Condo property tax measure passes out of panel

A Maui County Council committee voted 7-2 Tuesday to recommend approval of a compromise bill aimed at having condominium owners pay correct property taxes on their units.

The amended measure would require condominium associations to provide Maui County with a list of all the units in their complexes and report how each is being used by the owner – whether as a personal residence or a long- or short-term rental. Originally, the bill would have required condo owners to pay taxes according to the “highest and best use” of their properties, based on zoning, as other landowners do now.

Condominium owners, their associations and county administration officials supported the revised measure, but it was opposed by Council Members Jo Anne Johnson and Gladys Baisa.

Johnson, herself a condo owner, took issue with a condo association representing her to the county, although the county attorney and Finance Department officials assured her that condominium owners ultimately would be responsible for reporting their units’ use and would get sufficient notice before any tax classifications were changed.

“I still believe what you’re doing is illegal,” Johnson said. “I’m not buying it.”

Johnson didn’t like the idea of a condo association getting between her and the county, and believes the bill as written leaves the county open for litigation.

“I feel my rights are being abridged as a taxpayer,” she said.

County Finance Director Kalbert Young and Scott Teruya, administrator of the Real Property Tax Division, said the reports from condominium associations to the county would be used as a tool to initiate investigations into possible inaccurate tax classifications.

“We have never been strong-handed,” Teruya told Johnson as he explained the process in which a condo owner’s tax classification is bumped up to a higher property tax rate because it’s used more as a rental than a personal residence.

“We don’t want to enforce or police the report,” Young said, referring to the association list required in the bill.

The revised bill says a condo association would file an annual report of all units in the association before Dec. 1 of each calendar year. The county would provide the form for the list and indicate whatever supporting evidence is needed to determine whether a unit is owner-occupied or a rental.

Johnson and Baisa voted against a Budget and Finance Committee recommendation to approve the measure. Those voting in favor were: committee Chairman Joe Pontanilla, panel Vice Chairman Danny Mateo and Council Members Sol Kaho’ohalahala, Bill Medeiros, Mike Molina, Wayne Nishiki and Mike Victorino.

The proposal recommended for approval Tuesday is meant to close a loophole that allows condo owners to declare how their property should be classified for tax purposes. All other landowners in the county automatically pay taxes according to the highest use allowed under their property’s zoning.

The bill also consolidates the current “improved residential” and “unimproved residential” property tax categories into a single “residential rate.”

The bill is expected to come before council members for first reading Aug. 24.

According to Teruya, of the 25,000 condominiums in the county, approximately 16,000 can claim the units as private residences.

Dave DeLeon, government affairs director for the Realtors Association of Maui, testified that the bill “brings us to a middle ground” with the methodology in which condo owners are able to report their tax classification, with confirmation from their owner associations.

“The end result should be an end to widespread tax cheating, via a procedure that the industry can live with,” DeLeon said.

Bob Fondiller of the Association of Apartment Owners for Wailea Point also supported the bill. He said his group agrees that those renting short-term should pay the higher hotel and resort tax rate and that the association could assist in identifying which condo owners fit into that category.

He said the association at Wailea Point has been collecting information on its owners for years for its own internal reporting purposes and sees “no problem” with providing the same data to the county.

Like others testifying Tuesday, Fondiller said details on how a condo association drafts a list for the county tax division would have to be discussed more thoroughly. For example, questions about what do with condo owners who let their relatives or friends use the condo with no costs would have to be addressed.

Pontanilla said the bill would not go into effect until July 2011, and county officials would have time to work out the details prior to implementation.

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