LIHUE — The Kauai County Council on Wednesday approved amendments to a bill that would increase property taxes for certain vacation-rental owners.
The authors of Bill 2767, Councilmembers Luke Evslin and Mason Chock, say the proposal will close a loophole in county tax laws that allows the owners of over 100 transient vacation rental properties to pay a much lower rate than they should.
But the bill has gotten pushback from some community members who attended the Finance and Economic Development Committee meeting and a public hearing last week to complain they are unintentional victims of the proposal despite earning little to no revenue on homes they rent for part of the year in order to subsidize their incomes and travel expenses.
Evslin said the bill is an attempt to address Kauai’s rising housing costs driven primarily by a decline in resident-occupied homes and an ever-increasing tourist population. It seeks to remove transient vacation rentals, or TVRs, from a property-assessment category introduced in 2014 as a middle ground tax rate for homeowners whose permanent residence is also used for commercial purposes.
Bill 2767 passed first reading in a split council vote last month, but heated testimony at last week’s public hearing prompted a pair of amendments that push the effective date of the law back two years to 2023 and allow anyone who makes less than $45,000 a year on their property to remain in the cheaper tax bracket.
Chock said since writing the bill, he has come to a deeper understanding of how it could inadvertently affect some property owners, specifically those who would be subject to a higher tax rate because they use home-exchange websites to swap houses with people who live in an area they want to visit.
Home exchanges are “a different animal” than the short-term-rental properties Bill 2767 targets, according to Chock, who said the amendments should exempt those owners from the higher tax rate while still forcing residents who rent their homes to vacationers to pay their fair share of the county resources their tenants use.
Chock said he is trying to close the door on “clear lines of abuse” in current laws, citing examples in which vacation-rental owners can make it appear as though multiple rental units are their permanent residences, allowing them to avoid paying TVR tax rates.
Councilmember Felicia Cowden voted to approve the amended bill, but was its most vocal detractor during deliberations at Wednesday’s committee meeting. She said she spent months getting to know many long-time Kauai residents who could still fall between cracks in the proposed legislation even though they derive little to no substantive income from their homes.
Cowden asked her fellow councilmembers to put off further discussions on the bill and called for a “comprehensive meeting” with the county Finance Department to take a closer look at county tax codes before making legislative changes she believes could force some people out of their homes.
Several Kauai residents from the north and east sides of the island went to the committee meeting to speak out against the bill, reiterating the arguments presented at last week’s public hearing and expressing concerns that they would be unfairly taxed despite the amendments.
Planning Director Ka‘aina Hull explained that changes to county tax codes may be unpopular but are necessary to stop the proliferation of short-term-rental houses that drive property taxes up in surrounding neighborhoods and house tenants who require emergency rescue crews far more frequently than permanent residents and have a disproportionate impact on county parks and public facilities.
For the house-exchange website users, Hull offered a practical solution.
“My honest recommendation is, don’t use the website,” he said. “It’s a transient use. And it should be taxed accordingly.”
Council Vice Chair Ross Kagawa offered little sympathy for the residents who showed up to complain about the bill, pointing out that his family has been on Kauai for four generations and doesn’t own any vacation rentals. The meeting was called to a recess after an exchange between Kagawa and a woman who accused him and other councilmembers of creating a false narrative in support of the bill.
“You know what you bought it for. If you cannot pay the things on it then, you know,” he said shrugging, “it’s not my fault.”
The amended bill passed in a 4-1 vote and will be up for second and final reading at a council meeting next week.
This story has been edited to reflect accuracy.
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Caleb Loehrer, staff writer, can be reached at 245-0441 or cloehrer@thegardenisland.com.
