Op-Ed: From fire to fairness — To find solutions to rebuild Maui, we must address tax disparities and land ownership

Op-Ed: From fire to fairness:
To find solutions to rebuild Maui, we must address tax disparities and land ownership
By Shay and Ian Chan Hodges, Responsible Markets

In the wake of the devastating Lahaina wildfires, Maui communities face a complex landscape of recovery, compounded by pre-existing challenges of non-local land ownership, inequitable taxation and investment patterns that have long shaped our islands. The fires have not only brought about devastating suffering and displacement but also illuminated deeper issues related to the role of outside investors in our local economy — and whether they contribute their fair share. These issues rest on a fundamental question of: Who owns Maui County?

Billionaire Larry Ellison, for example, purchased 98% of Lānaʻi for an estimated $300 million in 2012. The second richest man in Malaysia has controlled one-third of Molokaʻi for some 20 years. In 2018, private equity fund Blackstone acquired the Grand Wailea and Ritz Carlton. That same year, a Canadian pension fund purchased 41,000 acres of land in Central Maui, calling itself Mahi Pono.

Use of public information, visualized and curated in an easy-to-use tool for Maui-based Responsible Markets by the nonprofit Center for Geospatial Solutions, reveals a number of paths forward for leveling the playing field between outside investors and our local community.

For instance, though there are few surprises when we look at Ellison’s ownership of the island of Lānaʻi, the data regarding the overall property taxes paid is illuminating.

Despite Lānaʻi Resorts, LLC paying one of Maui County’s highest property tax rates for its two hotel properties ($11.65 per $1,000 in assessed value), the average rate that Ellison’s company pays for its almost 89,000 acres of additional Lānaʻi properties is only $6.44 per $1,000 assessment — due to the diversity of its tax classifications.

98% of Lānaʻi Resort’s land is classified as “Agricultural” with an average tax revenue for Maui County of only $2.72 per acre, totaling $237,545.

The company’s 83 acres of “Hotel” properties generate almost $40,000 in revenue per acre, providing the County with over $3.3 million in property taxes.

This raises questions about the fairness of our current tax system and the potential for adjustments that more accurately reflect the financial benefit of developing and marketing an entire island as a luxury resort. 

In a recent meeting discussing hotel property tax rates, County Council Member Tamara Paltin asked about the payments received by hotels from the Federal Emergency Management Agency (FEMA) for victims of the Lahaina wildfires. 

In the context of her question, it’s worth noting that, as with Lānaʻi, many large resorts across Maui pay less for their portfolio of properties than the hotel property tax rate due to a mix of land categories, including golf courses being classified as conservation land. In Wailea, the Grand Wailea, Four Seasons, Andaz, and Wailea Beach Resort all have large portions of their properties classified as “Conservation,” a tax rate that is a little more than half of the “Hotel/Resort” rate, effectively avoiding a combined $1 million in property taxes. Many of these properties are owned by private equity entities that send profits outside of Hawaiʻi. Regardless of ownership structure, there are currently no locally-owned hotels in Maui County.

In the case of Molokaʻi, where nearly half of the privately held land on that island is owned by Molokaʻi Properties, Ltd, the Center for Geospatial Solutions mapping tool illustrates the disparity in tax contributions between wealthy landowners and local residents, 45% of whom are considered low-income. Due to its classification as “Agriculture” and extremely low land valuation, the land owned by Molokaʻi Properties only provides about 2.5% of the total tax revenue paid to the County by all of Molokaʻi’s private property owners. 

Molokaʻi Properties owns over 43,000 acres of ag land on Molokaʻi, while all other private ag land on the island comes to just under 43,000 acres.

On average, Molokaʻi Properties’ agricultural land (88% of its holdings) has a value per acre under $100, with each acre only generating $0.52 of tax revenue. The average value of other privately held Molokaʻi agricultural land is $4,451 per acre, generating $23.37 in revenue per acre — or 45X what Molokaʻi Properties pays. Consequently, the County of Maui collects $22,570 in taxes from Molokaʻi Properties compared to a total of $998,000 from the other private Molokaʻi agriculture landowners – for an equivalent amount of land.

As we navigate the challenges of recovery and rebuilding, it is imperative that we leverage data to inform our policy decisions. We must ensure that our tax system reflects the true value of property and the impact of ownership on the community at-large, encouraging responsible stewardship of the land and equitable contributions to our community’s well-being. 

The path to recovery should include re-evaluating the foundations of our local economy, addressing the concentration of land ownership in non-local hands, and ensuring that any outside owners are actively contributing to — and not just benefitting from — the sustainable rebuilding of Maui County.

Responsible Markets is a Maui-based venture catalyst firm, working for more than 20 years to integrate environmental care, social responsibility and good governance (ESG) into investment policies and practice. The firm is led by Ian Chan Hodges, founder/principal and Shay Hodges, stakeholder engagement lead.

*****Views expressed in Op-Ed pieces are those of the author’s alone and do not reflect or represent the opinions, policies or positions of Maui Now.*****