LIHUE — Twelve percent of transient vacation rentals on file on Kauai have appealed a denial for a permit-renewal.
Currently, 10 percent of the island’s TVR inventory is assigned to a contested case hearing, and this number could increase as more appeals are sent to a hearings officer.
“I think what we need to do … is to establish administrative rules on renewals: What is the documentation required to establish continued use?” Kauai Planning Commission Chair Wayne Katayama said at a commission meeting.
The other part of the issue, he said, are the more than 60 intervenor reports with findings from contested case hearings that will be coming back to the commission.
Katayama suggested that Planning Director Michael Dahilig make a proposal on how he wants to categorize and treat the different applications coming back, so the commission can rule on them, give them some latitude and be able to negotiate a settlement.
Dahilig said he can work on the process to develop rules, and may be able to provide a draft at the commission’s next meeting.
As far as the contested cases, Dahilig said the department is in discussions with various appellants.
In response to concerns regarding the proliferation of TVRs inside residential neighborhoods and agricultural lands, the Kauai County Council approved three laws — in 2008, 2009 and 2010 — grandfathering use outside visitor destination areas, provided a permit application included a set of documents showing use prior to March 8, 2008.
Going forward, no additional TVRs are allowed in residential neighborhoods or ag lands on Kauai.
The county Planning Department has 658 TVRs on file, and 407 of those are considered active without issues — 161 are inactive and 11 voluntarily abandoned use — according to Dahilig.
Out of all TVRs on file, 79 have been denied a permit renewal, and 65 of those have already been assigned to a contested case, including 19 that were assigned by the commission Tuesday.
County Attorney Al Castillo previously said each contested case could cost the county $10,000 to $35,000 in legal fees.
Some commissioners showed frustration Tuesday after hearing from Dahilig that, per county attorney’s opinion, the department can’t deny a permit renewal based on missing documents in the original application for a grandfathering permit.
Dahilig said the former planning director (Ian Costa stepped out in November 2010) granted permits based on whether there was enough evidence at that time for a nonconforming use. That determination is still valid today, he said.
“That doesn’t make sense to me,” Commissioner Hartwell Blake said.
The deadline to apply for a grandfathering permit was Aug. 16, 2011. The permits must be renewed each year.
“The renewal requirements are different than establishment requirements,” Dahilig said.
A renewal only needs state General Excise Tax and Transient Accommodation Tax records and a $500 fee, he said. By contrast, several documents are required for the original permits.
An audit found that only 16 percent of income tax filings were present in all TVR applications, according to Dahilig. Forty-five percent of applications didn’t have reservations or deposits lists; 16 percent didn’t have GE or TAT records; 11 percent didn’t have site and floor plans, and 8 percent didn’t have the For Your Safety and Comfort document, he said.
Part of the problem was that the original application for a grandfathering permit did not list all the required documents, according to Dahilig.
So, if someone has the proper renewal documents, they will get their permit renewed, he said.
“I don’t think anybody questions the fact that we need regulation of vacation rentals outside the visitor destination areas,” Dahilig said. “But as you heard many a time, there are questions concerning the legal conformity of the law.”
He said the department needed to identify material weaknesses from past decisions and the process leading to the current situation in order to make adjustments.
Dahilig said a multi-agency team inspected selected cases, which are being reviewed for enforcement action depending on the evidence. Current inspections are being done on lapsed certificates which have already received a cease-and-desist notice based on nonrenewal in 2012.
Hand audits were conducted, and permit holders were informed that required documents were missing from their original application and needed to be submitted, he said.
County inspectors hired to implement TVR laws were not adequately trained or supervised — the application process required high-level planners rather than inspectors, Dahilig said.
Some planning staff was moved to enforcement, a supervisor position was created and filled by planner Michael Laureta, he said. Also, duties with the commission support clerk were adjusted to facilitate contested case hearings, and the department increased collaboration with the Office of Prosecuting Attorney.
Another problem the department faced was the second TVR ordinance, passed in Jan. 20, 2009, allowed only a 10-week window for mandatory inspections on about 600 TVRs.