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Thank you alohaes. Terrific detective work. You are correct.
The data show that the Hawaii Leisure and Hospitality Employment figures were the hardest hit since 2008. During that same time period the Hawaii Government payroll has steadily increased by 6.4% (or by 9.4% from January 2002 to July 2010 or by 19.5% from January 1990 to July 2010), even in the face of the 2008 recession. Therefore, if the state has budget problems in the face of declining revenues, the Hawaii taxpayers need to know that their legislators are on a spending spree. What business would hire more employees and spend more money when revenues drop? Anyone with business sense knows that the correct solution should be exactly the opposite.
To illustrate your point graphically, I have organized the data from your 2 tables into a graph (attachment below), showing the data for the past 10 years.
Years and numbers of employed in the Hawaii Leisure / Hospitality sector (units=1000s). In January 2002, 95,800 were employed in this sector in Hawaii.
Attribution: data from alohaes on blog, page 73.
As you state, the Hotel Unions and those in the Leisure and Hospitality sector who were hardest hit as a result of the recession have every incentive to lobby the legislature to play Robin Hood. The legislature in turn would prefer to blame and punish someone else (like off-island owners) for this fiscal problem instead of getting their own “House” in order, like any other business.
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.
Alohaes, you should feel free to use this in your letter campaign to the Senators and Representatives, since you were the first one to supply the idea. That is why I provided it as a downloadable file (a pdf. file), so you could use it.
Will you kindly agree to be the one to send Pinkertonagent's chart as a letter tonite? We need to have someone other than me or Pinkerton agent to do this. You seem to be the kind of person who can carry this message in with the right aplomb and we need to have this task handled. Please confirm! We need to find another right person to do this if it is not you.
It is fine if you send two separate letters to keep both of the messages tight and to the point. Mahalo!
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?
Will you kindly agree to be the one to send Pinkertonagent's chart as a letter tonite?
While I agree with the point, I feel it's not the simpler message I'm trying to get across, and might be confusing to fit it all together... it would be best if this were part of another's reasoning. There seems to be some Facebook traction on this data too.
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.
Aloha Mauilizard, Can you kindly wait for one more hour? We will provide everyone the specific instructions for emailing of faxing. There is a reason for the delay, and best to hit the send button right before you go to bed anyhow. Please check back. Mahalo!
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 8th, 2012
Members of the Hawaii State Legislature
Hawaii State Legislature
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 20th, 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 28th and March 9th, 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:
There are three points you should know about renting your property out 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):
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.
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:
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.
773 Island Road
Victoria, BC V8S 2T8
Thank you for your response alohaes, I will gladly wait but remain confused as to the method we need to use to send our letters / communications. Will we be able to submit testimony on the website or do we have to do it via letters/ e-mails / faxes? Is there a preferred approach? Thank you for your guidance.
@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.
Discount Window Coverings
MauiLizard,We must send by email or fax.
The submit Testimony button is not an option at this time.
...and I don't get what you are talking about regarding the
requirements of HRS 467. I can't really find it anywhere.
For HRS 467 (basically: real-estate agent regulations), see http://hawaii.gov/dcca/pvl/hrs/hrs_pvl_467.pdf
Look at "-2, Exceptions"... that's where we're allowed, as owners, to manage our own TVR's... don't look at the caretaker exception, look at the owner exception. That's our current right.
Then, look at the "caretaker" exception and the definition (1:1, exclusive) of "caretaker"... that's what they want us to do if we don't have a licensed agent manage our properties and we're out-of-state owners.