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Home My WebLink AboutCOM 0469.000 1996-1998 I..WAII ISLAND B&B ASSOCIATIO_ PO Box 1890 Honokaa, Hawaii 96727 hibba@aloha.net F':-_ August 22, 1997 '97 SE~° 2 Pfl y 11 Councilperson Arakaki CGU~ County of Hawaii COUN IY 0;= H;;WAII 25 Aupuni St. Hilo, HI 967.20 Deaz James Arakaki, The Hawaii Island B&B Association (HIBBA) wishes to address the recent decision made by the Property Tax Department to reclassify residences which operate a bed and breakfast from a "homeowner" class to that of "hotel and resort". HIBBA membership and Boazd would like to contest this classification and be a part of the discussion in the solution of a reclassification. The hotel and resort classification changes the tax rate for residential from $4.45 per thousand to $8.50 per thousand for building value and $10.00 per thousand for land value. The hotel and resort classification changes agricultural land value considerably. This can be more than a hundred percent increase. Furthermore, there is some question as to whether the reclassification itself also causes the assessed value of the property to be viewed as more valuable since it is now a "hotel and resort". Our concern is not just the fear of a doubling tax rate. We feel that the "hotel and resort "classification is not an appropriate label for the following reasons: Bed and Breakfasts aze not hotels by County ordinance and the entire permitting process; B&Bs are primarily in areas zoned residential or agricultural; and some neighbors of B&Bs have expressed concern that the new classification could lead to the possibility of hotels and resorts being established where they would not be appropriate. The Tax Department is working to do its job, which is to maximize tax revenues. The Planning Department and the County Codes are working to assure that in running a B&B the property is first and foremost afull-time, private residence. There is a conflict here with the "hotel and resort" classification. We aze cazefully checked by the Planning Department to assure that the BBcB activities do not alter or change the chazacter of the area or the intent of the zoning laws. Unlike other businesses, we are unable to expand and grow. We are locked into operating a one to five room BBcB only. The number of rooms granted is determined by the owner, permitting process and the Planning Commission. The majority of B&Bs in our association aze small, with one to three rooms. A B&B cannot cope with a large tax increase by simply pressing another room into service. Given such circumstances it seems unfair to tax an entire property at a "hotel and resort" rate when we aze legally unable to utilize it as such. A permitted B&B is unable to sell their property as a "hotel or resort" and can only sell it as a residence which has permission to operate a B&B with a specific number of rooms. We feel that we have fallen between the cracks of two agencies. We would like to help bridge the gap so that it is fair to all parties concerned. Listed below are options that would allow us to explore different ways for this problem to be solved. 1. Allow residences who operate a B&B with all county permits to r~mma~in ~athe ~/~q homeowners classification. ---,P-=L~~.-~_. F'lle 2Qo. ltef. To: lief. Irate SEP 0 2 19~,~ H_ NAII ISLAND B&B ASSOCIATIO: PO Box 1890 Honokaa, Hawaii 96727 hibba@aloha.net Limited research done by HIBBA members as to how Oregon, Washington and other Hawaiian counties handle this reveals that Hawaii and Oahu are the only places that have the "hotel and resort" classification. Precedent for considering the hotxreowners classification may already exist in the Tax Code. Article 7 section 19-53(2) states that "In assigning land to one of the general classes the director of finance shall give major consideration to the districting established by land use commission... and the districting established by the county in its general plan and zoning ordinance, use classifications established in the general plan of the state and such other factors will influence highest and best use..." 2. Consider evaluating residential properties with B&Bs and taxing them according to portions of the building actually used for the B&B. It seems unfair to tax the entire Sand as a hotel and resort. The federal and state government does not allow land to be considered for a B&B tax deduction. The majority of the ]and in association with a B&B operation is used for residential purposes. Section 19-53 suggests that condos may be evaluated in such a way. property subdivided into condominium utrits.... shall be classified upon consideration of its actual use into one of the general classes in the same manner as land except that units which have been allowed a home exemption for the tax yeaz be classified as homeowner." Please note that the residences which use part of their home as a B&B aze allowed a home exemption too, but under this new classification are not allowed to be classified as homeowner, unlike a condo. The idea of evaluating a property in accordance with its actual uses is also done in the case of historic residential property. Sections 19-89(c) states that "the director of finance shall determine what portion or portions of the real property shall be exempted from real taxes." Similar evaluations could be used to tax the homeowner, B&B property. 3. Consider using the same guidelines of taxation that the federal and state tax agencies use. Bed and Breakfasts, as small businesses, add to the local economy with guests going to local restaurants, shops and attractions. The U.S. Guest Study found that the average B&B guest spends $33.32 a day on food and $33.11 a day on incidentals (not lodging) bringing much needed economic support to other businesses especially economically depressed areas. B&Bs should be encouraged b~ the officials of this county and should not be given a disincentive of much higher lases if they are open, aboveboard and officially approved by the Planning Commission. We present these views in keeping with the General Plan, to "provide residents with opportunities to improve their quality of life" and to "give diversity and stability in its economic system", and to "provide an economic environment which allows new, expanded , or improved economic opportunities that are compatible with the county's natural and social environment". Mahalo for your attention. Piper McKern at 934-8855 or Diane Shriner at 328-2335 are your HIBBA contacts on this issue. We look forward to hearing from you. Warm Regazds, ~