We recently introduced Bill No. 2767 to ensure that all vacation rentals and hotels/resorts are paying the appropriate property tax rate to provide adequate and equitable funding for our island’s infrastructure needs.
The bill generated a number of concerned emails from residents as well as a passionate op-ed published recently in The Garden Island. We appreciate the open feedback and we wanted to take this opportunity to explain our rationale for the proposal.
Kauai currently has more tourists than our infrastructure can handle. While tourism drives our economy and helps support many local families, we need to ensure that the impacts of the industry don’t overwhelm the benefits. This is clearly stated in the recently updated Kauai Tourism Strategic Plan (which is funded by the County of Kauai, Hawaii Lodging and Tourism Association and Kauai Visitors Bureau):
“We are at a tipping point, and the risk of overtourism threatens the environment, quality of life and the visitor experience…In order for the visitor industry to continue to thrive and be a positive contributor to our economy, it must also be a vital partner in contributing to the quality of life for Kauai residents…It is clear that the status quo for Kauai tourism cannot continue. Bold action must be taken to better manage tourism to protect the environment and residents’ quality of life.”
On top of the infrastructure impacts, the proliferation of visitor accommodation units also worsens our current housing crisis. The impact on residential communities from TVRs (transient vacation rentals) is clearly outlined in our new General Plan (which is the guiding policy document for the County of Kauai). The plan states that when homes are converted to TVRs, the resident population in the area declines, negatively impacting residential neighborhoods. It goes on to explain that:
“The displacement of low- to moderate-income households changed the social character of traditional neighborhoods. Once they were close-knit places where neighbors knew each other. Today, the transitory occupancy of these neighborhoods are more vulnerable to crime, noise, and illegal parking.”
Given that, the Kauai General Plan calls for taxing all TVRs “at a rate consistent with other resort uses.” And it includes a specific goal to “reduce the impact and number of transient vacation rentals” through the use of the property tax code. The recommendations within the General Plan regarding vacation rentals are cited by the Tourism Strategic Plan as “critically important to undertake to ensure resident and visitor satisfaction.”
Given all of that, the intent of Bill No. 2767 is simply to ensure that all vacation rental operations are covering the full cost of services and infrastructure that the tourists who occupy those units are costing the County of Kauai. Along with being more equitable because it will ensure that all TVRs are paying the same rate, the bill also provides an incentive for vacation-rental owners to long-term rent their units to Kauai residents instead of visitors.
Currently, if someone lives on the same property as their TVR or hotel/resort, instead of getting taxed at the higher vacation rental ($9.85 per $1k assessed value) or hotel/resort ($10.85) tax rates, they are getting taxed at the commercialized home use ($5.05) rate, which is the same rate applied to residents who operate a long-term rental or office from their home.
Many properties have multiple TVR units on one lot, and since the homeowner lives on the property, they are eligible for the lower commercialized home use rate instead of the vacation rental rate. That means that they’re paying the same rate for multiple TVRs as someone who long-term rents or works out of a portion of their property. And, under the current tax code, it’s even possible for the owner of a hotel or resort to move onto the premises and then cut the entire resort tax rate in half to the same rate that residents pay for a long-term rental in their own home.
If passed, our bill would close these loopholes and simply ensure that all TVRs or hotels/resorts get taxed at the respective vacation rental or hotel/resort rate.
If this bill passes, vacation-rental operators who do not want to pay the $9.85 vacation rental property-tax rate can continue paying the $5.05 commercialized home use rate if they use their unit as a long-term rental home rather than a short-term vacation rental. Vacation-rental operators can achieve the even-lower $3.05 homestead rate by renting their unit affordably to a Kauai family via the county’s existing long-term, affordable-rental program. Bill No. 2767, therefore, ensures that all TVRs are more fairly contributing to the cost of tourism-related infrastructure and services, while further providing incentives for TVR units to be converted to long-term rentals for Kauai residents.
This bill will not solve our housing crisis or bring balance to our tourism industry, but we believe that along with all of the other housing initiatives passed by the County Council this year, it’s a step in the right direction, and it ensures that all TVRs are equitably contributing to county infrastructure.
For those concerned about the impacts of the bill, we would appreciate hearing from you directly. Please email us any concerns or comments at levslin@kauai.gov and mchock@kauai.gov.
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Luke Evslin and Mason Chock are members of the County Council. Evslin is Finance and Economic Development Committee chair, and Chock is the Planning Committee chair.
