and we can do something about it.

        I am just happy they are not going to be micromanaging my taxes  :)

        • Dakine

          Except that your emergency contact doesnt need to be a PM company.  There is no point. If you want your property managed by someone, then hire a PM company, but if you manage your own, but need a local contact, it shouldn’t matter if the person is the local contact for 1 or 100 properties.  A contact is just that, a contact.  They arent managing anything.  They are available if there is an emergency, which is usually close to never.   From the posting below the true colors behind this legislation has come clear.  Its all about protection of the PM industry.  Except, they are trying to create new business.  Not all properties NEED management.

          Remember, MANAGEMENT does not equal EMERGENCY LOCAL CONTACT.  A Management Company would be responsible for handling bookings, cleanings, advertising, and maintenance for a TVR.  But, this is a value added service that some owners are not interested in.  Some owners want to handle all of these on their own as they already do.  An EMERGENCY LOCAL CONTACT has nothing to do with MANAGING a property.

          • WhoNos

             Dakine,
            I guess the reason this needed to be addressed was there is a large misconception out there of what is what.  In talking to PMs here is the belief and I see their point.  If you look hard at laws, definitions, etc you will find property management really covers the “management” of the property.  This can include handling rents or not.  People like the Lay’s, Schwabs, etc they have property managers and they do not rent.  Those people just take care of their place and fall under a caretaker.  Here on Maui we have situations where there is one licensed company that is a rental manager and just takes care of the rents and they work with a separate company that is a property manager that just takes care of the properties. 

            Getting to the point, the emergency contact has to be able to do something other than take the call and they feel when that happens they are then property managing.

            I believe Bakers response is similar.

          • Dakine

            So, your going to convince us, that if and when an emergency arises then that person is MANAGING the property.  Im not sure you understand what property management is.  Anyone can call plumbers, or electricians, or other service providers in the case of an emergency.  You dont need special licensing, or pay massive management fees to have someone on call in the rare case you have an emergency.  Sorry, but this is about as close to licensed racketeering as you can get.  And limiting the person to only being able answer the call for one property is silly.  Sorry, but, its not managing.  If these TVR owners need to have property managers, then I believe that if you leave your house for more than 5 days, you need to hire a property manager cause thats about the same amount of responsibly there is to care for your home when you are away.  What if there is an emergency while you are away.  Only PM companies can do it cause, during that moment, they are managing your property.  See how silly that is.  This is all shubai!

        • WhoNos

          Senator Baker….you get my vote when the time comes for dealing with these people.

          • Kanahele

            “these people”   LOL.  That pretty much sums it up for your argument.

          • WhoNos

            Yeah…lol. I am not talking about the owner community as a whole I am talking about the ones that are arguing everything. I bet she had to expand the size of her inbox….lol.

          • MauiM

             So WhoNos – you would vote for someone who creates unjust legislature that people object to BECAUSE people speak up about it?  That’s a kind of crazy reason to vote for a candidate, imho.

        • MauiM

           It does seem to me that if this law has been in existence since forever, that the realtors who sold all of us our properties did not use full disclosure when they did NOT tell us about it.  I was told I needed to have an on-island contact, which I have always had.  I was never told that this on-island contact could not be anyone else’s on-island contact.  Kind of a big piece of missing information that would have made a difference in my decision to buy.

  • Goldsole7

    I submit this letter in support of the legislators
     
     
    Based on events that have transpired with bills HB1707, SB2089, SB2078 and now HB1706, a pattern is clear.   By passing these bills this session’s legislators are helping Hawaii by:

     Looking for tax revenues to support the existing budget

    Observing that higher GE/TAT from non voters is an astute way to provide the basis for the legal terms employed in all of these bills -  including resident and non-resident

    Committing immediate, guaranteed new revenue streams to some deserving Constituents

     Demonstrating leadership and courage to pass this into law, in the face of so much opposition

     Knowing that while GE/TAT will not actually increase for the state or the counties, that is not what’s important.  Hawaii’s revenue loss shall be offset and more than compensated for by higher income tax for the state coming from a soon-to-be wealthier group of deserving Constituents

    Willingness on behalf of the Interests of some of our Citizens, to pass law of questionable constitutionality, as it will serve to be politically helpful in this election year.  The constitutionality issue can be handled later.
     
    That any of these bills  have been mentioned in the same sentence with the word taxes is not surprising, not at this point in time anyhow.   Our legislators’ even-handed approach as well as considerable flair with the various bills’ amendments has been admirable.  Given that the state needs to find revenues to repair infrastructures that have been neglected and undersupported, it makes sense to demonstrate your dedication to the people and put forth effort to seek tax revenues wherever they can be extracted. 
     
    It is a good thing that none of these Bills presented (HB1707, HB1706, SB2078, SB2089) were designed harm residents who operate TVRs and hopefully islanders will learn to show more aloha spirit to the owners and their guests of the non-permitted rentals who share their neighborhoods.  Just get over it already!!
    Another great thing about these bills,  is if you are one of the Winners who is either a hard working Property Manager or one of the Large Realty Firms that planned wisely and is blessed with a Property Management division to offset the dismal sales of your Real Estate Sales division, you will get  a sorely needed new revenue stream.     And add to that an infusion of some great new rentals that have been well cared for to freshen up your inventory.

    For the whiners and complainers, those whose businesses and success have been built on Hawaii’s only real economic engine,  tourism, well…. they can make do, after all they’ve got homes elsewhere to care for, and perhaps they will suffer a bit.     However, it’s the price that has to be paid.       In election years, and especially when we need to balance the budget, these types of decisions have to be made, it just makes good sense and works out very neatly too.

    Real estate market will continue to soften, off-island owners will lose properties to foreclosure and short sale.  But these are just mostly people who have made foolish investment decisions and everyone knows you win some, you lose some.
    That these bills all distinguish between resident and non-residents, I’m sure this might be legal.      The alternative could have been that each bill was made to be against all owners.      Thankfully,  this was not done, clearly and rightly protecting the Interests of those in Hawaii who Matter The Most.     
     
     SUPPORT HB1706, HB1707, SB2089, SB2078 and more!!   Yee Haw!!
     
    Patty Sullivan
    Maui

    • doriw

      This is from,(if not, correct me), a relative of Pat Sullivan. He is a local rental agent, and one of the originators of these bills. This is an email from him about these proposed bills. It says a lot about what he plans to make in profit from the possible requirement of an on island agent, and his motivation to support these bills (1706 at the time, now 2089, 2078, etc.)  

      From: Pat Sullivan
      Sent: Thursday, January 26, 2012 1:56 PM
      To: Recipients are void to protect them
      Subject: FW: Housing Committee Result – Bill HB 1706

      I didn’t have time yesterday to provide written testimony but they
      passed the initial Bill with a complete affirmative vote from the
      House…The Bill will require all mainland owners who rent their homes
      or condos out to have a licensed Realtor on
      and…ie…Bayer…vinson…~er~dt…~~j5 way the State can make
      sure everyone is paying their GET and TAT… yee hahhhhlll! But don’t
      tell anyone yet…let the Bill get passed! !…then we can get some
      $$$…unless they find a cheap Broker who will represent them for
      cheap…

      • MauiM

         That is shameful!!!

    • doriw

      “Real estate market will continue to soften, off-island owners will lose properties to foreclosure and short sale.  But these are just mostly people who have made foolish investment decisions and everyone knows you win some, you lose some.
      That these bills all distinguish between resident and non-residents, I’m sure this might be legal.      The alternative could have been that each bill was made to be against all owners.      Thankfully,  this was not done, clearly and rightly protecting the Interests of those in Hawaii who Matter The Most. “_____You win some, and you lose some? Do you feel that way about your business? Foolish investment decisions? You are calling me foolish for investing in your state, and bringing visitors there? I surely don’t consider myelf, or the thousands of other educated, hard working, and economically sound owners “foolish”.These bills will surely discourage investment in Hawaii, and damage the economy further, in the worst recession since the Depression! Unbelievable! Did you have any idea that in Canada, they are discouraging all Canadians from investing in Hawaii any more, because of the poor business environment? Is this the environment that you believe that Hawaii will flourish economically in? I think not. Many lawyers that have been hired to look into the legality of these laws,  have called them illegal  and discriminatory. Not to mention the illegalities of the laws in NAFTA – try reading this treaty. The US signed this treaty to assure that Canadians would be given equal protection for their investments. Very illegal, I would say.  Sorry, we think we also “matter”. We are the off-island owners.      

    • Concerned

      Goldsole has read the tea leaves. The GE/TA tax and consumer protection are side issues. These bills were written as jobs bills for Some Deserving Constituents. The problem is that Other Deserving Constituents (most people in Hawaii, in fact) will be hurt. But a lot of the People Who Matter Most are big contributors. You just need to follow the money.

      • Preserve Property Owner Rights

        I really think no proponent (in their right mind) would say what “Patty Sullivan” said… a “let them eat cake” speech that should even make politicians pause given the consequences detailed.  Add to that the scarlet ”Sullivan Letter” admitting how they were trying to  sneak this bill through… I suspect that was posted tongue-in-cheek by someone opposed to this bill. 

        • MauiM

           Maybe so but after some research I did discover that the “Sullivan” email is real!!  Kind of says it all to me….

          • Preserve Property Owner Rights

            I don’t doubt the “Pat Sullivan” email… but the “Patty Sullivan” post above looks like an absurd hoax… and one point in proof is merely using the “Sullivan” name after Pat’s email was revealed… I would think anybody named “Sullivan” would use an AKA for the remainder of this discussion.

    • WhoNos

       WOW!  An interesting spin.  I must agree with Blackburied and say someone spent too much time trying to act like they were someone else.

    • Bill

       Aaaaahhhhhhhh! More tax money from those who make it to support programs for those of whom do not…. and no legislation pertaining to, or proposing HOW to catch those who are non-compliant.
      Dakine pretty well summed it up about bureaucratic laziness and wanting more moneyh…

  • DORIW

    I appreciate Baker’s change in view of the law and how it affects individual owner/managers of vacation rental properties in Hawaii. Please keep in mind that when we had a property manager at another vacation rental house that we owned in CA, (vs. us managing it), the agency rented our property about 1/3 as much as we did. They rented it for more money, and kept up the property much worse than we did. We had “pride of ownership” when we did all of the work, and self managed it. We conversed a great deal with people, gave them extra instructions about the area and attractions, and generally made sure that our guests were very well tended to. We had very many happy customers, and many return guests. We made sure EVERYTHING was in working order at the home, and provided little extras like beach towels, beach chairs, beach toys, and such. A management company would have never made sure of these little extras. We went from losing $400/mo. on our vacation home, to making $1000/mo. We didn’t even consider an agency when buying our Maui place, due to our experience. Please keep in mind that many, many owners in Hawaii have seen that kind of dramatic difference in self management vs. an agency. 
    THIS IS WHY WE OWNERS ARE SO ADAMANTLY OPPOSED TO THESE BILLS. IT HELPS HAWAII WHEN WE WORK VERY HARD TO ATTRACT AND KEEP THE TOURISTS COMING TO HAWAII. IT HELPS OUR CLEANERS AND HANDYMEN, AND ALL OF THE TOURIST RELATED BUSINESSES IN THE AREA. IF WE ARE ABLE TO ATTRACT EVEN 25% (very conservative estimate), MANY MORE PEOPLE TO THE AREA. THINK OF HOW THAT HELPS THESE BUSINESSES, AND ALSO THE GOVERNMENT AND THEIR TAX BASE (PROVIDING THAT PEOPLE ARE PAYING WHAT THEY SHOULD, AND EVERYONE I KNOW IS).

    • Bill

       We have been down the very same road!  4 management companies, (3 of which are now belly up) and we decided to do it ourselves after so much disappeared from our rental and the lock-off was rarely rented!  We went to family rental -2 bedrooms- and have kept it nearly fully rented for some 6 years now.
      NOBODY CAN and will take care of our place like WE DO, and we don’t need dictation of new laws to tell us somebody else needs to manage our Condo because the state is missing some income for those who don’t pay!!

      • Rhood151

        My situation is the same.  I had a property manager who rented my place when I first bought it.  She managed to get about 25% occupancy.  One day she doubled her commission rate despite that fact that we had a contract.  I cancelled based on her breaking our deal and found out later that the 25% occupancy she achieved was by renting to prostitutes and drug dealers.  The place was a disaster and took $50k to repair.   It also took 3 years of work to repair my reputation with the condo association.   Since then my occpuancy exceeds 70%, I work well with the condo association and provide 3 times the TAT and GE taxes to the state as was done before.  A management company is certainly not the way to go in my opinion.  If forced to go this route, I will sell or rent long term.  The government will end up with nothing.

  • SmallHiBiz

    I just want to thank Senator Baker for tackling this issue that have been hurting the property managers in Hawaii.  I own a small property management company and work my tail off just to make a living.  A large part of that is the cost of doing business in Hawaii.  Over the course of the last few years I have seen cleaning companies become huge property management companies and be able to almost put us out of business because they can severely undercut our rate because they do not have any of the licensing fees, continuing education fees, insurance fees, employment costs, etc.   

    Living in Hawaii for over 20 years I knew that if I was going to do this business I needed to fulfill all the requirements of a realtor even though I really am not one.  That is what Hawaii has required for that entire time.  As far as I read things, the owners are not the ones going to get in trouble here, it is the cleaning companies.  They are the ones that don’t have the license to do what they are doing.

    I sympathize for the owners a tiny bit for dealing with these people offering services illegally and then having to change to a more legal operation.  I wish I could sympathize more, but the reality is that it is illegal and it is killing the legal small businesses of Hawaii.

    Mahalo Senator Baker!

    • Dakine

      Except this issue hasnt been hurting PM companies.  You guys are just looking for added business, forced by the government.  Doesnt sound entrepreneurial capitalism to me.  See my post above, EMERGENCY LOCAL CONTACT does not equal PROPERTY MANAGEMENT.  Owners that want your service will hire your company, if they see there is a value to using you, but if they opt to not use a PM company, they shouldnt be forced to.  Thats not how free enterprise works.  If your business is down, you may want to evaluate the services you offer, at what price and level of quality.   I had a suspicion about these bills and what was driving it.  Now its clear as day.  Thank you for that.

    • Stayincancun

      “I sympathize for the owners a tiny bit for dealing with these people offering services illegally and then having to change to a more legal operation.  I wish I could sympathize more, but the reality is that it is illegal and it is killing the legal small businesses of Hawaii”. What, do you consider that we, as owner/managers are doing illegally, Smallhibiz? We have followed the law, also. We have a local contact manager, post the phone number everywhere, take good care of our guests, and pay our taxes! Is it illegal that we haven’t hired an agency, is that what you’re saying? Where does it say that we are lawbreakers? How are we “killing the legal small business of Hawaii”. We are small business owners, also, and we are possibly having OUR small businesses killed. Another matter is the amount of fees that the agents cost. They took approximately 30-40% of our rent in our last rental that was agent managed. And, they rented about 50-70% less than we did, and took about 30-40% of our profit! We don’t make much now in profit managing our condos ourselves, considering the bad economy.  When you look at those figures, we will be in the red automatically with an agent. These are approximate figures for owners using an agency vs. owner managed properties, and generally the norm. This means that we will GO OUT OF BUSINESS. We are not blowing smoke with these figures. We cannot afford to keep our vacation rental, if we are forced to use an agent. We also hustle quite a bit, to make sales. This would force us to sell ASAP, along with thousands of other owners. A disaster for the real estate market, the local government (with less money in taxes),  and it would badly hurt the overall local economy of Hawaii with less tourists visiting here.  

      • Bill

         Yes, Ma’am, DoriW….  the golden goose is being flayed if this bill passes in it’s present form.
        You only paid 30-40%?!?  Wow, we were hit with 50% the first year and it was OUR INVESTMENT being used. 50%!!!…. and WE had to pay the TAXES, cleaning, utilities, etc., etc….. 
        NOPE… the management companies will kill the business in vacation rentals if this continues.

    • Preserve Property Owner Rights

      Property Management (PM) Advocate “SmallHiBiz” said: 

        “I sympathize for the owners a tiny bit for dealing with these people offering services illegally and then having to change to a more legal operation.  I wish I could sympathize more, but the reality is that it is illegal and it is killing the legal small businesses of Hawaii.”

      I would hope that you would think that anybody running an illegal operation would be caught, including PM’s that don’t pay proper taxes or offer rentals where not zoned, as we all do.  Your insinuation in singling-out property owners is that somehow these things are confined to owners, and not PM’s… where PM’s have a much worse track record.

      If you’re saying that we are somehow currently illegal by not hiring you in the first place, then you need to understand the law… the law we built our business plan around.  HRS 467 allows the property owner to act as manager/agent, much like real estate agents are not fond of “for sale by owner”, it is currently legal.

      I’ve seen lots of PM’s boast at how good they are, but in all the blogs and web postings, I’ve yet to hear of one owner who can say they are better off using a property manager: the property manager treats the property with the same pride of ownership the owner would, the property manager gets more bookings than an owner could, and the owner is making more money than of they were doing it themselves.  There must be at least one happy customer… even some wealthy brat who inherited the property and has no pride in ownership nor wherewithal to do it themselves.  At least one?

      Sen. Baker thinks she’s found a ripe ground for extorting more money: out-of-state property owners can’t vote, yet can’t easily leave without huge losses.  She isn’t thinking far enough ahead to the dire consequences mentioned previously that will effect the state negatively.

    • MauiM

       I sympathize with your situation but the reality MAY be that property management is going the way of travel agencies.  Some few will continue to need that type of red carpet service but most travelers these days prefer to do their business on line and with as little time spent contacting live people as possible.  I do not want someone else to MANAGE my unit nor do I need them to. I do a great job myself.  My on-island contact does NOTHING except have a phone number available in case of emergency and to date, no one has had to use it.  So tell me, what would I be paying a property manager for?  My housekeeper cleans.  Period.  She doesn’t manage anything either (except purchasing toilet paper, etc.)

  • Canuck

    As an off Island TVR owner who follows all the rules and has a CPA do all my taxes so I can be confident that I am compliant, I have a couple of  questions. Where is the consumer protection for those that rent from a person who lives on the same Island as their TVR when that owner has left the Island for Vacation or buisness for any length of time let alone a 3 or 4 week absence? Are these owners more able to be contacted when they are off their Island than anyone else. This would make it seem as though there is special communication levels set up for these owners VS off Island owners. They must have faster phones and internet than others.This is what makes this type of legislation discrimitory. Those who rent from those who are exempt are less likely to have an on island contact when neeeded due to the fact there is nothing to address on island owner absenteeism; thus giving an edge to off Island ownersas we can advertise this fact to potential renters. If consumer protectionism is the main concern of  the State then they should have thought about this and NOT tried to distinguish between on or off Island ownership.

    • JWE

      And if tax collection was a goal, why would they treat residents, who can more easily enter into a non-traceable cash transaction, differently. 

      Their idea is akin to searching every car that has already stopped at a red light because they heard that some motorists run red lights.  They will punish the innocent and let the guilty go free.  According to that approach,  if they that, on average, justice will prevail. 

  • Concerned

    Owner and PM operator-managed TVRS draw on very different types of visitors.  There is room in Hawaii for both models. Together they deliver our guests a rich diversity of choices. Some visitors even like to combine the two models, staying in a hotel or PM managed condo, for example, for a week and then in an owner-operated one.  The issue isn’t whether one model is better but whether some of these bills are designed to drive out the owner-operated choice.  If so, that will be bad for tourism overall and will affect everyone on the islands.

    • Dakine

      This is exactly it.  There is nothing wrong with PM managed properties, but, we shouldnt be artificially driving business them by mandate.  Both can and should exist.  As I posted earlier, let the market decide if owners want to use a PM company or not.  If PM companies are losing business, maybe they should focus on doing a better job.  This legislation will not raise the quality of the service that PM companies provide, but may actually lower it, cause the cost of customer acquisition will approach zero, and there is very little recourse.

      Btw, for the record, i do not own, operate, or have anything to do with real estate, property management, renting or owning vacation rentals, but are an impartial observer and call a spade a spade.

  • Jan

    It is very sad that Senator Baker doesn’t understand the Vacation Rental business when it is so huge on Maui, the island she supposedly represents.  All the tax people need is a couple of extra clerks to go through the websites and compare to tax records.  I am sure they would pay for thier own salary in finding people who do not pay taxes.  And I am willing to bet they find more on island noncompliance than off island owners.

    However, Baker doesn’t care about the non voters. 

    This is a shame, as we spend a fortune to employee those who do vote.  Our profit margin is slim to non existant in many cases.  We pay the electricians, the plumbers, the housekeepers, landscapers, people who pave parking lots and take care of pools,  people who clean our carpet and our drapes, window washers, people who remodel, building repairs, furniture stores, the phone company, the cable company, the insurance company, bank with the local banks, use the local stores and businesses, and pay a whole lot of taxes.  Then, our guests bring over millions of dollars to spend on all of the tourist businesses. 

    Many of us will have to shut down and sell if we can’t profit at all, or if we can’t at least break even.  Those tourists who do not want to stay in high priced hotels, will go elsewhere.  Families love the condos.  There will but huge job loss, and businesses will fold.

    How is this not apparent to Baker and the others in the legislature? 

    I do wonder if the Hotel Unions are in on this?  Our democratic legislature is heavily suppored by union labor.  Maui tourism is going up which then means less toursits for the Oahu hotels….makes you wonder……

    • Dakine

      I am sure its Hotel, and obviously, the PM companies.  Basically, any business that loses out to owner managed properties will be pushing this kind of legislation.

      • Bill

         I’ve a sneaking hunch there are considerably more off-island owners than Kamaina… and they don’t vote in Hawaii elections.  Hence the interest in their well being is of no interest to the local politicians who pander the to the votes.

  • Bill Painter

    There is no reason to stick it to the present owners who are following the letter of the law.  To make further burdens on those who do comply with taxation is a lazy, bureaucratic grab for more income without due cause as some bureaucrats may feel they are missing income for the state..  Those who pay properly and honestly ARE OBVIOUS as the paperwork is ON FILE!!!  Do a little research leave the good folks alone!!

  • alohaes

    Sorry, but Senator’s Baker’s quotes above are very “troubling”, to use her own words, as they are entirely misleading from what is the reality.  Specifically and for example she says: 
     
    “I have reviewed hundreds of pages of testimony, almost all from out of state. The opposition to these measures has been passionate and outspoken, but supporters have also raised some troubling issues in the vacation rental industry. The reason the committee advanced the most recent bill, HB2078, is twofold: to protect the consumers who are renting these accommodations and to assist the Department of Taxation in enforcing the tax laws that are already on the books.”
     
    Now this sounds like good politician speak to me.  Because it would lead a casual reader to believe that “troubling issues” were found.   This is not the case at all.  But does the casual reader have access to the truth?

     In fact, tax issues have been only vaguely mentioned or inferred by the committees.   NO FACTs have been provided in spite of repeated requests by TVR Owners to see the data for the “cited studies”.   Alternatively the FACTS that we have had access to, and which were not referred to by the legislators in support of “citing tax” compliance problems, show that in fact this category of TVR owners ARE in compliance.   Why is it so difficult for Senator Baker to make this statement?   I can not understand.
     
    Even worse is a veiled accusation that there are consumers not being supported.  Again, NO FACTs provided.  Rather one should look at the SOURCE for Senator Baker’s “troubling issues”.  What was admitted as “testimony” was inflammatory accusations made by the Large Property Management firms lobbying the Senators to mandate all nonresidents to turn over their units to be managed at fees of 50% or more of the gross.  Does it make sense for the Senator would consider the source – for a conflict of interest?   Or is there a common interest by and between the Senator and the Property Management companies?           Do Maui’s readers take this article as factual?   I hope not!

    What these bills DELIBERATELY DONT DO is catch the tax cheats who will simply go further underground or the illegal operators in the residential neighborhoods.  These bills instead target, isolate, corral and corner some of the best small businesses in the islands and attempt to force them into foreclosure.  

    What will remain?  The tax cheats, the illegal operators and the non-optional big Property Managers with a monopoly and hence no more concern about earning new business through healthy competition.    

    What will result is dollars flowing into the pockets of a few, essentially no new taxes flowing into the states coffers and a huge exodus of investment dollars.      Does not sound like the type of fiscal manager (legislator) I would vote for this November!

    • Pat

      THIS IS THE TRUTH. Hawaii Island readers – if you read this last post too quickly and  don’t comprehend it all, read it again. IT IS THE TRUTH!!

      • Kanahele

        I am a local resident, and can concur with the above post 100%.  Baker doesnt mention anything concrete so that she can not be held responsible for her words.  There is no FACTS for her position, only biased testimony in favor of this legislation.  She also surmises incorrectly that only off island owners are concerned about this legislation and that is completely untrue.  She is counting on the fact that these special interests vote in Hawaii, and the “off island” owners dont.  She better keep in mind that the resident TVR owners are watching and will vote appropriately in the upcoming election.  I am pretty sure “the people”, whether they own TVRs or not, will not favor a system that provides legislative handouts in favor of “big business”. against the “small businesses” of Hawaii.  The voters will not tolerate this kind of crap any longer.

        • SmallHiBiz

          Kanahele, you should be happy to know then that this bill really is a “small business bill”.  If passed, I don’t see any of these owners going to the big businesses such as Outrigger.  They are going to go to the small companies that can set up a program specific to their needs at a reasonable cost.

          As a small business in Hawaii all I want is a level playing field.  If I am going to be required to pay all the costs associated with running a property management business in Hawaii then my competitors should be too.   

           

          • JustinG

            Unfortunately, you are comparing apples to oranges like no one notices.  Your small property management company should succeed by virtue of the services and value your provide to the housing industry, not by government mandate.  People dont need to use you for simple things like being an emergency contact.  People arent going to pay you 50%, 40%, or even 20% to be the emergency contact.  Its never going to happen.  The service provided as an emergency contact is virtually non existent and can be done by anybody, licensed as a PM for not.  Since you arent managing the properties, you dont need to be licensed.  So, in reality, if you want to setup an EMERGENCY CONTACT business, then do so, and drop all your expensive PM licences, cause you dont need them to be an emergency contact.  But, your fees have to match the service you provide.  I am guessing $100 a year would do to be an emergency contact.  Good luck making a business out of that.  This bill is not going to bring you business if passed.  I am guaranteeing you that.  People would rather sell their businesses than LOSE money on a vacation rental business.  The business model doesnt support the services you want to provide.  You should stick LARGE time share projects or try to win a contract to manage an independent vacation rental complex, that’s where real money is.  Nickle and dime-ing these small independent business owners will make you nothing, and will hurt the state and county more.  So, unless you are willing to provide an EMERGENCY CONTACT service at a very low price of $100 per year, or on a AS NEEDED fee, then, its dead on arrival.  Properties that NEVER actually have an emergency should be paying virtually nothing to you in the end.  If that’s the business you want, have at it. But if you think you are going to rake each booking at 20%+ of gross (and thats low), think again.

            Also, independent vacation rental is “smaller” business, than you trying to manage more than one.  So, in the posting above by Kanahele, YOU are the big business.  

      • Kanahele

        I am a local resident, and can concur with the above post 100%.  Baker doesnt mention anything concrete so that she can not be held responsible for her words.  There is no FACTS for her position, only biased testimony in favor of this legislation.  She also surmises incorrectly that only off island owners are concerned about this legislation and that is completely untrue.  She is counting on the fact that these special interests vote in Hawaii, and the “off island” owners dont.  She better keep in mind that the resident TVR owners are watching and will vote appropriately in the upcoming election.  I am pretty sure “the people”, whether they own TVRs or not, will not favor a system that provides legislative handouts in favor of “big business”. against the “small businesses” of Hawaii.  The voters will not tolerate this kind of crap any longer.

  • alohaes

    Sorry, but Senator’s Baker’s quotes above are very “troubling”, to use her own words, as they are entirely misleading from what is the reality.  Specifically and for example she says: 
     
    “I have reviewed hundreds of pages of testimony, almost all from out of state. The opposition to these measures has been passionate and outspoken, but supporters have also raised some troubling issues in the vacation rental industry. The reason the committee advanced the most recent bill, HB2078, is twofold: to protect the consumers who are renting these accommodations and to assist the Department of Taxation in enforcing the tax laws that are already on the books.”
     
    Now this sounds like good politician speak to me.  Because it would lead a casual reader to believe that “troubling issues” were found.   This is not the case at all.  But does the casual reader have access to the truth?

     In fact, tax issues have been only vaguely mentioned or inferred by the committees.   NO FACTs have been provided in spite of repeated requests by TVR Owners to see the data for the “cited studies”.   Alternatively the FACTS that we have had access to, and which were not referred to by the legislators in support of “citing tax” compliance problems, show that in fact this category of TVR owners ARE in compliance.   Why is it so difficult for Senator Baker to make this statement?   I can not understand.
     
    Even worse is a veiled accusation that there are consumers not being supported.  Again, NO FACTs provided.  Rather one should look at the SOURCE for Senator Baker’s “troubling issues”.  What was admitted as “testimony” was inflammatory accusations made by the Large Property Management firms lobbying the Senators to mandate all nonresidents to turn over their units to be managed at fees of 50% or more of the gross.  Does it make sense for the Senator would consider the source – for a conflict of interest?   Or is there a common interest by and between the Senator and the Property Management companies?           Do Maui’s readers take this article as factual?   I hope not!

    What these bills DELIBERATELY DONT DO is catch the tax cheats who will simply go further underground or the illegal operators in the residential neighborhoods.  These bills instead target, isolate, corral and corner some of the best small businesses in the islands and attempt to force them into foreclosure.  

    What will remain?  The tax cheats, the illegal operators and the non-optional big Property Managers with a monopoly and hence no more concern about earning new business through healthy competition.    

    What will result is dollars flowing into the pockets of a few, essentially no new taxes flowing into the states coffers and a huge exodus of investment dollars.      Does not sound like the type of fiscal manager (legislator) I would vote for this November!

  • Aurorasands

    What’s really ironic is that the legislature is seeking to adopt SB3048, which recognizes that tourism is Hawaii’s principal
    industry, bringing $12.6 billion to the state in 2011. It states “Hawaii is at
    risk of losing its competitive edge in the travel and tourism industry…” and
    proceeds to propose investment incentives for construction and remodeling
    hotels, hotel-condominiums and time-shares.

    The billions of dollars that “mainland investors” have poured into the Hwaiian economy is being ignored.  It is these investments that have taken aging properties and refusbished them (paying more millions to local contractors,suppliers, et al) and made them into world class short term rentals for visitors. With one fell swoop, the legislature is seeking to wrest management of private properties from their owners and to enrich a class of Hawaiian business (Property Managers) unjustly to the detriment of the thousands of Hawaiians who work for far better remuneration for the private owners. 

    Go figure!

    • Bill

      Liberal socialism at it’s best…

  • Msodman54

    Tax collection is the Dept. of Taxations job NOT the state legislature. The department and its director should be required by law to function in its present capacity to impliment the necessary efforts to ensure tax compliance. Easier said, “DO THE JOB YOU’RE GETTING PAID TO DO”. Now, if that requires adding staff to ensure all rental units are in compliance then do that. Use some of the millions of dollars stated you are losing to pay for the program. If you do not have the expertise to do this hire a consusltant but don’t add laws to enforce existing laws GOOD GRIEF!!  If anyone fails to pay their federal income tax, the IRS will pay you a visit and change your mind. Where is the Hawaii State Department of Taxation??? 

  • alohaes

    Senate Votes 22 in favor, 3 against passing HB2078.

  • lucky13

    Senator Baker,  a chameleon may change its colors, but it still is a chameleon. 2078 has changed it’s terminology but it still is an attack on the small business (vacation rental) sector of the Hawaiian Vacation Industry. Rather than enforcing current tax land zoning laws; and rather than partnering with the small businesses 2078 will effect (including on island cleaners, caretakers, etc.) the legislature deemed the best approach is to unilaterally impose strong-arm tactics on the little guy (unless that is the large hospitality industry and certain property management firms that I smell in the background, then it may not be so unilateral.) Really???? This bill is the best you could come up with?  Consumer Beware! Hawaii legislators think you, as a stupid consumer, need “their” protection, and it will cost you! As legitimate Rentals by Owners are regulated out of business you get to pay more for the fewer remaining options… Maybe Florida, Bahamas, and other popular Rental by Owner destinations will think a little more highly of your ability to make economical informed choices.

  • Msodman54

    I am positive the Beatles had Roz Baker in mind when they wrote this song:

    Let me tell you how it will beThere’s one for you, nineteen for me’Cause I’m the taxmanShould five per cent appear too smallBe thankful I don’t take it all’Cause I’m the taxmanIf you drive a car, I’ll tax the street,If you try to sit, I’ll tax your seat.If you get too cold I’ll tax the heat,If you take a walk, I’ll tax your feet.Don’t ask me what I want it forIf you don’t want to pay some more’Cause I’m the taxmanNow my advice for those who dieDeclare the pennies on your eyes’Cause I’m the taxmanAnd you’re working for no one but me

    • KCardwell

      This isnt the first time Roz has pulled this BS.  She is almost as bad as Romney talking out of the both sides of her face.

      • Msodman54

        She has to be voted out of office along with josh green.  The local people have to know neither give a rip about them at all!

  • Evan9132

    My wife and I live in Alaska, but we have owned a nice condo in the South Kihei area since 1983, and we enjoy spending a month there every winter.  We also rent the condo the rest of the year to people from the mainland and Canada.  I handle the rentals myself, have a Hawaii tax license, and am very careful to collect GE and TA taxes and remit them to the Dept of Taxation on a quarterly basis.  I have a local cleaning person who, along with her husband, are the local contacts for our renters if a problem ever arises.  I advise renters of their names and phone number if they are needed, and the same information is posted in the condo.  I do not need a “property manager” to manage my condo.  I am fully capable of paying the bills myself and I have a Bank of Hawaii account so that the people I hire to do repair work, etc., are paid locally and don’t have to wait for a check to clear our bank here.  The  County of Maui is already making life difficult for us by requiring us to pay the highest property tax rate because we rent the condo, and the Maui Assessor’s Office has just increased the assessed value of our condo for this year by more than $110,000!!  If  HB2078 or SB2947 become law, we will probably sell our Maui condo and buy somewhere else.  Senator Baker and her colleagues in the legislature are not going to help the Hawaii tourism industry by pursuing this kind of legislation.

    • Bill P

       Update on House Bill 2078 SD 2 There’s
      been a huge uproar from out-of-state owners regarding the proposed
      state legislation requiring the use of real estate licensees as property
      managers. I am pleased to announce that according to the legislative
      update at RAM’s broker luncheon last week, this part of the bill is
      dead. Although the law still requires a property manager to hold a real
      estate license if managing property for more than one owner,
      out-of-state owners retain the right to manage their own rentals while
      designating an on-island contact, licensed or not, as their property
      manager.

      • Dakine

        Sounds like they are CORRECTLY differentiating between “On Island Emergency Contact”, and “Property Management”.

        • MauiM

           It is only further “wordsmithing.”  Not changed at all!

      • MauiM

         Because owners will have to find one person for one property to “manage” their properties and there are more individual condo owners than there are local contacts willing and able to take on this task, this is a thinly veiled way of continuing to force non-resident owners to hire property management firms, imho…

      • Aurorasands

        They are still trying to migrate the restrictive language in HRS 467 (which applied to real estate agents) over to HRS 521 – which is the landlord-tenant act. At the present there is no restriction on who can be a local contact for a private property owner. Under the current version of the legislation, a non-licensed individual will not be able to serve as local contact for more than one owner

      • Canadian in Maui

        Sorry Bill P, but this is not entirely accurate.  The wording requiring a PM was removed, and replaced with wording that stated an on-island representative can only be representative for one owner.  There simply isn’t enough work involved in being an on-island rep to make it a full time job and therefore economically viable for an individual.  More importantly, there simply are not enough willing and able people on the islands to have a 1 to 1 match with the vacation rentals.  In order to be representative for more than one owner, you have to be a realtor.  Which, brings us full circle back to the property manager requirement. 

        • Bill P

           By the response to the blurb I posted yesterday, I am a bit chagrined that I did note to you all that I pulled the article directly from “Maui Now,” a publication I get online on a regular basis.
          I will be much more informative in the future.  Sorry for the kapakahi info…  Bill

  • MauiM

    Two new articles on this topic – Honolulu Civil Beat today – “Vacation Rental Legislation is Deceptive” and an excerpt from the Vancouver Sun article “Hawaii Vacation Rental Bills Violate NAFTA.”  These bills remain discriminatory and BAD!!!

  • Rathgaber

    It sounds like Ms Baker is on the condo owners side now…..but….she was one of the original proponents of the bills and was reported to be working  along side or with the Realtor associations that wanted a bit of the transient accomodation pie. Everything always come down to money doesnt it??? on both sides!!!!

  • Madmat40

    If the state can not successfully enforce drivers to have a valid DL and or liability  insurance, then how could they even begin to enforce any variation of HB1706. It is evident that it will be necessary to staff  with new hires in order to see that all taxes that are due to the state will be collected, but what will be the final revenue results? Will the state net revenues in excess of the staffing costs, or will it just become an another employment  magnet for budding bureaucrats?

    The state should be careful before they create  a new bureaucracy. There are surely more imaginative and efficient ways to see that rentals are monitored, that renters are treated fairly, taxes are collected, and that property owners are not deterred from investing in the Islands.

    But I will still come back to the terrible state of drivers that lack  DLS and liability insurance. Fix this first then move on to an imaginative and effective method of collecting from vacation renters. If driver regulations can not be enforced, does the state really think they will be successful with a new program?

  • SmallHiBiz

    From online continuing education course us licensed operators have to take.

    “If a property owner lives on the same island where he has rental property, then he can manage his own properties. However,
    according to the law, an absentee owner cannot manage his rental
    property himself from the mainland, from another island, or from some
    other locale. Hawaii law requires that if property owners are absentee
    owners, they must designate an agent living on the island where their
    rental property is located to act on their behalf.

    This
    does not automatically mean that the agent needs to be a real estate
    licensee. The logic behind requiring an on-island agent (or
    “representative”, which term has the same meaning as “agent” herein) is
    to have someone immediately available to tenants when issues arise. This
    means that the property owner can designate an unlicensed friend or
    relative who lives on the island where the property is located to serve
    as the owner’s representative as long as the person does not represent
    more than one owner or undertake any activities that require a license.”


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