The Maui County Council voted 5-4 on Tuesday to ask the Maui Planning Commission to consider rezoning 32 vacation rental condominium complexes in Māʻalaea, Kīhei and West Maui from apartment to hotel use. The vote came a week after the commission recommended against most of an earlier batch of properties.

The action on Resolution 26-129, Committee Draft 1, does not rezone anything. It refers two proposed bills to the commission, which must hold hearings and make a recommendation before the Council takes final action. One bill would amend the Kīhei-Mākena and West Maui community plans. The other would change the zoning of 19 A-1 Apartment District properties to the H-3 Hotel District and 13 A-2 Apartment District properties to the H-4 Hotel District, allowing transient vacation rentals to continue.

The Council had planned to take up the resolution at its Sept. 25 meeting, which was recessed and postponed until Tuesday because of the approach of Hurricane Nolo.

The Council’s vote margin matters. If the Planning Commission recommends against the bills, the Council would need six of its nine members to pass them, one more than the five who voted for the referral Tuesday.

The Council created the H-3 and H-4 districts through Bill 88 (Ordinance 6008), which took effect June 22. Bill 9 (Ordinance 5909) is phasing vacation rentals out of apartment districts.

Council Member Nohelani Uʻu-Hodgins, who chairs the Housing and Land Use Committee and introduced the resolution, said the properties qualify because more than 50% of their building footprint lies in the state’s Sea Level Rise Exposure Area at 3.2 feet of sea-level rise, a special flood hazard area or the shoreline setback area. The buildings also must not have been originally intended for affordable or workforce housing. The committee adopted those criteria last month and recommended the resolution 5-4 on Sept. 9. Uʻu-Hodgins said the criteria apply only to the properties in this resolution and do not control future rezoning proposals.

Council Chair Alice Lee, Vice Chair Yuki Lei Sugimura, and Council Members Kauanoe Batangan, Tom Cook and Uʻu-Hodgins voted in favor. Council Members Keani Rawlins-Fernandez, Gabe Johnson, Shane Sinenci and Tamara Paltin voted no.

Amendment fails

Before the final vote, the Council defeated an amendment to add two West Maui properties, Nohonani at 3723 Lower Honoapiʻilani Road and Hoyochi Nikko at 3901 Lower Honoapiʻilani Road, to the referral. Lee proposed the amendment in a Sept. 18 county communication, and Sugimura moved it on the Council floor. The amendment would have changed the zoning of Hoyochi Nikko from A-1 Apartment District to H-3 Hotel District and Nohonani from A-2 Apartment District to H-4.

Sugimura said both properties sit in a special flood hazard area and that their founding documents allowed short-term rentals from the start, with 28 units at Nohonani and 17 at Hoyochi Nikko.

Rawlins-Fernandez said Nohonani’s original declaration restricted the rental of its apartments for transient or hotel purposes. She urged the administration or the county’s enforcement division to look into how short-term rentals were ever allowed there.

Sugimura later asked whether two other properties—Māʻalaea Kai and Island Sands—dropped under a committee criterion tied to long-term residential use in 2008 could be added. Council members were told only properties listed on the meeting agenda could be considered, based on advice from the state Office of Information Practices. Uʻu-Hodgins said she had asked the Department of Finance to keep working with the Planning Commission on how it determined which units were owner-occupied in 2008, a question raised in testimony.

Planning Commission tension

The debate centered on how the volunteer Maui Planning Commission would receive the list. Uʻu-Hodgins said the commission rejected much of what the Council sent it earlier, and Lee said the commission approved only five of 48 properties in that referral. She called that “just astounding.”

“It’s like all of our work was for nothing,” Lee said, adding that she hopes the outcome will be different this time.

Now, with the second group of properties, “I hope the outcome will be different, but it doesn’t seem that it stands much of a chance if it’s going to go through some kind of scrutiny that none of us are aware of,” she said.

Rawlins-Fernandez said commission members “were not happy with the Council for sending them such a long list” of properties “for them to take up in their volunteer time. They don’t get paid. They have to listen to a lot of testimony.”

The commission’s recent meeting ran from 9 a.m. until about 5 or 6 p.m., she said.

“I’m really grateful to our volunteers serving in that capacity,” she said. “And I’m sorry that the Council majority keeps sending you these long lists without sufficient information.”

“Good for, you know, the commissioners for standing up for themselves,” Rawlins-Fernandez said.

“I don’t think we should be sending a list of 32 properties and asking them to take it up on their volunteer time,” Rawlins-Fernandez said. She said she would not vote to override a negative commission recommendation.

Johnson said the commission had offered “legitimate criticism,” and added, “I think we’re wasting their time.” He said the county could raise revenue through other means, such as an empty-homes tax or a new tax tier for homes worth more than $8 million, and could buy existing units for residents.

“There’s creative ways to make up on these taxes that some people claim that we’d be losing,” he said. “Instead of just relying on, you know, these short-term rentals, when we could actually have units for our people.”

Johnson noted that the bills will likely need six votes when they return to the County Council. He alluded to three-dimensional chess and asked council members supporting the bills, “do you really think the commission is going to go 180 degrees (in changing its position) and bring this back to us? No, you’re going to need another super majority, but you might as well not be supporting this because you’re going to need six when it comes back to us.”

Revenue and safety arguments

Council members supporting the bill said it reduced Bill 9’s negative impact on county finances. Cook, who holds the South Maui seat, said losing vacation rental tax revenue would limit the county’s ability to pay debt service on bonds for roads, flood mitigation and water projects.

“The tax base that this is affecting is huge,” he said.

Cook said South Maui is a “substantial district in the community,” and “I frankly feel that this is really irresponsible. I have colleagues (from) very small districts that don’t generate much revenue, that the revenue is going to be lost from this, and it isn’t immediate. It’s going to show up in the future, the near future, which is going to impact our ability to finance infrastructure that everybody says they need.”

Lee said about $640 million in annual real property tax revenue supports county services, and that more than half comes from the visitor industry. Forty percent comes from short-term transient vacation rentals, she said.

She called Bill 9 “perhaps the most reckless piece of legislation in the history of Maui County.”

“I have been here the longest, so I should know it was wrong, wrong, wrong and many, many, many things that went wrong,” she said. “But after it passed, we tried to work with it.”

Lee said the Council created the new hotel zoning and a list of exemptions for comprehensive zoning.

“We try to do all the things that generally make good legislation,” she said, noting that council members can’t rely on future Council’s to fix poor legislation. “You can’t predict what a new Council is going to do or a different planning commission. It’s impossible. You have to do all those things up front, and it wasn’t done.”

Lee said she wonders if the Council takes away money from the county’s tax base, what will replace it? “The Council came up with nothing,” she said.

Sugimura, who chairs the Council’s Budget, Finance and Economic Development Committee, said the vacation rental phase-out could cost the county $94 million a year in tax revenue, including about $60 million in property taxes, as well as transient accommodations tax and general excise tax revenue loss. She predicted more lawsuits as the county takes further actions.

Paltin said allowing shoreline properties to keep operating as vacation rentals is “very dangerous” as sea levels rise. She also said West Maui residents still contact her about housing needs as federal wildfire assistance winds down.

The Planning Commission will now review the two bills.