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COM 0675.379 2022-2024
/ PCPLu.D Bill 121 60M.6-e From: Liz Lees Sent: Tuesday, July 2, 2024 8:26 AM To: Council Testimony Subject: Please pause bill 121 Attachments: TravelTech-Maui-6-12-24.pdf Aloha council members, I have written to you before, but I am a full-time Hawaii Island resident and I host in the guest suite portion of my home in White Sand Beach Estates. Bill 121 is excessively complex and will be very difficult for most mom and pop Island residents to comply with the onerous rules. Not only will Bill 121 have a devastating financial impact on my family, it will have a similar impact on my many friends and neighbors who host or work in the tourism industry in my area. I strongly encourage passage of Bill 556 and pause Bill 121. There was a recent study prepared by Kloninger and Sims Consulting. I have attached a copy of the full study for your reference. Their estimate for Hawaii Island combined GET and TAT 2023 is $24,838,420 collected. Does it benefit Hawaii county and its constituents to lose this revenue? Most of this study related to Maui, but I think it would be valuable for EVERYONE in Hawaii County to understand the impacts of severely restricting short-term rentals. Mahalo for your consideration, Liz Lees s `� 77-110 Nahale PL Kailua Kona, HI 96740- Yahoo Mail: Search, Organize, Conquer CD i Ref. TO: Ref, Date ' 4—� 024 KLONINGER & SIMS COW)MING H.C. State of Hawaii and Maui Economic and Fiscal Impacts of the Short -Term Rental Industry Prepared by Kloninger & Sims Consulting LLC for IV TRAVEL TECH' The Travel Technology Association June 12, 2024 KLONINGER & SIMS June 12, 2024 Ms. Laura Chadwick President & CEO Travel Technology Association 3033 Wilson Blvd., Suite 700 Arlington, VA 22201 Dear Ms. Chadwick, In the aftermath of the tragic August 8, 2023 wildfires that claimed at least 101 lives and destroyed hundreds of structures in West Maui, policy makers in state and county government in Hawaii are considering new regulations on the short-term rental industry. A law recently passed by the state legislature gives each county the authority to phase out short-term rentals. The Travel Technology Association ("Travel Tech") represents the leading innovators in travel technology, including global distribution systems, online travel agencies, metasearch companies, travel management companies, and short-term rental platforms. Travel Tech has asked Kloninger & Sims Consulting ("K&S") to analyze the economic impact of Hawaii's short-term rental industry, as well as the fiscal impact of Maui County's proposed phase- out of about 7,000 short-term rental condominium units in Maui County. This report summarizes our approach and findings. Thank you for the opportunity to study this important issue. Please let me know if you have any questions or would like to discuss our findings further. Regards, Erik Kloninger Kloninger & Sims Consulting LLC KLONINGER & SIMS Contents Background..................................................................................................................................... 4 KeyFindings................................................................................................................................... 5 2023 Hawai'i Visitor Spending by Accommodation Type ...................................................... 8 2023 Hawaii Visitor Spending by Category ........ - .................................................. ...... 9 2023 Hawaii Visitor Spending by County......................................................... ...................... . 9 Short -Term Rental Visitor Spending Economic & Fiscal Impact..........................................10 EconomicImpact.....................................................................................................................10 FiscalImpacts... ................................................................ ........................ - ..... ..................... - 10 Methodof Analysis......................................................................................................................13 Estimated Impact on Real Property Taxes - West Maui Minatoya List Properties ......... 15 Estimated Impact on Real Property Taxes - Other Maui Minatoya List Properties ........ 17 Estimated Fiscal & Economic Impacts - TOTAL Minatoya List Properties ....................... 20 PropertyTaxes: ........................................................................................................................ 20 ..................... County GET & TAT Surcharges: ...................................................................... 20 EconomicImpacts: ................................................................................................................... 20 Estimated Fiscal & Economic Impacts - All Maui Short -Term Rental Properties ........... 21 PropertyTaxes: ................................................. - .................................. .................. ...... - ....... 21 County GET & TAT Surcharges: ...... ...... .................... ..................................... 21 EconomicImpacts: ................................................................................................................... 23 HotelMarket Analysis.................................................................................................... ............. 23 ................... Conclusion..................................................................................................... ............24 APPENDIX.................................................................................................................................... 25 Kloninger & Sims Consulting Page 4 of 26 Background KLONINGER & SIMS C:OMULTIN6 [I.C.. Visitor spending is a major driver of Hawai'i's economy. During 2023, visitors spent $20.8 billion, according to the State of Hawai'i Department of Business, Economic Development & Tourism ("DBEDT"). Tourism is Hawai`i's largest export sector, representing 17.2% of the state's GDP when including direct and indirect spending, rising to 23.6% when induced spending is included, according to the most recent DBEDT analysis. In recent years, increasing numbers of Hawai'i visitors have chosen to stay in vacation rentals. While vacation rentals have long been a component of Hawai'i's accommodation mix, the advent of vacation rental platforms such as Airbnb and VRBO has contributed to the growth of HawaiTs vacation rental market. Our analysis of vacation rental visitors' spending provides an understanding of the role that vacation rentals play in Hawaii's visitor industry. In the aftermath of the August 8, 2023 wildfires, Hawai` s. state legislature passed a bill that gives each of the state's counties the authority to eliminate short-term rentals. Shortly after Governor Green signed the law, Mayor Bissen of Maui County proposed legislation that would phase out short-term rental usage of approximately 7,000 condominium units zoned for residential use. Mayor Bissen has stated that the purpose of the proposed legislation is to increase the supply of housing for Maui residents. Units in the condominium projects in question have been operated as legal short-term rentals for decades under a state law, HRS §46-4, prohibiting counties from phasing out this activity. The condominium projects in question are identified on a list known as the "Minatoya List". Maui County's proposed legislation would eliminate short-term rental usage in the Minatoya List projects located in West Maui effective July 1, 2025. Effective January 1, 2026 short-term rental usage would be eliminated from the balance of the approximately 7,000 units in condominium projects on Minatoya List throughout the rest of the county. You have asked K&S to analyze the fiscal impact of the proposed phase -out of short-term rentals in Minatoya List condominiums as well as a potential total ban on all short-term rentals in Maui County. Kloninger & Sims Consulting Page 5 of 26 Key Findings KLQNINGER & SIMS (: ()N1.11_ 1 IN( I I t_. Visitors staying in Hawai'i short-term rentals represent a significant share of our state's total tourism market. • On any given day in 2023, about 29.6% of the visitors in the state stayed in a short-term rental. • In 2023, Hawaii visitors staying in short-term rentals spent an estimated $6.1 billion. • Spending by short -terra rental visitors in 2023 generated an estimated $675 million in $554 million in General Excise Tax ("GET") and Transient.Accommodations Tax ("TAT"). Of the $675 million total, $554 million was tax revenue for the State of Hawaii, while the county surcharges to the GET and TAT generated an estimated $121 million for the counties. • The short-term rental condominium units in projects on the West Maui Minatoya List have a total assessed value of $2.6 billion. Taxed as short-term rentals, these 2,684 condominium units would generate $34.7 million in property taxes in 2024. Taxing these units at the various residential property tax rates would generate between $5.1 million and $20.3 million in property taxes, resulting in a decrease of between $14.4 million and $29.6 million in real property tax collections per year. • The 4,264 short-term rental units in projects listed Minatoya List projects outside of West Maui have a total assessed value of $4.2 billion. These units would generate $55.2 million in real property taxes in 2024, compared with between $8.1 million and $31.4 million in property taxes if taxed at residential rates. This would translate into a decrease in property tax collections of between $23.8 million and $47.1 million. • Phasing out all of the condominium units in projects on the Minatoya List would result in a decrease in real property tax revenue of between $38.2 million and $76.7 million. The total Maui County tax loss including GET and TAT revenue would be between $53.3 and $91.8 million. • Maui County's 14,475 units currently taxed as short-term rentals have a total assessed value of $20.6 billion and would generate $284.5 million based on 2024 tax rates for short-term rentals. If taxed at residential property tax rates, these properties would generate between $49.1 million and $201.7 million, resulting in property tax collection decreasing between $82.8 million and $235.4 million. Kloninger & Sims Consulting Page 6 of 26 KLONNGER & SIMS CON5Hl) HN(:, I I C • In 2023, Maui visitors staying in a short-term rental property spent a total of $2.2 billion in Maui County. This spending generated $33.7 million in county TAT and $11.8 million in county GET or a total of $45.5 million. Taking into account the county TAT and GET surcharges, elimination of all of Maui's short-term rentals would result in a decrease of county tax collections of between $128.3 million and $280.9 million. • In 2023, hotels on Maui averaged 66.1% occupancy at an average daily rate ("ADR") of $591. Based on the total supply of 13,730 hotel rooms, this means that on average there were 4,660 vacant hotel rooms each night. We note that Maui's hotels do not have the capacity to accommodate visitors who would otherwise stay in a short-term rental in a condominium unit in a project on the Minatoya List. Kloninger & Sims Consulting Poge 7 of 26 KLONINGER & SIMS C_ 0N',-, _11_ I'ING l.1 C 2023 Hawaii Short -Term Rental Visitor Market, Visitor Spending & GET/TAT In 2023 Hawai'i welcomed about 9.5 million visitors, which translated to about 85.6 million visitor days. Short -Term Rental visitors accounted for 25.4 million visitor days statewide, or 29.6% of the state's visitor market. Short -Term Rental visitors accounted for 17.7% of visitor days on Oahu during the year, the lowest share among the counties. Hawai'i Island had the highest short-term rental market share in 2023, representing 43.7% of the market. For the purpose of this study, we have defined Short -Term Rental visitors as visitors who indicated that they stayed in either a Rental House, Bed & Breakfast, Private Room in a Private Home, Shared Room in a Private Home or Short -Term Rental Condo. Table 1: 2023 State of Hawaii Visitor Days, Vacation Rental Visitor Days by County & Share of Short -Term Rental Market County Total Visitor Days Vacation Rental Visitor Days Vacation Rental Visitor Days Percent of Total Oahu 40,627,690 7,171,614 17.7% Maui 20,478,555 7,972,472 38.9% Kauai 10,544,252 4,132,337 39.2% Hawai'lIsland 13,945,651 6,092,977 43.7% state 85,596,149 25,369,399 29.6% Source; Kloninger & Sims analysis of DBEDT data Kloninger & Sims Consulting Page 8 of 26 KLONINGER & SIMS t..)l�iStJt I11y16 i! �.. Table 2: 2023 Total State Short -Term Rental Visitor Spending by Category Category 2023 Vacation Rental Visitor Spending Lodging $2,939,800,000 Food & Beverage $1,274,700,000 Entertainment $570,200,000 Transportation $706,700,000 Shopping $524,500,000 Other $54,700,000 Total $6,070,400,000 Source: Kloninger & Sims analysis of DBEDT data 2023 Hawaii Visitor Spending by Accommodation Type Visitors spent $20.8 billion in the State of Hawaii in 2023. Visitors staying in hotels accounted for the largest share of the spending, 49.0% of the total. Vacation rental visitors spent an estimated $6.1 billion, or about 29.2% of all visitor spending for the year. Timeshare visitors accounted for 8.2% of spending, while Condo Hotel visitors accounted for 5.2%. Figure 1: 2023 Hawaii Visitor Spending & Share by Accommodation Type tl Hotel $10.2 Billion d Vacation Rental $6.1 Billion 13Timeshare $1.7 Billion *Condo Hate[ $1.1 Billion * Other $1.7 Billion Source: Kloninger & Sims analysis of DBEDT data Kloninger & Sims Consulting Page 9 of 26 2023 Hawaii Visitor Spending by Category Lodging accounted for the largest share of short-term rental visitor spending, at $2.9 billion. Short -Term Rental visitors spent $1.3 billion on food & beverage, followed by $707 million on transportation and $570 million on entertainment. Shopping accounted for $525 million of the $6.1 billion in total spending. Figure 2: 2023 Vacation Rental Visitor Spending by Category $525 M $55 M 0 Lodging $707 h im Food & Beverage E3 Entertainment a Transportation $570 M ®Shopping mother �)LaD Source: Kloninger & Sims analysis of DBEDT data 9B KLQNINGER & SIMS Ct.)NSUI_HN(.31 i_( 2023 Hawaii Visitor Sending by County Maui County short-term rental visitors spent an estimated $2.2 billion in 2023, followed by Oahu's short-term rental visitor spending of $1.6 billion. We note that spending in Maui County achieved the highest short- term rental visitor spending despite the temporary pause in tourism to West Maui following the catastrophic wildfire that destroyed Lahaina on August 8. Governor Josh Green paused West Maui tourism following the fire, with a phased reopening that started in October. Spending by short- term rental visitors topped the $1 billion mark on both Kauai and Hawai'i Island. Figure 3: 2023 Total Short -Term Rental Visitor Spending by County $2.5 Billion $2 2 B $2.0 Billion $1.5 Billion $1.0 Billion $0.5 Billion $0.0 Billion Oahu Maui Kauai Hawvai'i Island Source: Kloninger & Sims analysis of DBEDT data Kloninger & Sims Consulting Page 10 of 26 Short -Term Rental Visitor Spending Economic & Fiscal Impact Economic Impact Applying the multipliers developed by DBEDT, $6.1 billion in 2023 spending by Hawaii visitors staying in short-term rentals generated $11.3 billion in total economic activity, $3.1 billion in personal earnings and supported about 66,000 jobs. The calculations of these figures is in the appendix to this report. KLONINGER & SIMS (. OW.iH INN I ( Fiscal Impacts Based on the high end of our estimates of 2023 spending by visitors staying in Hawaii short-term rentals, we have calculated the associated GET and TAT. According to this analysis, the GET and TAT associated with 2023 spending by visitors staying in Hawaii short-term rentals totaled $675 million. State GET and TAT generated by short-term rental visitor spending in 2023 totaled $554 million, while the counties' share totaled $121 million. The tables below detail the spending and GET/TAT tax generation by category and county. Kloninger & Sims Consulting KLON I N G E R& Sl M S Page 11 of 26 t, CML11. INN' I_I_(:. Table 3: 2023 Estimated Short -Term Rental Visitor Total State Taxes by Category State of Wawal`i 2023 Estimated Spend State TAT State GET Total State GET & TAT Lodging $2,939,700,000 $301,319,250 $122,487,500 $423,806,750 Food & Beverage $1,274,650,000 $0 $53,110,417 $53,110,417 Entertainment $570,200,000 $0 $23,758,333 $23,758,333 Transportation $706,640,000 $0 $29,443,333 $29,443,333 Shopping $524,600,000 $0 $21,858,333 $21,858,333 Other $54,610,000 $0 $2,275,417 $2,275,417 Total $6,070,400,000 L $301,319,250 $252,933,333 $554,252,583 Source: Kloninger & Sims analysis of DSEDT data Oahu Table 4: 2023 Estimated Short -Term Rental Visitor Total County Taxes by Category 3.0% 0,545% 2023 Estimated Spend County TAT County GET Surcharge Total Oahu GET & TAT Lodging $672,680,000 $20,180,400 $3,668,630 $23,849,030 Food & Beverage $358,180,000 $1,953,425 $1,953,425 Entertainment $148,990,000 $812,555 $812,555 Transportation $151,710,000 $827,389 $827,389 Shopping $216,320,000 $1,179,766 $1,179,756 Other $15,110,000 $82,406 $82,406 Total $1,562,990,000 $20,180,400 $8,524,160 $28,704,560 Kloninger & Sims Consulting Page 12 of 26 Maui County KLONINGER & SIMS 3.0% 0.545% C_(_)1\1`,U1. (lNta I C 2023 Estimated Spend County TAT County GET Surcharge Total Maui GET & TAT Lodging $1,124,600,000 $33,735,000 $6,132,744 $39,867,744 Food & Beverage $439,040,000 $2,394,415 $2,394,415 Entertainment $192,450,000 $1,049,575 $1,049,575 Transportation $222,170,000 $1,211,660 $1,211,660 Shopping $158,740,000 $865,729 $865,729 Other $21,050,000 $114,801 $114,801 Total $2,157,950,000 $33,735,000 $11,768,925 $46,503,925 Kauai 3.0% 0,545% 2023 Estimated Spend County TAT County GET Surcharge Total Kauai GET & TAT Lodging $551,760,000 $16,552,800 $3,009,162 $19,561,962 Food & Beverage $200,860,000 $1,095,441 $1,095,441 Entertainment $102,840,000 $560,864 $560,864 Transportation $125,270,000 $683,192 $683,192 Shopping $56,720,000 $309,337 $309,337 Other $7,290,000 $39,758 $39,758 Total $1,044,740,000 $16,552,800 $5,697,753 $22,250,553 Hawal'1 Island 3.0% 0.545% 2423 Estimated Spend County TAT County GET Surcharge Total Hawai'i County GET & TAT Lodging $590,760,000 $17,722,800 $3,221,859 $20,944,659 Food & Beverage $276,570,000 $1,508,344 $1,508,344 Entertainment $125,920,000 $686,736 $686,736 Transportation $207,490,000 $1,131,599 $1,131,599 Shopping $92,820,000 $506,217 $506,217 Other $11,160,000 $60,864 $60,864 Total $1,304,720,000 $17,722,800 $7,115,620 $24,838,420 Source: Kloninger & Sims analysis of DBEDT data Kloninger & Sims Consulting Page 13 of 26 Method of Analysis For the 2024 tax year, Maui taxes short-term rental properties at the TVR-STRH ("short- term rental") tax rates of between $12.00 and $15.00 per $1,000 of assessed value, depending on the value of the property. The proposed action to convert about 7,000 condominium units from short-term rental to residential will result in the properties being taxed at one of the residential tax rates. As the residential property tax rates are lower than the short-term rental rates, the proposed conversion will reduce the real property tax collected by Maui County. We note that the highest property tax rate levied by Maui County is the $15.00 per $1,000 of assessed value paid by short-term rentals with assessed values higher than $3 million. As shown in the table below, Owner - Occupied properties are taxed at between $1.80 and $3.25 per $1,000 of assessed value. Properties that are used as long-term rentals are taxed at a rate of between $3.00 and $8.00 per $1,000 of assessed value. Non -Owner Occupied properties, which includes second homes that are not rented when not being used by the owner, are taxed at rates ranging between $5.87 and $14.00 per $1,000 of assessed value. We analyzed the proposed conversion of short-term rental condominium units in Minatoya List projects from their current tax classification of Short -Term Rental to three different residential property tax rates. We identified the affected condominium projects using a copy of the Minatoya List dated KLONINGER & SIMS March 22, 2024 that was posted on Maui County's website. Table 5: Maui County 2024 Tax Rates Classification 2024 Tax Rate per $1,000 of Assessed Value Owner Occupied $1.80-3.25 Tier 1 <$1,000,000 $1.80 Tier 2 $1,000,001-$3,000,000 $2.00 Tier 3 $3,000,001> $3.25 Non -Owner Occupied $5.87-$14.00 Tier 1 <$1,000,000 $5.87 Tier 2 $1,000,00143,000,000 $8.50 Tier 3 $3,000,001> $14.00 Apartment $3.50 Hotel & Resort $11.75 Timeshare $14.60 Short Term Rental $12.5-$15.00 Tier 1 <$1,000,000 $12.50 Tier 2 $1,000,001-$3,000,000 $13.50 Tier 3 $3,000,001> $15.00 Long Term Rental $3.00-$8.00 Tier 1 <$1,000,000 $3.00 Tier 2 $1,000,001-$3,000,000 $5.00 Tier 3 $3,000,001> $8.00 Agricultural $5.74 Source: Maui County Kloninger & Sims Consulting Page 14 of 26 After downloading Maui County real property tax data from the county's website, we identified the condominium units located in Minatoya List projects that are currently taxed as short-term rentals. For each condominium unit we applied the applicable Owner -Occupied, Long -Term Rental and Non -Owner Occupied tax rates, which vary depending on the value of the property. Each of these residential uses has a tiered scale of property tax rates. Tier 1 properties are valued at less than $1 million; Tier 2 at between $1 million and $3 million; Tier 3 properties are valued at more than $3 million. Calculating each unit's property taxes based on three alternate residential uses results in a range of potential property taxes for each unit. We then calculated the net loss in property taxes that would be generated under each of the three residential uses considered. We first estimated the impact of the conversion to residential use on property taxes generated by West Maui condominiums in projects on the Minatoya KLONINGER & SIMS List, which would convert to residential use on July 1, 2025 under the Mayor's proposal. Secondly we calculated the expected decrease in property tax generation for the non -West Maui Minatoya list projects. We note that our analysis did not consider possible changes in assessed values that could be associated with the transition from short-term rental use to residential use. We also calculated the decrease in property tax collections if all short-term rentals on Maui were eliminated and taxed at a residential property tax rate. There are currently 14,475 properties in Maui County that are taxed at the Short -Term Rental tax rate. In addition to the estimated decrease in county property tax generation, this analysis also considered the fiscal impact of visitor spending generated by visitors staying in short-term rentals. This visitor spending generates county taxes in the form of the county TAT surcharge of 3.0% and the county GET surcharge of 0.5%. Our estimate of 2023 visitor spending by Maui visitors staying in a short-term rental was based on our analysis of visitor characteristics and spending data provided by DBEDT. Kloninger & Sims Consulting KLO N I NG E R& S I M S Page 15 of 26 CCONSU HNC` L L_(� Estimated Impact on Real Property Taxes - West Maui Minatoya List Properties Our analysis shows that the West Maui generate about $5.1 million in property condominium units in Minatoya List projects taxes, or about $29.5 million less than they have a current assessed value of about $2.6 would if taxed at the short-term rental rates. billion. Based on the 2024 rates for short- If all the West Maui Minatoya List term rentals in Maui County, the West Maui condominium units were to become second Minatoya List condominium units will homes taxed at the Non -Owner Occupied generate about $34.7 million in property tax rates, they would generate about $20.2 taxes this year. If all 2,520 condominium million in property taxes, or about $14.4 units in West Maui Minatoya List projects million less than if they were used and taxed were converted to and taxed at the Long- as short-term rentals. Term Rental tax rates, they would generate about $11.5 million in 2024 property taxes, It is likely that there will be a mix of long-term or about $23.1 million less than they would rentals, owner occupied units and non - generate if used and taxed as short-term owner occupied units after short-term rental rentals. If all of the West Maui Minatoya List use is terminated as of July 1, 2025. The total condominium units were converted to decrease in Maui County's real property tax owner -occupied units and taxed at the revenue from these units will depend on owner -occupied tax rates, they would what that mix is. Table 6: West Maui Minatoya List — 2024 Property Taxes at Short -Term and Residential Property Tax Rates 2024 Property 2024 Real Property Taxes, Applying Residential Total Average Tax Based on Property Tax Rates Long -Term Owner- Non -Owner Unit Assessed Assessed Short -Term Count Value Value Rental Tax Rates Rental Occupied occupied West Maui Minatoya 2,684 $2,632,100,000 $981,000 $34,700,000 $11,600,000 $5,100,000 $20,300,000 List Decrease of RPT due to Residential Conversion $(23,100,000) $(29,600,000) $(14,400,000) Source: K&S analysis of Maui County RPT Data Kloninger & Sims Consulting Page 16 of 26 KLONINGER & SIDS (J)r,N.il_-1 II` G i I Table 7: Summary of West Maui Condominium Projects on the Minatoya List OJECT PROPERTY YEAR 13U1LT, COUNTY BONING ..:. -COUNT 0F, , LISTINGS ��... O TAt, VAtUIs TOT A!'. ROPERTY `: TAX AT SHORT .' TERMAIENl',4Cs Papakea 1977 A211"12 364 $372,100,000 $5,020,000 Hale Kaanapali 1967 A2IHIOS 258 $228,700,000 $2,860,000 Maui Eldorado 1968 A2 205 $125,600,000 $1,570,000 Kapalua Golf Villas 1979 A2IAGIOSIGC 186 $260,300,000 $3,510,000 The Ridge 1979 A21PK-4 161 $247,400,000 $3,340,000 Kapalua Bay Villas 1977 A2 141 $285,000,000 $3,850,000 Wavecrest 1975 A211ntedm 126 $29,400,000 $370,000 Kenani Kai 1983 A-1 120 $32,500,000 $410,000 Kaanapali Royal 1980 A2 105 $133,800,000 $1,810,000 Kuleana 1974 Al 100 $60,100,000 $750,000 Kahana Reef 1974 A2 88 $68,700,000 $860,000 Paki Maui I & 11 1975 A2 80 $51,200,000 $640,000 Hale Ono Loa 1969 A2 67 $49,800,000 $620,000 Kalelaloha 1973 A2 67 $56,900,000 $710,000 Maui Sands 1 1966 A2 56 $57,600,000 $780,000 Hale Mahina Beach 1981 A2 53 $59,900,000 $810,000 Polynesian Shores 1972 Al 52 $55,900,000 $760,000 Noelani 1974 A2 50 $55,200,000 $750,000 Mahina Surf 1969 Al 44 $54,800,000 $740,000 Kahana Village 1978 Al 42 $58,800,000 $790,000 Hale Kai 1 1967 A2 40 $31,000,000 $390,000 Lokelani 1971 A2 36 $40,000,000 $540,000 Mahinahina Beach 1979 Al 32 $21,600,000 $270,000 Honokowai Palms 1965 A2 30 $30,500,000 $410,000 Makani Sands 1974 A2 30 $11,600,000 $150,000 Nohonani 1974 A2 28 $34,600,000 $470,000 Paki Maui lii 1978 A2 28 $35,800,000 $480,000 Maui Sands li 1969 A2 20 $10,200,000 $130,000 Kuleana 1972 Al 18 $13,800,000 $170,000 Hoyochi Nikko 1973 Al 17 $17,100,000 $230,000 Lahaina Beach Club 1971 A2 12 $3,700,000 $50,000 Pikake 1966 A2 12 $13,000,000 $180,000 Kahana Outrigger 1981 Al 8 $11,900,000 $160,000 Kahana Outrigger 1981 Al 4 $5,600,000 $80,000 Kahana Outrigger 1981 Al 4 $7,900,000 $110,000 2,684 $2,632,100,000 $34,700,000 Kloninger & Sims Consulting Page 17 of 26 KLONINGER & SIMS C ONS it l ING I i c Estimated Impact on Real Property Taxes - Other Maui Minatoya List Properties The balance of the Minatoya List condominium projects, with a total of 4,347 units, would convert from short-term use to residential use by January 1, 2026 under the Mayor's proposal. Based on 2024 property tax rates, these condominium units will generate an estimated $48.5 million in property taxes. When converted to and taxed as residential units, these units would generate between $7.1 million and $27.2 million in property taxes. The conversion to residential use and taxation would result in a loss of between $21.2 million and $41.4 million in annual property taxes. Table 8: Other Maui Minatoya List — 2024 Property Taxes at Short -Term and Residential Property Tax Rates 2024 Property 2024 Real Property Taxes, Applying Residential Average Tax Based on Property Tax Rates Long -Term Owner- Non -Owner Unit Total Assessed Assessed Short -Term Count Value Value Rental Tax Rates Rental Occupied occupied Other Maui Minatoya 4,264 $4,217,300,000 $989,000 $55,200,000 $17,700,000 $8,100,000 $31,400,000 List Decrease of RPT due to Residential Conversion $(37,500,000) $(47,100,000) $(23,800,000) Source: K&5 analysis of Maui County RPT Data Table 9: Summary of Other Maui Condominium Projects on the Minatoya List TOTAL IF'ROPIRTY TOTAL TAX Al YEAR GOUNT OF -SHORT TERM „PROJECT PR01? RTY „ ;Bt1ILT , COUNTY, d�11NG . ;; >wWINGS ., 11ALUI" .. . ; . RIENTRL RAT!~,..` Kamaole Sands 1983 A2 440 $474,800,000 $6,410,000 Maui Vista 1980 A2 280 $227,300,000 $2,840,000 Maui Kamaole Ili 1994 Al 240 $291,200,000 $3,930,000 Maui Sunset 1974 A2 225 $160,000,000 $2,000,000 Grnd Champ Villas 1989 A2 188 $266,300,000 $3,590,000 Hale Kamaole 1974 A11A2 188 $188,300,000 $2,540,000 Kauhale Makal 1976 A2 169 $116,600,000 $1,460,000 Palms At Wailea 1 1990 Al 150 $235,400,000 $3,180,000 Wailea Ekolu 1979 A110S-GCIPUD 148 $271,800,000 $3,670,000 Maui Hill 1981 Al 140 $66,600,000 $830,000 Pacific Shores 1979 A2 136 $96,900,000 $1,210,000 Klhei Bay Surf 1980 Al 118 $49,900,000 $620,000 Luana Kai 1979 A2 113 $104,600,000 $1,310,000 Kdoninger & Sims consulting K LO N I N G E R& S I M S Page 18 of 26 ('O 1JYJtaHNG HC ,PROPER P Y TQTAL TAX AT YEAR ,. GQUIVT OF AS,SESSED!! S141 TERM .' I'R©JECTPR�PERTY. ,BUILTJ. UNTY,zoiillG ..'''LISTINGS:.. , . VALUE .. REiVTAL}iATE; Wallea E;kahl Ili 1976 A11H110S1PUD 104 $182,100,000 $2,460,000 Wailea Ekahi 1 1976 A118R1OSIPUD 100 $191,700,000 $2,590,000 Wailea Ekahi li 1976 Al 92 $178,800,000 $2,410,000 Kihei Garden Estates 1979 Al 84 $61,200,000 $760,000 Island Sands 1975 A2 83 $57,200,000 $720,000 Kanai A Nalu 1977 A2 80 $55,100,000 $690,000 Maalaea Kai 1974 A2 79 $70,900,000 $890,000 Maalaea Banyans 1987 A2 78 $59,000,000 $740,000 Haleakala Shores 1974 A2 76 $55,300,000 $690,000 Kihei Resort 1981 Al 64 $45,800,000 $570,000 Maui Parkshore 1974 A2 64 $57,100,000 $710,000 Kalama Terrace 1972 A2 61 $30,000,000 $380,000 Kihei Bay Vista 1989 Al 60 $39,300,000 $490,000 Hate Kai O'kthei 1969 Al 59 $52,800,000 $660,000 Koa Resort li 1980 Al 54 $47,400,000 $590,000 Waiohuli Beach Hale 1979 A11PU 52 $61,200,000 $640,000 Shores Of Maui 1975 Al 50 $34,800,000 $430,000 Maui Kamaole Ii 1989 Al 48 $55,400,000 $750,000 Lauloa Maalaea 1979 A2 47 $40,800,000 $510,000 Hono Kai 1972 A2W 46 $26,600,000 $330,000 Milowai-Maalaea 1977 A21M1 42 $26,200,000 $330,000 Waipuilani 1975 A2 42 $9,000,000 $110,000 Kuau Plaza 1973 A2 30 $14,300,000 $180,000 Maui Kamaole 1988 Al 28 $40,200,000 $540,000 MakanE A Kai 1974 Al 24 $22,700,000 $280,000 Leinaala 1975 A2 24 $15,400,000 $190,000 Hana Kai -Maui 1974 Al 19 $13,500,000 $170,000 Keawakapu 1976 Al 18 $10,300,000 $130,000 Kanoe Apts 1982 A-1 18 $2,500,000 $30,000 Kihei Parkshore 1974 Al 16 $10,600,000 $130,000 Punahoa Beach Apts 1970 Al 15 $18,800,000 $260,000 Kamaole One 1973 Al 12 $25,300,000 $340,000 Leilani Kai 1974 Al 9 $1,000,000 $10,000 Lihikai Apts 1963 Al 8 $4,400,000 $60,000 Hale Mahialani 1976 Al 7 $2,300,000 $30,000 Wailea Inn 1985 Al 6 $3,900,000 $50,000 Kihei Cove 1980 Al 6 $2,300,000 $30,000 Hale Iliilt 1978 Al 4 $2,100,000 $30,000 Aloha Villas 1980 A-1 4 $8,000,000 $110,000 1444 Halama St 1968 A-1 4 $7,000,000 $90,000 Kloninger & Sims Consulting KLO N I N G E R& S I M S Poge 19 of 26 (.C:)W-lE_ilkl(,; 11C, ROPERT P Y TOTAL YEAR COUNT OF.,.,' ASSESSEt SHORT TERM , 1?ROJEC7 PROPERTY. BU1LT C0IJNTY,ZNIG `; L.ISi1NGS V GLUE . .. RENTAL RATE ; 1194 Ulunlu Rd 1964,1979 A-1 2 $4,000,000 $50,000 Kapu Townhouse 1980 Al 2 $3,700,000 $50,000 Waiohuli Bch Duplex 1977 Al 2 $2,100,000 $30,000 My Waii Beach Cottage 1970 Al 1 $6,900,000 $100,000 Indo Lotus Beach Hse 1970 Al 1 $4,200,000 $60,000 2131 Iliili Rd 1946 A-1 1 $1,300,000 $20,000 Moana Villa 1973 Al 1 $3,200,000 $50,000 1440 Halama St 1946 A-1 1 $4,900,000 $70,000 1470 Halama St 1960 A-1 1 $5,000,000 $70,000 4,264 $4,217,300,000 $55,200,000 Source: K&S analysis of Maui County RPT Data Kloninger & Sims Consulting Pose 20 of 26 KLONINGER & SIMS Cf.kNJ( Ili1J61 t.I_(I Estimated Fiscal & Economic Impacts -- TOTAL Minatoya List Properties Property Taxes: Our analysis indicates that conversion of all Minatoya List properties to residential use and taxation would result in decreased property tax revenue ranging from $38.2 million to $76.7 million, as summarized below. Table 10: Total Minatoya List — 2024 Property Taxes at Short -Term and Residential Property Tax Rates 2024 Real Property Taxes, Applying Residential Property Tax Rates 2024 Property Tax Average Based on Short - Unit Total Assessed Assessed Term Rental Tax Long -Term Owner- Non -Owner Count Value Value Rates Rental Occupied occupied Full Minatoya 6,948 $6,849,400,000 $986,000 $89.900,000 $29,300.000 $13,200,000 $51,700,000 List Decrease of RPT due to Residential Conversion $ (60,600,000) $(76,700,000) $(38,200,000) Source: K&5 analysis of Maui County RPT Data County GET &TAT Surcharges: We estimated the county GET & TAT Surcharges generated by visitors staying in Minatoya List short-term rentals to be $15.1 million in 2023. We allocated the estimated total Maui County GET & TAT surcharges to the Minatoya List properties based on total assessed value. The total Maui County tax loss including GET and TAT revenue would be between $53.3 and $91.8 million. Economic Impacts: We estimate the following economic impacts of the Minatoya List short- term rentals, again based on an allocation of the estimates for all Maui County short-term rentals: s $1.3 billion in economic output, • $370 million in earnings, • 7,800 jobs. Kloninger & Sims Consulting Page 21 of 26 KLONINGER & SIMS Estimated Fiscal & Economic Impacts - All Maui Short -Term Rental Properties Property Taxes: According to our analysis of Maui County RPT data, the 14,475 properties taxed at the short-term rental rate will generate about $284.5 million in property taxes this year. The decrease in property tax collections associated with the conversion of all Maui County short-term rentals to residential use would range between $82.8 million and $235.4 million. Table 11: All Maui County Short -Term Rentals -- 2024 Property Taxes at Short -Term and Residential Property Tax Rates 2024 2024 Real Property Taxes, Applying Residential Property Tax Property Tax Rates Based on Average Short -Term Unit Total Assessed Assessed Rental Tax tong -Term owner- Non -owner Count Value Value Rates Rental occupied occupied RPT List Maui 14,475 $20,636,700,000 $1,426,000 $284,500,000 $114,900,000 $49,100,000 $201,700,000 Total Decrease of RPT due to Residential Conversion $(169,600,000) $(235,400,000) $(82,800,000) Source: K&S anaiysis of Maui County RP I Uata County GET & TAT Surcharges: The 7,167 units located in condominium projects on the Minatoya List represent about one half of the total number of properties taxed at the short- term rental tax rate. For the purposes of this study we have assumed that the 14,475 units taxed by Maui County at the short -terra rental tax rate represent the entirety of the short- term rental market. In addition to estimating the lost RPT revenue attributable to the decrease in property tax rates associated with conversion of short-term rentals to residential use, we have also estimated the 2023 spending by visitors staying in a Maui County snort -term rental. We estimate that short-term rental visitors to Maui spent about $2.2 billion during 2023, as presented in the table below. About half of the short-term rental visitor spending in 2023 was for accommodations. That $1.1 billion in lodging spending generated $33.7 million in county TAT via Maui County`s 3.0% county TAT and an additional $6.1 million in GET via the county GET surcharge. Visitor spending generated by short-term rentals in Maui County Kloninger & Sims Consulting Page 22 of 26 KLONINGER & SIMS generated a total of $11.8 million in GET for the year. Combined, the county TAT and GET associated with 2023 spending by Maui visitors who stayed in a short-term rental was $45.5 million. The total decrease in property tax revenues that would be expected if the county eliminated all vacation rentals ranges between $82.8 million and $235.4 million. Adding the county TAT and GET surcharges results in a total fiscal impact of between $128.3 million and $280.9 million. Table 12: Estimated Vacation Rental Visitor Total County Taxes by Category Maui County 3.0% I 0.545% 2023 Estimated Spend County TAT County GET Surcharge Total Maui GET & TAT Lodging $1,124,500,000 $33,735,000 $6,132,744 $39,867,744 Food & Beverage $439,040,000 $2,394,415 $2,394,415 Entertainment $192,450,000 $1,049,575 $1,049,575 Transportation $222,170,000 $1,211,660 $1,211,660 Shopping $158,740,000 $865,729 $865,729 Other $21,050,000 $114,801 $114,801 Total $2,157,950,000 $33,735,000 $11,768,925 $45,503,925 Source: K&S Analysis of DBEL)I Data Figure 4: Decreases in Maui County Tax Revenue Based on Conversion of Short-term Rentals to Residential $0.0 Million -$50.0 Million -$100.0 Million -$150.0 Million -$200.0 Million -$250.0 Million -$300.0 Million Changes in Tax Revenue Long Term Rental Owner Occupied Non -owner occupied -$280.9 M r1 Total Maui GET & TAT M Real Property Tax Source: K&S analysis of Maui County RPT Data Kloninger & Sims Consulting Poge23of26 KLONINGER & SIMS CUNMA 1IN(j I._I_C; Economic Impacts: According DBEDT's multipliers, Maui County's $2.2 billion in spending by visitors staying in a short-term rental results in: $4.0 billion in economic output, • $1.1 billion in earnings, • 23,000 jobs. We have included the worksheet calculating the output, earnings and jobs supported by spending by visitors staying in a Maui short-term rental in the Appendix. Hotel Market Analysis In 2023, hotels on Maui averaged 66.1% occupancy at an average daily rate ("ADR") of $591. Based on the total supply of 13,730 hotel rooms, this means that on average there were 4,660 vacant hotel rooms each night. There were on average 2,381 vacant hotel rooms each night in West Maui, where hotel occupancy averaged 63.6%. It is reasonable to assume that some of the demand for accommodations that would be displaced by the residential conversion of Minatoya List condominium units would be accommodated by Maui hotels. There are not enough hotel rooms in Maui County to accommodate visitors who would otherwise stay in a short-term rental property. In addition, since short-term rentals have kitchens and often multiple bedrooms, hotel rooms will not meet the needs of some visitors. Table 13: Summary of 2023 Maui Hotel Room Supply and Demand Daily Supply Daily Demand Occupancy Rate ADR Daily Vacant Rooms West Maui 7,473 5,092 68.1 % $525 2,381 Other Maui 6,257 3,978 63.6% $676 2,279 Total Maui 13,730 9,070 66.1% $591 4,660 S-,ce:STRinc.du.p,m,i d by f]BED Kloninger & Sims Consulting Page 24 of 26 KLONINGER & SIMS C:'.0N1 ()1.J1N(:3 Ll.{... Conclusion The proposed conversion of units in condominium projects on the Minatoya List from short- term rental to residential use would reduce Maui County's tax revenue. The expected impact on real property tax revenues have been presented as ranges, because residential real estate on Maui is taxed at different rates depending on whether the property is owner - occupied, a long-term rental or a second home. We note that the residential use that would have the smallest negative impact on the county's property tax collections, the Non -Owner Occupied classification, does not increase Maui County's housing supply. Rather than being rented out short-term during periods when owners are not using them, these units would sit empty, generating none of the visitor spending that is the lifeblood of Maui's economy. Conversion to owner -occupied units would increase the available housing supply but result in the greatest decrease in property tax revenue. Our analysis of the impact on real property taxes is based on no changes in the assessed value of the units. Any decreases to the assessed values of Minatoya List units would further reduce the county's property tax revenue. Since the intent of the proposed legislation is to increase the supply of housing on Maui, the suitability of Minatoya List properties to address Maui's housing shortage should also be considered. Papakea, a 364-unit project on 13 oceanfront acres in West Maui built in 1977, has a mix of studios, one-, two- and three - bedroom units. 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