I attended the meeting(s) today
OK, no flames please. Just what I heard and my thoughts. I could be wrong. Before I start, I have owned at both North and South starting when each was a hole in the ground. I have been on my neighborhhod association and Temple Boards of directors, as well as President of our Brotherhood, so I have some experience with volunteer boards, and a good bit of sympathy.
There were 4 meetings-Master Association and BOD for both North and South. The meeting was not the annual meeting. It was a special meeting to deal with the NEW movie filming proposal and hiring an expert witness to testify re: proporty valuation for the appeal of the tax increases.
The Boards had some overlap in membership. Each has 4 owners plus 1 rep from Starwood. After each Board met, they threw the phone call open to questions from attendees (apx 20 owners showed up). They were very open about answering all questions. Not defensive. No sense of ducking any concerns or complains. The property general manager, Greg Lundberg, (who is also an owner) stuck around and answered additional questions and listened to suggestions until we ran out of questions or suggestions.
Topics and what I heard...
The election. One of the members of the BOD informned the board he was resigning just before Thanksgiving, causing the Board to have an unexpected election at the annual meeting. This required some changes in the paperwork around Thanksgiving and for a couple of reasons materials got mailed late, which required a remailing. The Board pressed for clear explanations of what caused the confusion and how to avoid it in the future.
The new movie (Adam Sandler and Jennifer Aniston) is requesting to film in public areas (pools, lobby, elevator areas, rooms, etc). They want to film for 39 days starting after Easter. The production company contact Starwood about this. The production company is looking at Sheraton Waikiki and KORN. Greg has put together a proposal for them. He was very clear that they would look to monimize the impact on guests. They would give notice of what was being closed when so folks could plan ahead. They would make sure similar facilities were available if the film crew was using one. For instance, 1 hot tub would always be open. If the film was at the lower pool, the upper pool would be open, or the South pool would be open. The pirate ship would be not be used since that is a unique feature that cannot be replaced if a guest wants to use it. Given we have pool closing from kids getting sick in the pool, being bumped next door up to the other end for a few hours seems pretty normal
The 2 main reasons Greg thinks this is a good proposal for the property. 1-The crew will be renting rooms during the low season (apx 60 rooms, while Greg said he has 600 rooms to fill during that season) and the crew wants breakfast and lunch every day, and the hotel restaurant isn't open for those meals, so it will be no impact to guests and put money into the restaurant. Overall, Greg thinks this could put up to $500K into the ASSOCIATION's pocket beyond what the restaurant makes. And this is the SLOW season, so its a good time. 2-This is good visibility for the property. Starwood is negotiating to get the hotel name and log into the film, which should help sell rooms in the future, and long term that is good for the property. Greg mentioned while Eastwood did not film here, they rented rooms, which is always good. He said he also had a number of guests who loved getting to see Clint and get autographs. That is totally up to taste. Could be seen as an inconvenience. Could be a selling point. I wasn't here, so I won't judge. I will say, given the number of vacancies on the island, anything that is not too disruptive and shows people how cool this property is is likely to put money into the pockets of the association or let us tell our friends, "yeah., Its a cool resort and we own there".
The Tax issue. Let me step back. Greg mentioned there were a series of events beyond the ossociations controls that have bumped things up (a perfect storm). They had 3 "100 year storms" in 1 year which caused flooding in the basement. The Indonesian tsunami raised everyone's disaster insurance. The the county decided to go after the timeshares for taxes. One couple mentioend they owned at St John's resort and were just hit with a 3 year $600/year special assessment for room remodeling (change the counter tops, etc). This was driving by the way the previous firm ran their assessments. It was nice to hear KOR(south) had just finished remodeling the soft features (carpet, etc) in 3 building over the last 2 years and that was ALL covered by fees paid over the years for that purpose. They are also starting to save up for ADA changes that will need to be implemented over the next 5 years (nothing major so far, but probably grab bars). My sense was the things that are fairly preductable are being managed and accounted for. Greg mentioned he'd given the Board a proposal to make cuts in 15 areas last year. The Board accepted some, rejected others, aiming to keep the resort feel (we could certainly cut back to become the Whaler, but not what I was looking for when I bought). They froze professional staff salaries. They have reduces energy/utilities usage by $1 million a year. The new housekeeping/groundkeeping crew is all local Hawaiian (Philippino Hawaiians) vs having to bring in crew from the mainland when the unemployment rate was near zero a few years ago. All this supports the bottom line of the Association.
So the Tax thing. I truly came away PISSED at the County and appreciative of the work the Board and Greg are doing. [Political comments deleted.] ...many companies are avoiding having any meetings of conferences at anything labeled a resort or at any nice location, EVEN IF IT IS CHEAPER. Las Vegas has had this problem. Hawaii is having it in spades. There was an article in the local paper about hotels pulling "resort" out of their name to get more business.
My read-The Mayor of Maui county has decided that since Timeshare owners don't vote and have enough money to buy timeshares, we are a cash cow.
The facts: The mayor has proposed a budget for next year where total propoerty tax revenue increases but has said all resudential values will be reduced. So Hotels, timeshares and Condos will make up the difference. Owners have contacted the county and received different reasons for the tax increase. it seems like they have just decided they want more money and are making up different stories on how to get it. There are 2 issues in play. First, the county raised the tax rate from $7.50/1000 in value to $14/1000 a couple of years ago. They had proposed going to $21/1000 but the Timeshare association got them to reduce it. I believe Greg said fully-owned condos (or maybe it was houses) are taxes at $2/1000. But hey, they vote. We don't. Second issue is how the county appraises the value of the resort. They have told the Association and Greg that while the units were being sold, the property was appraised at its construction value. Now that it is 95% sold, they are appraising compared to similar properties. Funny how KOR(south) has been sold out a while, but they didn;t notice that till the economy and tax base tanked). They have chosed The Whaler, Kapalua and a 3rd full time owner condo developments as comparissons, assessing our unit values at $1.1 mil. And they sprund this in 1 year, not build up.
What has the association done? They paid the taxes, protesting the increase. So the increase is sitting in an escrow account and may be returned if our challenge is successful (I say our and we, because as owners, we are the association). There will be a hearing as soon as April where we will challenge both the tax rate and the valuation. If that fails, we go to State and then Federal court. Ultimately, the county has a lot of leeway to charge whatever taxes they want. So we'll see ho it goes. The association approved an expert witness to testify on the appropriate appraisal process/value. This is complex and political.
On the encouraging side, There is an association (American Resorts Development Association) which is organizing a grass roots campaign by owners to support the formal protests. Greg is te Maui Chair. He mentioned at one county hearing he brough his local employees to testify on how the county's moves are hurting Hawaiin's jobs. He said the tone of the country changed visibly. So we'll likely hear more on what we can do to support the association in pressuring the county (e.g., if my fees go up, I eat at my condo, not at the local restaurants, and jobs will suffer more).
I had heard Marriott did not get hit by fees/tax increases. Greg mentioned he got called by the GM at the Marriott last week asking if we'd had a tax increase and if he could hear how we were addressing it. Sounds like we're on the pointy end of the spear on this, but others will follow as they get county notices.
In the Q&A they also discussed people who defaulted on their fees. I'll post re: that later (got to run off to the Barefoot Bar for snacks).
I hope this was helpful.
BTW, jeff, great to see you on this BBS. And thanks for running for the board.
