Councilwoman questioned on vacation rental

North Kona Councilwoman Karen Eoff, the primary sponsor of a bill limiting vacation rentals on the island, has come under fire for her ownership of a vacation rental condo in Kailua-Kona.

Eoff is the only council member who owns a short-term vacation rental, according to financial disclosure reports filed by Jan. 31 with the county clerk.

She’s also the council member who co-sponsored a bill to regulate short-term rentals that the Hawaii County Council will consider.

Eoff lists her ownership of the condo in the real estate section of the financial disclosure, but doesn’t list income received from the rental with her other sources of income as required by law for any income received of $1,000 or more.

The 372-square-foot condo at the Islander Inn on Kuakini Highway is valued for tax purposes at $89,800, according to the county Real Property Tax Office website.

Eoff’s condo ownership came to the attention of Rob Guzman, who owns the vacation rental Bananarama Cottage in Kalapana Seaview. Guzman accuses Eoff of writing the bill in a way to exempt her own condo from the regulations.

“She has a conflict of interest in this legislation,” Guzman said Friday. “Barring people in other areas, especially areas with high numbers of poorer people and people of color, they will be prohibited from doing what she is doing herself.”

An email conversation Thursday between Eoff and Guzman, copied to newspaper reporters, showed Eoff first denied she had a vacation rental. Guzman was pressing Eoff to explain why she shouldn’t recuse herself from the legislation because of her own property holdings.

“I do not have — and have never had — a rental of any kind,” Eoff said in an email. “Please stop sending misinformation.”

When confronted with the record of her transient accommodations tax license, she backed off that assertion, saying she misunderstood.

“I should have qualified my response. … I do own a small condo unit at the Islander Inn which is in a Resort Zone on Alii Drive and managed by a rental agency,” Eoff responded.

Eoff said the Resort Zone is the appropriate place for the rentals. Her Bill 108 would require existing transient vacation rentals outside of the Vacation District, the General Commercial District or Resort Nodes to apply for a nonconforming use certificate in order to be grandfathered in.

Those in the allowed districts, such as Eoff, would be required to register with the county, but they don’t have to apply to the Planning Department for a nonconforming use permit.

“So you would only directly benefit because your legislation exempts people like yourself and you will even lie to constituents to hide this fact until called on your deception,” Guzman responded to Eoff. “Deeply disturbing.”

The bill, set for a Feb. 20 hearing, is creating a stir among property owners who rent out their homes through Airbnb and the like, and residents of established neighborhoods who see them overtaken by vacationers.

The bill applies to rentals of 30 days or less. It doesn’t apply to short-term rentals of a dwelling unit that is the owner’s primary residence. It also does not include “hosted rentals,” meaning transient use of a single room or sleeping area of a residential dwelling unit or guest house where the owner or operator lives on the property.

“At this point, I don’t believe there is a conflict of interest, and I am excited to hear from the public about how they see Bill 108 addressing commercial use of residential housing,” Eoff said. “I intend to disclose to the County Council the fact that my husband and I own a condo.”

Ethics boards traditionally have taken a lenient interpretation of conflicts of interest issues for state and county legislative bodies, saying as long as the elected official doesn’t derive a unique benefit or gain a greater advantage than the rest of the class of people affected by legislation, it’s not a conflict.

But Eoff’s failure to report her earnings on her annual disclosure could raise a red flag.

The instructions on the form state, “You must report the source and amount of all income of $1,000 or more received during the preceding calendar year. You must report the source of the income, the amount of income received and your occupation. For example, if you are employed by a business, then report the name of the business, the amount of income received during the preceding year, and your occupation with the business. When disclosing the source, provide the complete name (not acronyms) and the address of the business or source from which the income was derived.”

Eoff said she didn’t need to report the income because it didn’t meet the $1,000 threshold. She has been paying transient accommodations tax on the earnings since 2006, according to state Department of Taxation records.

“Our condo is listed on the financial disclosure form, however it operates at a loss and doesn’t produce income in excess of $1,000,” Eoff told the newspaper Friday. “The Financial Disclosure Form asks for annual income in excess of $1,000 and therefore no income was reported.”

That’s not how the county ethics code defines what income should be on the form, or how state Ethics Commission Executive Director Dan Gluck interprets what should go on financial disclosure forms. Both the county code and the state Ethics Commission, upon whose forms the county forms are based, say the form is asking for gross income, not net.

“‘Income’ means gross income defined by section 61 of the Internal Revenue Code of 1954,” according to the county code. The IRS code includes rents.

Rents would be considered gross income and the amount reported on the state form would be the amount that’s reported for general excise taxes, Gluck said.

“If the rent was $3,000, they would report income as $3,000,” Gluck said.

Eoff, chairwoman of the council Planning Committee, said she was given an initial draft of the legislation by the Mayor Harry Kim administration to help refine and introduce it.

Eoff said she and the bill’s co-sponsor, Kona Councilman Dru Kanuha, spent more than six months meeting with the community, vacation rental agents, Airbnb representatives, the Hawaii Island Board of Realtors and legislators from other counties.

Email Nancy Cook Lauer at ncook-lauer@westhawaiitoday.com.