Pinkerton Agent,  Of course the picture is worth a thousand words effect is well in operation here.  thank you.  Shall I assume that this will become part of your letter which shall be sent to every Senator and Representative tonite?  If not, please allow someone else to make it's distribution on your behalf.   Mahalo.

Thank you Pinkertonagent.  I will submit it as part of the letter campaign.

I tried submitting testimony on the Hawaii Status site but it told me the measure is not scheduled for a hearing and would not allow me to do so.  Where / how are we being asked to submit our opinions on this measure?

BIG WAVE UPDATE (for your letters tonite)

We will post email addresses and fax numbers at 6pm PST.  We request that you hold off distribution of your letters however until you go to bed.   The reason is that there are some letters going in ahead of the Big Wave.  Once the Big Wave starts, the specific letters we want to stand out shall be buried.       So please do your best to accomodate.   In the meantime, some wording that is important to attend to because there are two bills being reviewed on Tuesday and our messages must refer to both bills in the single email.

Hi, all:

Some great information and support posted these past few days, and I am, as usual, indebted to you for your intelligence and cleverness.  Never mind your dedication.  Marathon, anyone?

Here's the piece I'll be sending to Hawaii Legislators, but I need to proof it one more time.  And maybe get a glass of water.

Yes, it's long, but I have some other plans with it, too, so as usual, I'll say thank you now to those who have the ability to be concise.  You have my admiration.

Oh, and yes, I know, the bullets and indents might be a bit off in this positng, but that';s just cut-and-paste noise; the original holds format.

April 8^th, 2012

Members of the Hawaii State Legislature

Hawaii State Legislature

State Capitol

415 South Beretania Street

Honolulu, HI 96813

Dear Members of the Hawaii State Legislature:

Re:  HB2078 SD2 HD2 and SB2947 SD2 HD2

My name is Adam Leamy.  I am a Canadian citizen, residing in Victoria, British Columbia, Canada.  I am writing in respect of the North American Free Trade Agreement (NAFTA) and HB2078 SD2 HD2 and SB2947 SD2 HD2.  My interest in these bills, and recent bills like them, stems from my ownership of two properties on Maui; units 203 (purchased in 2008) and 208 (purchased in 2011) in Hale Kai O’ Kihei.

I believe that the latest version of HB2078 goes some way to acknowledging concerns I have raised previously.  And it is my profound hope that additional goodwill prevails to see this bill reflect Legislative policy priorities in a manner that upholds the provisions and protections of NAFTA.

Last week I received correspondence at my home in Canada from “Century 21 — All Island Maui,” in the name of principals Adam Falb, Steve Baxter, and Ms. Darcy Baxter. In their letter, they note that,

“ . . . from the beautiful island of Maui, we bring you a message of Good News . . . 1. Buyer activity is up substantially (demand has doubled) and 2. The number of properties for sale (Inventory) has gone down.  The Reason; International Demand.  Looking at our results for 2011, approx. 62% of the sales were to international buyers.  If you’re considering selling your property, don’t miss out on our free Maui -- International Buyers Report.  You’ll see where buyers are coming from . . . .”

According to Hawaii realtor David E. Buck, they’re coming from Canada.

Writing on Hawai’iLife.com, on May 20^th, 2011 Realtor David E. Buck, R, BIC, of Hawai’i Life Real Estate Brokers (4614 Kilauea Ave., Suite 206, Honolulu, HI 96816) advises that in 2010 and 2011, “Canada has taken over for Japan as the #1 foreign country investing in residential real estate in Hawaii.”  In his article, “Canadians Surpass Japanese for Foreign Investment in Hawaii Real Estate” Mr. Buck wrote:

I had the opportunity to hear Dr. Michael Sklarz of Collateral Analytics speak today at the Hawaii Convention Center about foreign real estate investment. He had some interesting data that he was able to compile with the help of Title Guaranty.  For the state of Hawaii, Canadian investment in real estate has by far surpassed other foreign countries over the past few years. Over the past decade or so, the Japanese have been averaging 250-300 purchases/per year. Canadian investment is nearing 400 purchases/year over the last 2 years. Following a distant third behind Canada and Japan is Hong Kong.

Sklarz also had some good data on where foreigners were buying throughout Oahu, Maui, and the Big Island . . . On Maui, the Canadians are by far the largest foreign investment country . . . . On the Big Island, Canadians have also taken the top spot . . . . It makes sense why the Japanese are being surpassed when you see some of the graphics that were displayed. The residential market in Japan is still down 60% from 20 years ago! Sklarz anticipates foreign investment to pick up from Hong Kong, Singapore, Australia, and Canada as their residential markets are near all time highs. He went on to compare what we’re seeing with the Canadians, and other foreign investment here, being analogous to the Japanese bubble we experienced here in Hawaii . . . . The difference between now and then is the Japanese back then were willing to pay 25% more than domestic buyers for most properties. Although the Canadians are whipping out their checkbooks, they are not “overpaying” and it is predicted this trend we are seeing will be more sustainable and long lasting.

On the same website on February 28^th and March 9^th, 2012, Ms. Pat Strausse, RB, also of Hawai’i Life Real Estate Brokers, provides a two-part list of “Ten Things Canadians (or any Foreign Buyers) Need to Know Before Buying Real Estate in Hawaii.”  In her Part 2 Report, Ms. Strausse advises the following:

1. 8. Thinking of using your property as a vacation rental?

There are three points you should know about renting your property out as a vacation rental.

1. Laws on short term vacation rentals are set by the laws of the local county government, not all islands are open to vacation rentals, so check local laws.  (Emphasis added.)
2. Condos are very popular as a vacation rental, but some condo projects restrict the use as a vacation rental, so again check before putting in an offer.
3. There are special Hawaii state taxes that apply to short term rentals such as a vacation rental.

I raise these examples of communication from Hawaii for three reasons.  First, Canadians have emerged an important investor-class in Hawaii.  Second, as Ms. Strausse’s article shows, efforts by the Hawaii State Legislature to advance consumer protection may well need to attend to those who are marketing Hawaii abroad.  And third, Canadians making cross-border investments in Hawaii are subject to the provisions and protections of the North American Free Trade Agreement (NAFTA).

The US Department of Commerce’s International Trade Administration makes clear on its Trade Compliance Center website the NAFTA Chapter 11 National Treatment issue (http://tcc.export.gov/Trade_Agreements/Exporters_Guides/List_All_Guides/NAFTA_chapter11_guide.asp):

Nondiscrimination

Chapter Eleven obliges each NAFTA government to accord "national treatment" or "most favored nation (MFN) treatment", whichever is better, to investors of other NAFTA countries. "National treatment" means treatment no less favorable than that accorded to a country’s own investors who are in like circumstances. "Most favored nation (MFN) treatment" means treatment no less favorable than that accorded to investors of any other country who are in like circumstances. The national treatment and MFN obligations are applicable to the establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of an investment.

Prohibited Performance Requirements

Chapter Eleven imposes disciplines on seven types of "performance requirements". A NAFTA government may not, as a condition for the establishment or operation of an investment in its territory, require a firm to:

. . . . buy or use components from a local supplier or accord a preference to domestic goods or services; achieve a minimum level of "domestic content" . . . . ;

Which brings me to HB2078 SD2 HD2 and SB2947 SD2 HD2.

• I have offered testimony previously that I am in tax compliance, and so should be all who own and make use of transient accommodation in Hawaii, be they residents or non-residents of the Island on which the property is located.

• I agree that to aid tax compliance and business operation opportunities, all who make available transient accommodations should provide relevant information to condominium associations or their equivalent so such information can be forwarded annually to the Hawaii Department of Taxation.

• I agree that all who make available transient accommodations should be required to post or place the appropriate tax registration identification number in internet and all other advertising (so long as efforts are undertaken by the Hawaii State Government to ensure its digital and information-releasing and -sharing protocols in respect of such tax registration identification number combine to make such action as safe as possible from those seeking to profit from same for identity-theft purposes).

• I agree, as it is already my practice per previous testimony, that all who make available transient accommodations should be required to demonstrate responsibility and accountability for their guests by making sure they provide to their guests a local contact able to support their stay in the transient accommodation.  (In addition to me, available through cell/text/email, I have a local contact available to guests, and for our 59-unit building, make available the contact information for our resident manager for shared- or common-property issues.)

• I agree, as it is already my practice, that to aid guest experience and owner accountability and responsibility, all who make available transient accommodations should provide their condominium associations or equivalent with the local contact information noted in the preceding, acknowledging that in the instance where an owner lives on-Island, such owners may designate themselves as the local contact.

• I agree, as it is already my practice, that to aid guest experience and owner accountability and responsibility, all who make available transient accommodations should provide their guests, i.e., the paying consumer of their transient accommodation, the name and contact info of the local contact in both the written rental agreement and in prominent display within the rental unit.

And on this, I’ll go a step further:  Perhaps we can also take it as agreed that Legislators and those who are investors in Hawaii share these above beliefs.  So why can’t the Legislature create, or support the creation of, a task force, committee, or some ongoing consulting mechanism so that we can work together regularly to further the realization and advancement of these shared beliefs far, far earlier in the problem-defining and policy-response process?

It seems to me that there are some exceptionally clever and experienced people who have been drawn in to these matters since all these bills were introduced. Does it not make sense that long before the matter comes to legislation, that through regular consultation and ideas-sharing, we might avoid misunderstandings and hurtful counter-productive efforts to help all owners — resident and non-resident — become law-abiding and tax compliant?  I’ve said it before, and I’ll offer it again:  I’ll help.  Maybe we could start with building a simple fact sheet that we could supply to realtors like Pat Strausse, above, so that investors’ relationship with the State of Hawaii get off on a better, fact-based footing.

The issue that has troubled me and continues to do so is the feeling that because I’m compliant, accountable, and responsible — but that others aren’t — I have to forfeit, some, broad, or complete control of my cross-border investment. Yes, this violates NAFTA, but more than that, it seems an affront to those who have played and are playing by the rules.  What is it about some owners that the moment they purchase, they take steps to find out what constitutes compliance, and then execute the actions to ensure that they meet all obligations?  For me, it’s what helps me sleep at night; that I’m acting responsibly.

Why are others not in compliance?  One might just as easily ask, “Why are our jails full?”  But surely the answer to the question, “Our jails are full, so what do we do to stop people from breaking the law?” is not, “Arrest everyone, and put them all in jail; it’s just easier that way.”

And therein lies the frustration with this and other such bills.  Accordingly, notwithstanding the NAFTA provisions and protections that govern my cross-border investment in Hawaii, and in respect of my stated beliefs, above, we need to find balance.  We need to find balance that allows the State to achieve tax-compliance goals for all owners of transient accommodation, and that can be achieved in a way that does not jeopardize any tax-compliant, law-abiding owner’s ability to run an investment in Hawaii, cross-border or otherwise.  In short, we need to avoid the “Arrest everyone” scenario.

Against this backdrop, it remains that distinguishing between residents and non-residents, i.e., terminology such as ‘on-Island or without,’ undermines what the bill purports to do; ensure tax compliance and enhance consumer protection.  As I have noted previously in respect of NAFTA, if residents are afforded an exemption from provisions of State law, it constitutes “the most favorable treatment,” and remains the standard to which NAFTA partners, in my case Canadian cross-border investors, claim for application to their investment, too.  Full stop.

Should the State persist in forging a distinction between resident and non-resident, in violation of NAFTA, the NAFTA protections afforded Canadians would be expected to be employed, as noted by Cornell University, in its report, “Free Trade and State and Local Government” at http://government.cce.cornell.edu/doc/reports/freetrade/#book2:

An “investor” is any person, company or lender with a financial venture that sells goods or services in a participating country where the investor is considered foreign[ii]. These investors have a right to bring nations into international arbitration to defend government measures that affect their investments (property) negatively. These agreements expand foreign investor rights by granting:

• property rights greater than domestic citizens and
• access to an international court that can award damages for government actions that impact investor profits.

The expanded view of "property" is defined to include future profits, market share, and market access. Partial losses of profit or use of land may require government compensation. This is a greater right than U.S. citizens have under the takings clause. Partial regulatory takings are considered non-compensable, reasonable losses for the privilege of citizenship in the domestic context[iii].

Foreign investors have also been granted the right to comment on draft legislation that might affect investments. If displeased with the final legislation, foreign investors can circumvent the legislation and challenge the law by asking a secretive international arbitration tribunal to declare the law invalid under NAFTA on a number of grounds. These changes are the basis of much of the concern voiced by state and local governments. The concern is not unfounded, and has been reinforced by the actions of some investors.

Related to the resident/non-resident NAFTA issue is that of the Owner-Manager (Owner) and on-island contact; Roles, definitions and limitations.  In my practice with my cross-border investment units in Hawaii, my local contact, while identified, has yet to be used in any meaningful or substantive way by guests:  Guests have always been able to contact me first, and are encouraged to do so. That said, my local contact has no involvement in the management of the rental, securing bookings, collecting fees, making remittances, etc., as that is exclusively my responsibility.

Like others, therefore, I am concerned with use of any language that refers to a local contact as an “agent” or describes their duties as management; again, that is exclusively my responsibility.  It would be of benefit to both intents on the bill, i.e., to ensure tax compliance and to enhance consumer protection if the Legislature were to change the name of this assisting party to “on-Island contact” and specify that the function of the “on-Island contact” is not management, but is, instead, the fulfilment of “roles, responsibilities and duties as determined by the owner, and that the on-Island contact also serves as the emergency contact for the rental and its guests.”

Similarly, as this “on-Island contact” does not perform the role of a Licensed Real Estate professional or professional Property Manager, there is no requirement for the individual to be real-estate licensed.  In the same vein, there is no need for the “on-Island contact” to handle guest monies or payment of taxes, as that is exclusively my responsibility.  Indeed, any requirement by the State for the use of a Licensed Property Manager, as noted previously, violates NAFTA per the “Prohibited Performance Requirements, i.e., “[a] NAFTA government may not, as a condition for the establishment or operation of an investment in its territory, require a firm to . . . . buy or use components from a local supplier or accord a preference to domestic goods or services.”

In the same vein, HB2078 SD2 HD2 offers language that an owner may use an agent — for which others I have suggested, above, the term “on-Island contact” as long as the on-Island contact provides the service to no more than one party.  While the NAFTA provisions and protections under Chapter 11 would again apply to this restriction, too, I understand that the Hawaii Legislature and its Members are taking steps to garner inputs from others in order to produce an agreeable solution that addresses the impracticality of this language, i.e., actual market conditions for available qualified employees or independent contractors to perform the role of on-Island contact.  I would hope, therefore, the type of restriction proposed in this instance in SB2078 HB2 SB2 would be removed.  I, like other tax-compliant cross-border investors in Hawaii transient accommodation would like to operate without this restriction and with our current on-Island contacts’ support described previously regarding Owner-Manager and on-Island contact.

Lastly, I remain at a loss to understand the purpose or consumer-protection benefit inherent in requiring that the “on-Island contact” name and phone number be listed in sales advertisements.  It seems premature to offer such information on a marketing page on the internet; surely it is better used when a ‘potential’ guest has advanced to ‘committed’ or ‘booked’ guest and as such, receives from me all manner of information about making their stay in my units enjoyable and safe.  In respect of NAFTA, this State prescription would again run afoul of the Chapter 11 protections, not the least of which would be requiring the posting of information that, in creating confusion, would negatively affect the operation of my business, and make the State liable for penalties to be paid as a result.  Indeed, since posting testimony to the Hawaii State Legislature, I have received no end of unwanted emails and robocalls; but I did that willingly, so now I’ll have to deal with it.  But asking my “on-Island contact” to face the same harassment would likely make them think twice about providing the service to me, and as a result, would again see the State fall afoul of NAFTA in prescribing a requirement on me that undermined my ability to operate my cross-border investments in the US.  The requirement offers no measure of consumer protection, does nothing to ensure tax-compliance, and puts the State at risk of yet another NAFTA penalty liability.  It should, therefore, be deleted.

This has been a most unpleasant experience, and in Canada, potential-cross-border investors in Hawaii and the US have had Canadian, Mainland US, and Hawaii website access to all manner of articles now reporting the dangers inherent to Canadians in investing in the State.  With the agreements and proposals for improvement and NAFTA compliance outlined in the preceding, I believe the Legislature can address HB2078 SD2 HD2 and SB2947 SD2 HD2 to imbue them with the balance necessary for the bills to ensure tax compliance by all owners of transient accommodation, to advance consumer protection, and to fulfil the State and US obligations under NAFTA. This is a true win for us all.

In addition, I do hope you will create, or support the creation of, a task force, committee, or some ongoing consulting mechanism so that we can work together regularly to further the realization and advancement of these shared beliefs earlier in the problem-defining and policy-response process.  All manner of bills this Session, i.e., HB1706, HB1707, SB2078, SB2089, and SB2947, have taken to an adversarial level first that which could have been furthered more effectively through stronger communication, joint effort, and cooperation. This is a shame, and I hope the damage can be undone; I believe that through the type of ongoing committee or body I have suggested above, and the type of communications I would be willing to assist in writing, it can be undone.  Through regular consultation and ideas-sharing, we can avoid misunderstandings and hurtful counter-productive efforts to help all owners — resident and non-resident — become law-abiding and tax compliant, and operate in a way that enhances consumer protection.

To me, that’s an approach worth embracing for goals that are important to us all.

Sincerely,

Adam Leamy

773 Island Road

Victoria, BC    V8S 2T8

Canada

@jive  I am just not getting what is happening now.  I looked at the Hi

legislature HB2078 HD2 SD2 and the thing that is not clear is the Duties of

the Designated Agent and who that agent can be.  I read the Versions of the bill

HB2078 SD2 SSCR3167 and I don't get what you are talking about regarding the

requirements of HRS 467.  I can't really find it anywhere.  I just don't feel

like I know what we should be saying in this next testimony.

 Gail Baker

Discount Window Coverings

530-587-5577

discountwindowcoverings.hdspd.com

By email or fax.  The testimony period is over.