It was simpler before the arrival of timeshares on Kauai. Before their onset, Kauai’s visitors stayed mostly in hotels and camps. But since the early 1980s, when timeshares began their appearance and vacation rental use escalated, our officials have tried, mostly unsuccessfully, to preserve rational zoning concepts and to create an orderly location criteria for visitor accommodations.
The initial step to repair the situation was for the council to adopt a Visitor Destination Area ordinance in which the island was divided into two areas, one where hotels, timeshares and vacation rental accommodations would be allowed, and the other where they wouldn’t.
In broad, the areas where these visitor accommodations would be permissible were Princeville, Kapaa, Lihue and Poipu. Inferentially, visitor facilities would not be allowed in the remaining island areas. But the ordinance failed to make the prohibition clear and while hotels and timeshares, which require extensive governmental approvals for construction, continued to be limited to the Visitor Destination Areas, vacation rentals, B&Bs and homestays arose frequently in some non Visitor Destination Areas. A notorious illustration of this development was Hanalei, where vacation rental properties now outnumber resident-occupied sites.
Confronted with the reality that an unknown but significant number of transient vacation rental properties and some B&Bs were operating in the non Visitor Destination Areas, our council struggled to develop a program that would contain such usage but preserve the basic locational standards for locating visitor facilities. But they were beset with hostile residents who claimed economic disaster if they could not continue the usage for their properties they had chosen. So the council restricted the Visitor Destination Area principle and attempted to create law that “grandfathered” deviations under a licensing program for pre-existing continuing rentals.
As always, taxation issues are interwoven in the circumstances. It has been an accepted principle of the Kauai property tax structure that residents who used their homes exclusively for family occupancy would enjoy a tax class — homestead — that provided exemptions and a tax rate that is a minor fraction of the rate applicable to commercial properties. Hotels, vacation rentals and timeshare owners accepted this reality without undue grumbling, but owners of B&Bs and homestays felt aggrieved because when they engaged in renting overnight accommodations in their homes they ceased having exclusive use of their home for family purposes and were subject to the higher tax rate applicable to properties being used for commercial purposes. Seemingly amendable to accommodating taxpayers who are vigorous enough in presenting their grievance, last year the county further complicated the property tax law by enacting another property tax classification known as the commercialized home use class, which will include homestays as well as such occupational uses as dentists and other professionals operating out of their homes. While the definition of a homestay remains a work in process, it is expected that there will be about 1,700 properties in the new class. It will enjoy a lower rate than other commercial classes — $5.02 as proposed by the mayor — but will not include the exemptions that are given to the homestead class taxpayers. Properties in the new class will be taxed at roughly half of the amount payable by commercial operations.
Our tourist bureaus are endlessly engaged in seeking to bring tourists to our island. And our government remains engaged in the almost impossibly endless effort to enact and to enforce laws to govern the location and type of facilities required to provide suitable accommodations for those who choose to come here. It is readily ascertainable that at this time the maze of requirements makes compliance confusing and unduly difficult.
The problems as to how to regulate, how to tax, and how to limit locations have been with us now for over 30 years. Isn’t it time for our council to tackle these matters with considered and effective ordinances so that our citizens and our visitors will have a stable and understandable set of rules to meet?
Walter Lewis is a retired attorney who lives on Kauai and writes a regular column for The Garden Island.