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Friday, January 22, 2010
Maui time-share taxes surge
Pacific Business News (Honolulu) - by Janis L. Magin Pacific Business News
A four-year-old tax on time shares on Maui is enraging property owners who say they are being hit with dramatically higher bills than local residents are paying.
At the same time Maui property values are falling, taxes on some time-share properties doubled, tripled and more in the past year.
Time-share owners say Maui County officials are trying to balance the county’s budget by collecting more money from absentee vacationers so they don’t have to raise taxes on local residents.
Maui County became the only local government in the U.S. to create a tax rate category just for time shares in 2005, and at $14 per $1,000 of assessed valuation has the highest tax rate on time shares in the nation, according to the time-share industry’s trade group, the American Resort Development Association.
“They’re the highest property tax values, bar none, across the country,” said Jason Gamel, vice president of state government affairs for ARDA in Washington, D.C. “They’re the only ones who have made an effort to break time share out and give it a separate rate.”
The issue is serious enough for ARDA’s president, Howard Nusbaum, to fly to Hawaii last week for two days to tout the economic benefits of time shares to government, tourism and business leaders. Nusbaum spent one day on Maui meeting with Mayor Charmaine Tavares, county council members and business leaders about time-share taxes and plans for future growth.
Starwood Vacation Ownership recently sent e-mail letters to time-share owners describing their tax situation on Maui. The company said the property taxes for the Westin Kaanapali Ocean Resort Villas North shot up from $1.2 million last year to nearly $6.4 million this year, while the taxes for the company’s Westin Kaanapali Ocean Resort Villas went from just under $2.3 million last year to nearly $6.4 million this year.
Several time-share owners posted Starwood’s letters about the tax increases on the Timeshare Users Group Web site, while others protested the county’s move to tax time-share owners at such a high rate while keeping residential rates low.
Robin Suarez, Starwood Vacation Ownership’s vice president for registrations and government relations, declined to comment.
Starwood is reportedly appealing the assessments of the two properties. Other smaller time-share projects are also appealing their assessments.
In fact, the county saw its assessment appeals jump from 501 in the 2006-07 fiscal year to 1,568 for the 2009-10 fiscal year. Those are unlikely to be resolved soon; the county has a backlog of appeals from two years ago, said Scott Teruya, Maui County’s real property tax administrator.
The method Maui County uses to calculate a time share’s value has sent already high property taxes soaring.
Most time-share companies sell the same one-bedroom or two-bedroom unit 51 times to buyers who own the right to use the unit either one week per year or one week every other year.
On Maui, a residential condominium is taxed at $4.85 per $1,000, or $2 per $1,000 if it is the owner’s primary residence. A unit that’s used as a time share is taxed at $14 per $1,000, and that bill is split among the 51 owners.
At the Westin Kaanapali Ocean Resort Villas, the 2009 assessed values for more than 280 units ranged from $555,000 to $2.9 million, and taxes on those units range from $7,770 to $41,101.
The county assesses projects like the Westin time shares differently based on whether the project is still under construction or whether it is completed, and whether the units have gone through the condominium process or whether the property is considered one unit, Teruya said.
Starwood, for example, recently completed both projects, whose units are assessed as condominiums.
“Since 2005 there’s a lot of new timeshare developments that are being built.” Teruya said. “A lot of times when it’s being built, it’s a pre-completion.
The completed project is then assessed at fair market value and taxed at the higher time-share rate, he said.
“Is the tax bill going up because of the market or because you’re adding inventory?” he said. “It’s not that taxes increased, the state of the project changes.”
Maui County has benefitted from taxing time-share projects, with tax revenue from time shares soaring 200 percent in the four years since the new tax rate was implemented.
The county counts 2,317 time-share units on its books, while ARDA officials said Maui has 2,998 time-share units. As Teruya noted, the number of time-share units has increased significantly in the past couple of years as Starwood Vacation Ownership and Marriott Vacation Club completed new time-share resorts.
The county collected just $8 million during the 2005-06 tax year, the first year the $14 rate went into effect. Before that, time-share projects were lumped in with hotel-resort properties and taxed at a rate of $8.30 per $1,000 of valuation.
In 2008-09, the county took in $15.5 million from time-share owners, a figure that jumped to $24.4 million for the 2009-10 tax year.
The carrying costs for time-share owners are higher than regular condominiums, too, with some paying thousands of dollars in maintenance fees for one week per year.
Higher tax bills could lead to time-share buyers avoiding Maui for purchases, or cause existing time-share owners to sell, or even fall into foreclosure, ARDA’s Gamel said.
Resales are even tougher. Because of increased maintenance costs, which include property taxes, time-share owners are seeing an erosion in their equity, said Fred Messreni, the owner of Timeshare Resale Gallery in Palm Desert, Calif., a resale brokerage firm that specializes in Hawaii time shares.
Real property taxes are not the sole source of concern for the time-share industry.
The state’s transient accommodations tax, which will go from the current 8.25 percent per night to 9.25 percent on July 1, is a sore spot for owners who must pay when they stay in their own units, as is the 4.5 percent general excise tax that is levied on the homeowners’ association.
“A condo is paying over $35,000 in taxes per year in Hawaii taxes; what that’s done is destroyed the equity in Hawaii time shares,” Messreni said. “I transact these daily — secondary market prices, which at best represent 50 percent of developers’ prices, have fallen 50 percent in the last 18 months.”
Starwood sold units at its Westin Kaanapali Ocean Resort Villas North sold for an average of $95,700 per one-week interval, Messreni said.
“You can buy one today, without negotiating the price, for $25,000, on the secondary market,” Messreni said.
Maui time-share taxes surge
Pacific Business News (Honolulu) - by Janis L. Magin Pacific Business News
A four-year-old tax on time shares on Maui is enraging property owners who say they are being hit with dramatically higher bills than local residents are paying.
At the same time Maui property values are falling, taxes on some time-share properties doubled, tripled and more in the past year.
Time-share owners say Maui County officials are trying to balance the county’s budget by collecting more money from absentee vacationers so they don’t have to raise taxes on local residents.
Maui County became the only local government in the U.S. to create a tax rate category just for time shares in 2005, and at $14 per $1,000 of assessed valuation has the highest tax rate on time shares in the nation, according to the time-share industry’s trade group, the American Resort Development Association.
“They’re the highest property tax values, bar none, across the country,” said Jason Gamel, vice president of state government affairs for ARDA in Washington, D.C. “They’re the only ones who have made an effort to break time share out and give it a separate rate.”
The issue is serious enough for ARDA’s president, Howard Nusbaum, to fly to Hawaii last week for two days to tout the economic benefits of time shares to government, tourism and business leaders. Nusbaum spent one day on Maui meeting with Mayor Charmaine Tavares, county council members and business leaders about time-share taxes and plans for future growth.
Starwood Vacation Ownership recently sent e-mail letters to time-share owners describing their tax situation on Maui. The company said the property taxes for the Westin Kaanapali Ocean Resort Villas North shot up from $1.2 million last year to nearly $6.4 million this year, while the taxes for the company’s Westin Kaanapali Ocean Resort Villas went from just under $2.3 million last year to nearly $6.4 million this year.
Several time-share owners posted Starwood’s letters about the tax increases on the Timeshare Users Group Web site, while others protested the county’s move to tax time-share owners at such a high rate while keeping residential rates low.
Robin Suarez, Starwood Vacation Ownership’s vice president for registrations and government relations, declined to comment.
Starwood is reportedly appealing the assessments of the two properties. Other smaller time-share projects are also appealing their assessments.
In fact, the county saw its assessment appeals jump from 501 in the 2006-07 fiscal year to 1,568 for the 2009-10 fiscal year. Those are unlikely to be resolved soon; the county has a backlog of appeals from two years ago, said Scott Teruya, Maui County’s real property tax administrator.
The method Maui County uses to calculate a time share’s value has sent already high property taxes soaring.
Most time-share companies sell the same one-bedroom or two-bedroom unit 51 times to buyers who own the right to use the unit either one week per year or one week every other year.
On Maui, a residential condominium is taxed at $4.85 per $1,000, or $2 per $1,000 if it is the owner’s primary residence. A unit that’s used as a time share is taxed at $14 per $1,000, and that bill is split among the 51 owners.
At the Westin Kaanapali Ocean Resort Villas, the 2009 assessed values for more than 280 units ranged from $555,000 to $2.9 million, and taxes on those units range from $7,770 to $41,101.
The county assesses projects like the Westin time shares differently based on whether the project is still under construction or whether it is completed, and whether the units have gone through the condominium process or whether the property is considered one unit, Teruya said.
Starwood, for example, recently completed both projects, whose units are assessed as condominiums.
“Since 2005 there’s a lot of new timeshare developments that are being built.” Teruya said. “A lot of times when it’s being built, it’s a pre-completion.
The completed project is then assessed at fair market value and taxed at the higher time-share rate, he said.
“Is the tax bill going up because of the market or because you’re adding inventory?” he said. “It’s not that taxes increased, the state of the project changes.”
Maui County has benefitted from taxing time-share projects, with tax revenue from time shares soaring 200 percent in the four years since the new tax rate was implemented.
The county counts 2,317 time-share units on its books, while ARDA officials said Maui has 2,998 time-share units. As Teruya noted, the number of time-share units has increased significantly in the past couple of years as Starwood Vacation Ownership and Marriott Vacation Club completed new time-share resorts.
The county collected just $8 million during the 2005-06 tax year, the first year the $14 rate went into effect. Before that, time-share projects were lumped in with hotel-resort properties and taxed at a rate of $8.30 per $1,000 of valuation.
In 2008-09, the county took in $15.5 million from time-share owners, a figure that jumped to $24.4 million for the 2009-10 tax year.
The carrying costs for time-share owners are higher than regular condominiums, too, with some paying thousands of dollars in maintenance fees for one week per year.
Higher tax bills could lead to time-share buyers avoiding Maui for purchases, or cause existing time-share owners to sell, or even fall into foreclosure, ARDA’s Gamel said.
Resales are even tougher. Because of increased maintenance costs, which include property taxes, time-share owners are seeing an erosion in their equity, said Fred Messreni, the owner of Timeshare Resale Gallery in Palm Desert, Calif., a resale brokerage firm that specializes in Hawaii time shares.
Real property taxes are not the sole source of concern for the time-share industry.
The state’s transient accommodations tax, which will go from the current 8.25 percent per night to 9.25 percent on July 1, is a sore spot for owners who must pay when they stay in their own units, as is the 4.5 percent general excise tax that is levied on the homeowners’ association.
“A condo is paying over $35,000 in taxes per year in Hawaii taxes; what that’s done is destroyed the equity in Hawaii time shares,” Messreni said. “I transact these daily — secondary market prices, which at best represent 50 percent of developers’ prices, have fallen 50 percent in the last 18 months.”
Starwood sold units at its Westin Kaanapali Ocean Resort Villas North sold for an average of $95,700 per one-week interval, Messreni said.
“You can buy one today, without negotiating the price, for $25,000, on the secondary market,” Messreni said.
have contributed to the Maui timeshares for sale. There are sure a bunch listed for sale on the Red Week web site
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