Council OKs gradual timeshare tax change

LIHUE — Timeshare owners on Kauai will receive a temporary reprieve from higher property taxes, at least for the next year.

A divided Kauai County Council on Wednesday approved a proposal to change the current tax system by assessing timeshare properties at their fair market value. Those changes, outlined in Bill 2548, passed by a 6-1 vote. 

Councilman Gary Hooser cast the lone dissenting vote against the measure. Councilmembers Tim Bynum, JoAnn Yukimura, and Jay Furfaro all cast silent votes, which were counted toward the majority vote to approve the measure.

“I think we’re taking a step in the right direction,” Councilman Ross Kagawa said before casting his vote. “A wrong valuation problem was occurring for many years … and I sit here today concerned about the (timeshare) industry as a whole and the impact it will have on its workers and possible foreclosure rates.” 

Previous tax laws that assessed value of each timeshare unit operating under a timeshare plan were based on “the combined value of the individual time share interests contained in the time share plan.” The value of timeshare interests, in turn, was initially based on the fair market value of those available on the resale market. 

Declining interval resale prices, county officials said, caused some condo owners to pay more in property taxes than their timeshare counterparts, who in some cases, lived in the same building.

Timeshares are taxed under the county’s hotel and resort class — a rate that is set at $10.85 per $1,000 in assessed valuation. Condominiums, meanwhile, are taxed based on their use as homestead, residential or vacation rental properties.

Although the approved changes now bases the assessed value of timeshare units on its fair market value, the new valuation system will be phased in over the next year. 

To do this, the assessed value of a timeshare unit for the 2014-2015 tax year will be capped at 50 percent of the difference between the assessed value of the timeshare unit for the 2014-2015 tax year and the fair market value of the timeshare unit for the 2015-2016 tax year. 

Phasing in the changes, Kagawa said, would give timeshare owners and officials time to prepare for increased maintenance fees and other costs. 

“This is simply to give timeshares a better chance at succeeding,” said Kagawa, who introduced an amendment that lowered the capped difference from 75 percent. 

Councilmembers Bynum, Hooser, Yukimura cast the dissenting votes against that measure. 

The seven-member board, Yukimura said, has already alleviated concerns from timeshare industry officials about significantly higher property tax bills by deciding not to create a separate tax category for their properties.

“I think it was a huge way of positively addressing the request from the timeshare industry,” Yukimura said before casting her vote against Kagawa’s proposal. “After years of having given pretty low rates to the timeshare industry, we are increasing it but we’re also, I feel, being very attentive to their needs.” 

Bynum said he was also opposed to the amendment because the County Council previously voted down proposals to provide tax relief for residents in the homestead tax class but were willing to provide that opportunity for the timeshare industry. 

Previous tax laws, he claimed, already shielded time share owners from paying higher taxes.

“The public record will show that, over and over again that this council said, ‘We can’t hurt businesses that much — let’s protect them,’ but we haven’t done the same for people who live and work here,” Bynum said.

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