July 2017 E-Mail Update
Here is our 07/10/2017 e-mail update. It is sent after the statistics for the preceding month have been posted on the Board of Realtors website. You can find previous newsletters by visiting www.stott.com/news.
Please use the following link to access our most recently published quarterly newsletter:
The City and County of Honolulu passed a bill in April 7, 2017 that modified a city ordinance affecting residential units in condos on land zoned mixed use, hotel, or commercial. The Department of Budget and Fiscal Services mailed a letter in June to approximately 8,000 condominium units that may qualify for the residential classification (see link for a copy of the letter). An owner of a condo being used for residential purposes (owner occupied or a rental leased for more than 30 days at a time) must file a petition form to dedicate the property for residential use by September 1, 2017. 45 buildings fall into this category according to an addendum included with the letter. If approved, the unit will be taxed at the lower residential rate. The dedication lasts for five years and is automatically renewed for another five year period unless the property is sold. The new owner will have to fill a new petition form. An existing Home Exemption will no longer automatically qualify the property for the Residential Classification. Failure to file the petition by September 1, 2017 will result in the property being taxed at the higher rate.
Roughly 50,000 people welcomed the return of the Hokule’a, a Hawaiian double-hulled canoe, that just completed a three-year, 46,000 nautical mile journey around the world to nineteen countries. The adventure was estimated to have cost about $12 million paid for by local and national sponsors of the voyage. Polynesian Voyaging Society President, Nainoa Thompson, led the crew and was overwhelmed by the welcome he and his crew received. Hokule’a’s first ocean voyage occurred in 1976 from Hawaii to Tahiti. In 1980, Thompson navigated the double-hulled canoe from Tahiti to Hawaii for the first time in 600 years. The Polynesian Voyaging Society now hopes to raise an additional $1 million so that the Hokule’a can sail to 30 ports across the state.
Oahu residents celebrated the nation’s birthday by traditional means like attending Kailua’s Independence Day Parade and watching fireworks on Waikiki Beach or on Kailua Beach. Four tourists asked Tim and Mark to take photos with “American Hat Men” (see link for photo). A newer event, the “floatilla,” is causing concern among Hawaii officials. An estimated 10,000 people floated off Waikiki’s beach in motorized boats, kayaks, canoes, dinghies and inflatables. Winds from 15 to 25 mph pushed some people as far as a mile from shore and ocean safety personnel had to transport hundreds of people back to the beach, primarily by jet skis. Ten people had to be rushed to the hospital for alcohol intoxication and one woman was in critical condition. The Coast Guard pulled over 100 abandoned inflatables from the ocean. One state representative is already calling for legislation to control the unsafe behavior that sent people to the hospital and kept four life guard Jet Ski crews and two Coast Guard patrol boats busy for about five hours in the afternoon and evening.
Vacation rentals made front page news again in the Honolulu Star Advertiser. The Hawaii Tourism Authority released information from a study that they ordered showing Hawaii’s alternative accommodations industry (vacation rentals) supported $3.1 billion in visitor spending, $5.1 billion in total spending, $1.4 billion in household income, and 34,000 jobs. On Oahu, it is legal to rent for less than 30 days if the property is in a resort district and the association allows short-term rentals, or the city issues a non-conforming use certificate. A 1989 city moratorium has limited those non-conforming use certificates to 775 vacation rentals and 41 bed-and-breakfast homes. Some tenants are risking $1,000 per day fines and eviction by subleasing their properties to vacationers. Advocates for revising city statutes to allow short-term leasing claim that it helps tenants and homeowners pay for their rent or mortgage while opponents claim that it displaces local families, limiting the supply of housing, and driving up already high cost of housing. The city Department of Planning and Permitting has made an effort to crack down on the illegal activity, but proving that a tenant or landlord has broken the law is difficult. The city has only issued $13,700 in fines in 2015, $13,550 in fines in 2016, and $2,000 in fines to date this year.
Some Hawaii taxpayers have taken a major hit to their wallets recently. State legislators have raised income tax rates on individuals earning more than $150,000, heads of households making more than $225,000, and married couples making more than $300,000. The additional income will fund initiatives to provide tax credits to lower income households. City and County Council Members have raised property tax rates for homeowners that don’t have a homeowner exemption. Residential A property now encompasses all second homes and rental property regardless of value. The tax rate for Residential A property will be 0.45% for property valued up to $1 million and 0.9% for property valued over $1 million. The city council and mayor are trying everything possible to raise funds for the over-budget rail project without raising taxes on the majority of the voting public. If you are an owner-occupant of a home and have not filed a homeowners exemption, then you should due so before the September 30th deadline. You can file online using the link below:
The state Department of Taxation’s new computer system has generated so many complaints from taxpayers that the Legislature refused Governor Ige’s request for $18 million in additional funding to continue the tax system upgrades. House Finance Chairwoman, Sylvia Luke, struggled to use the system to pay her own General Excise Taxes (GET). She hopes that withholding funding will get the tax department’s attention and encourage fixing the current problems before expanding the system to include individual income taxes. Stott Property Management has spent countless hours trying to register their clients and often having to fix the tax department’s own errors before completing the process. Additionally, Stott Property Management personnel have spent hours on hold before getting through to the overwhelmed help desk. Several clients received erroneous letters demanding tax payments and several clients are still waiting on tax refunds for overpaying GET in earlier periods. Luke contends that tax department officials are claiming success when they meet a series of deadlines for implementing components of the system without measuring the impact on the taxpaying public. The tax department has acknowledged that additional security associated with the new system caused problems with registering and that some of the measures were not needed. The tax department will defer certain purchases to free up $2 million to keep the project moving forward. As a result of the complaints, the tax department will not require income tax filers to register when they roll out the fourth rollout of the system in August. That is when the system will be expanded to include the individual income tax. Users will be able to sign on as a guest if they have trouble logging into the new system.
State Legislators are looking to raid the $150 million green energy loan program to install LED lights and other energy conservation measures at Hawaii’s public schools. Both chambers of the Legislature unanimously approved a bill that would provide the state Department of Education an interest free $46.4 million loan to improve energy efficiency. Proponents of the bill claim that the bill would save taxpayers money in the long-run while opponents claim that this is just another end run by legislatures to spend money outside the normal budgeting process. The Green Energy Market Securitization (GEMS) funding comes from fees paid by Hawaiian Electric Company (HECO) customers and the program was designed to make energy more affordable to low-income families. The program failed to meet its goal of lending all the money by the end of November 2016. The program has leant about $3 million since its inception and administrative costs have totaled $2.9 million to date. Hawaiian Electric Company ratepayers would end up paying the $8.9 million in interest payments since the GEMS program was funded by a bond sale and the Department of Education would not be paying an interest on a loan that would be paid over a period of 20 years. Governor Ige has until July 11 to sign, veto, or allow the bill to become law without his signature.
The Hawaii Department of Taxation has contracted with a new armored car service to accept the large amount of tax payments in cash from the newly approved medical marijuana dispensaries. Federal Law makes it difficult for the dispensaries and testing labs to obtain banking services. As a result, almost all transactions have to be cash.
The City and County of Honolulu plans on shoring up crumbling portions of a sea wall that protects Kapiolani Park near the Waikiki Aquarium. Waves have toppled portions of the wall and water is pooling behind it. It has been 30 years since the city had to repair the wall. Failure of the seawall could result in extreme erosion, soil runoff into the ocean, and damage to the promenade. Repair estimates range from $1.8 million to $3.1 million. The city has not yet approved a contract to address the 460-foot stretch of wall.
Honolulu’s first major bike-share rental system, Biki, commenced operations in late June with 1,000 turquoise bikes available for rent at nearly 100 stations from Diamond Head to Chinatown. Only time will tell if enough commuters and recreational riders will use the system to make the $8 million investment worthwhile. Tim has witnessed many bikers pedaling through Ala Moana Park and other parts of Honolulu on the new rental bikes over the past few weeks.
Members of the state Land Use Commission are trying to force the City and County of Honolulu’s Planning Commission to come up with alternative sites for Oahu’s only public landfill, Waimanalo Gulch. The action is in response to the city’s request for a special use permit to extend the use of the existing landfill. The Waimanalo Gulch landfill was initially opened in 1988 and was expected to last 15 years. Four consecutive mayors have taken steps to expand the landfill and extend its life. West Oahu has grown significantly since the landfill was first opened and West Oahu residents are pushing back and insisting that the Waimanalo Gulch landfill be closed. Mayor Kirk Caldwell has argued that a majority of the garbage is now either recycled or burned at the city’s H-Power plant and that only 10 percent of Oahu’s solid waste ends up going into the landfill. The city further hopes to reduce landfill usage to dumping the ash from the H-Power plant.
Concerns over public beach access have surfaced from The Kahala Hotel & Resorts request for to exchange a revocable permit to a more permanent nonexclusive easement. The new owners of the resort would like to expand the number of outdoor wedding areas on state land from two to three and place the hotel’s beach lounge chairs on the beach to be used on a first come, first serve basis. The hotel would also like to provide torch-lighting ceremonies and rides in traditional sailing outrigger canoes in order to stay competitive with other hotel offerings in Waikiki. Several Kahala residents have voiced concerns since Waikiki hotels have violated rules regarding the deployment of beach equipment on public beaches. Other residents have complained that beach access has been denied while outdoor wedding ceremonies have been conducted at The Kahala Hotel & Resorts existing outdoor wedding venues. Other residents have complained that taxpayers are getting short-changed by the state not charging enough rent for the use of state lands. Several neighborhood boards plan to discuss the issue in their next meetings and may request that the state reopen the environmental assessment comment period to provide the public more time to provide feedback.
Tim and Tracey attended Pacific Business News’ annual panel focusing on business in Windward Oahu. Alexander and Baldwin, Inc. (A&B) updated the audience on their planned shops in the old Macy’s building to be named Lau Hala Shops. Part of the reason for choosing the name Lau Hala was to take advantage of the old railings with the Liberty House (LH) logo. The railings will remain, providing a nostalgic reminder to the long-time Kailua residents that remember the island retailer. Maui Brewing Company and Roy’s will be new tenants in 2018 and A&B is expecting to sign a lease with a fitness company to occupy the 2nd floor. A&B’s design plans aim to provide open spaces catering to some outdoor dining and encourage pedestrian traffic in downtown Kailua. The CEO of Castle Hospital spoke about their recent purchase of Hawaii Pacific University’s Windward Campus and their evolving plans for expansion. Other topics centered around public safety issues concerning the increasing bike and vehicular traffic and a recent attack on restaurant employees by a mentally troubled homeless individual.