City falls short on pinning violators?

In the past five years, city Department of Planning and Permitting officials have fined just 8 percent of the short-term rental owners whom they investigated for violating isle laws.

And the department’s collection rate for those assessed fines was just over 8 percent.

Since 2009, city inspectors have handled 335 requests for investigations, but issued only 88 violation notices or warnings of which under 30 resulted in an order against the owner.

Altogether, they collected $48,853 of the $601,000 fines that they imposed during that period. While the department elected to waive $194,147 in fines, the city left $406,853 sitting on the table.

It is such a dismal record that some critics, including the head of a group opposed to illegal rentals, say it’s almost as if the department were trying to fail.

The heated and complicated issue has both sides clamoring for city and state reforms.

Unfortunately, said Mayor Kirk Caldwell, there isn’t a simple solution to bridge the divide.

"The vacation rental issue is highly controversial. We face a huge challenge here, as you know, regulating and enforcing vacation rental issues, and it always comes down to money and whether we have the money to actually do the enforcement," he told the Honolulu Star-Advertiser. He added that DPP is also challenged by its volume of work, which also includes building permits, and by the huge burden of proof it must meet.

FINDING THE EVIDENCE

Larry Bartley, executive director of Save Oahu’s Neighborhoods, suspects the problems go deeper.

"This is a clear case of no political willpower. The administration thinks they are making a lot of money out of this industry and that it’s a boon to the economy, and they clearly don’t care about the quality of life for residents," said Bartley, whose group formed in 2005.

While plenty of city resources are being expended, there has been little resolve to crack down on violators.

The Star-Advertiser found obtaining evidence of illegal activity was as easy as plugging a request into the Vacation Rental by Owner (www.vrbo.com) booking calendar, which displays short-term reservations by month. But city officials say their burden of proof is much higher.

"It’s like a cat-and-mouse game," said Mike Friedel, DPP’s chief of code compliance.

George Atta, the department’s director, told the Kahala Neighborhood Board this year that owners frequently outwit the department, which has gone to court several times and lost.

"Quite honestly, operators are smart. They tell their tenants not to answer the door and not to speak to anyone from the city. Because my inspectors don’t have a warrant, they can’t insist on entering," said Atta. "In a certain sense, we don’t have the tools that are necessary to gather evidence."

The department said it must show a "preponderance of evidence" and that compliance is favored over punishment. Advertising a vacation rental isn’t considered proof of illegal activity even in cases where the owners do not have nonconforming-use certificates.

Their stance has left North Shore resident Kathleen Pahinui dumbfounded, especially in light of the Hawaii Tourism Authority’s recent vacation rental study that shows thousands of uncertified operators are advertising online.

Pahinui, a North Shore Neighborhood Board member, said the city must sharpen its enforcement policies to bring offenders to heel. "What you have is a preponderance of evidence showing that these people are doing illegal operations," she said.

Bartley said the city must get beyond their excuses.

"Don’t blame the inspectors. It’s the people behind them, the mayor and the director of the Department of Planning and Permitting. Clearly, their heart isn’t into enforcing this." 

Inadequate enforcement is behind the spread of illegally operated short-term rentals, said Kailua Neighborhood Board Chairman Chuck Prentiss, who once worked as a city planner.

"The city has been really negligent," he said. "It’s been totally inadequate and that’s what has enabled people to proliferate and advertise."

City Councilman Ikaika Anderson, who represents Windward Oahu, said he’s willing to address enforcement, but only in a holistic manner. His proposal would allow owner-operated bed-and-breakfasts to expand by up to 1,275 units. No more than 25 percent of them would be allowed in one district and violators would be dealt with sternly. He’s not in favor of grandfathering in offenders, which has been the practice on some neighbor islands.

"I can’t support rewarding people for breaking the law and penalizing people who have abided by it," he said.

Anderson said fees paid by certified bed-and-breakfasts would pay for about a dozen new city inspectors, who would concentrate only on vacation rental enforcement and would not have the power to negotiate fines.

"I’ve always felt that the current fines at the current levels are merely a cost of doing business for many of the illegal entities that are out there," Anderson said.

City Council Chairman Ernie Martin, who represents a district that stretches from Mililani to the North Shore, agrees the issue should come back before the Council. He supports additional enforcement. However, unlike Anderson, he also would entertain the expansion of non-owner-occupied transient vacation units.

"I would like to see the moratorium lifted. But we would have to get a reasonable gauge as to what the market could bear and what we could enforce," he said.

The city should work with communities, the state legislative and executive branches, and the tourism industry to set tolerable limits, he said.

Martin doesn’t have a limit in mind, but said 4,411 vacation units, the number the Hawaii Tourism Authority said was advertised as short-term rentals on Oahu during 2014, might be too high. "As the Council is entering into a new session, perhaps it is something that we should take on," he said.

Martin said that pending measures — such as allowing homeowners to build accessory dwelling units and creating a special property tax category for transient vacation units and bed-and-breakfast homes — are tied closely to vacation rentals and could prompt a re-examination of the rules.

While Caldwell has touted accessory dwelling units as a means to create additional affordable housing, critics of the illegal use of vacation rentals fear that lack of enforcement could cause these units to be used for visitors.

"If we do decide to take on (vacation rentals) it would all have to be taken concurrently with the whole affordable housing as well because it would affect that particular crisis," Martin said. "I think all members would have an interest in this aspect."

CRACKDOWN OBSTACLES

Some proponents of reining in illegal properties would like the city to use state tax records to identify and crack down on short-term rental operators.

But the state tax office has repeatedly denied the city access to tax information related to short-term rental operators. Caldwell said he will discuss the issue with Gov. David Ige and Maria Zielinski, the state’s new director of taxation.

"Obviously, some of these folks are paying excise tax, if we knew what it was coming from we could enforce. That is something that I’ve talked to former tax directors about. I’ll try again under the new Ige administration," Caldwell said.

Furthermore, the state tax office might not be any more adept at catching offenders than the city is. After more than six weeks of research, state officials could not tell the Star-Advertiser how many vacation rental and bed-and-breakfast owners were paying transient accommodations taxes.

Martin added that state legislators would have to pass new laws for the counties to gain access to state tax records.

Meanwhile, frustration mounts with ineffective enforcement.

SharLyn Foo, a North Shore vacation rental operator who has been certified since the 1980s, said she knows of operators who have let their certificates lapse because it didn’t seem to matter. New operators, who ignore the rules, face little risk of getting caught, she added. "This level of enforcement is a waste of time. It’s a waste of my taxpayer dollar," Foo said.