 Mark Coleman, and we are here with another episode of Talking Tax on Think Tech Hawaii. Thank you very much for being with us. I'm the co-host, along with Tom Yamachika, who is president of the Tax Foundation of Hawaii, and a prolific writer of columns that you can see on his website, the Tax Foundation of Hawaii website, and in newspapers around the state. I'm with the Grousford Institute of Hawaii. Today, we're going to talk about a recent article of his, his latest article, which was called Owning in a Burn Zone. And he was talking about the predicament that private property owners in Lahaina find themselves after the whole town burned down in early August with all the plans to rebuild it. There's a lot of questions about how the town is going to be rebuilt. And he brought up some, Tom brought up some really interesting points, primarily suggesting that we have to remember that there are private property owners in Lahaina whose rights as property owners need to be, be respected. But yet, of course, there's also government concerns and the community at large that has to be considered. So in addition, we have Jonathan Hilton with us today. He's a policy researcher at the Grousford Institute of Hawaii, which is where I work also. And Jonathan has been doing a lot of research recently into the Lahaina situation, Maui's stoning codes in particular, which will play a factor in the rebuilding of Lahaina. So Tom, how about first we get you to explain a little bit more about what prompted you to write this article. I noticed that you did cite a really good article by John Hill in Civil Beat, which comprised consisted of some interviews with private property owners in Lahaina, how some of them feel like their rights are being ignored. A lot of people want to come in and master plan top down, sort of. And yet there are people there who, you know, they have, they have their homes are in down and they have a big say in how it should turn out. So could you like summarize that for us and what your views are on that? Sure. These days, there's a lot of talk in the news and elsewhere about rebuilding the burn zone. That was once Lahaina. It was the former capital of the Kingdom of Hawaii. And the question is, you know, can or should it be restored to its former 1800s glory? Should it be keeping a character as a picture, picturesque, but sleepy little fishing town? Or should it be something else? Obviously, government will have, you know, some role to play in the rebuilding. And there have been community meetings that have kind of attended to address what the rebuilt Lahaina is going to look like. But there are, you know, folks who kind of came away from that meeting going, wait a minute, listening to these people talk about all their plans for the property, but it's not their property. All the rules they wanted. It's absurd. The socialist mentality, they think they own the land. That's a direct quote from, from, from John Hill's piece. Right, right. He put some developer in Maui is saying that. Yes, right. So, so let's kind of explore, you know, what is going on in Maui. What private property rights are what the government's role is, because, you know, I mean, as a tax program, we look at the government's role a lot. And let's talk a little bit about where the lines are. Yeah, I like it in Tom and John's article. And actually, you pretty much said very much the same thing. And what does it mean to own land in the US? In large part, it means that you get to choose what you do with it. But there are limits, master plans, zoning, building codes, et cetera. In theory, these are larger, these are reflection of largest societal values. But what I liked in your article was how you pointed out that although there's some master planning and zoning will probably survive scrutiny, officials should not be going hog wild with restrictions on new development or risk claims that private property has been taken. We talked about that a little bit, you and I offline yesterday. Could you explore that concept a little bit? Yeah, when I talk about property being taken, I'm talking about, you know, the Fifth Amendment of the US Constitution says that private property shall not be taken except for a public purpose. And if that happens, there needs to be compensation paid for. You know, the government can't just take your property for no reason. So, for example, and I'll bring Jonathan in on this at this point. There have been a lot of proposals about exactly how should they be allowed to rebuild? I know the Grasswood Institute, Jonathan's work, we've proposed that people whose homes burned down. Well, like you pointed out in your article, it was kind of there was a lot of construction in Lahaina that didn't meet code, modern code. And and so one proposal was to let people be exempt from modern building codes. They were they were operating under exemptions from, you know, they were grandfathered in, so to speak, as the codes were developed. And now when they rebuild, do they have to meet modern code or can they can they build like what they used to build? Jonathan, what's what's what's your take on all of that? If a property was completely destroyed, it's probably going to have to rebuild under modern building code. So there's a question of how does the county offset some of those burdens because the building code today is stricter than it would have been 50, 60, 70 years ago when a lot of these houses were put up. So there's a discussion of what code requirements should be imposed on some of these houses. And there's and so maybe if all of the modern building code is what these houses are going to have to be rebuilt under, there might be room for the county to almost compensate the owners for those stricter requirements and say, maybe we would give you some some zoning density that you would be allowed to either use on your land or to sell to someone else, kind of as a compensation for the fact that you're going to have to rebuild with all of these stricter standards in place. Well, let's let's kind of start off with with the zoning laws. Now, when we're talking about zoning laws, the general rule is you you you build to the zoning codes that were in effect at the time you build. And if the zoning laws change, which they do over time, then you're usually allowed to keep what you got. But if you make some kind of substantial alteration to your property, then you got to comply with the current codes. But a number of the structures that were there in La Hina when you know, when it burned down were, of course, 70, 80 years old. And if they hadn't done any substantial structural renovations, they were under 70 or 80 year old rules. So number one is there's a realization at least some of the rights or the the rights that you have as a grandfather in under the old rules don't exist anymore because like everybody's got to substantially rebuild. So the the justification for keeping under the old old rules has kind of gone away. And therefore everybody's looking at, you know, some different some different set of, you know, rules that are on the table when the rebuilding happens. And I guess the first question is, is that a taking? And is that something that's been within your research, Jonathan? I haven't looked into the Fifth Amendment implications of of rebuilding in a burn zone yet, although I I'm going to go do that right after we get off this call for sure. Yeah, there's there's a whole body of law regarding what they call inverse condemnation, which basically says that if you substantially change the use that property is going to be put while somebody is on it, then at some point you cross the line and you got to compensate people because there's a taking under the Fifth Amendment. And and these issues came up, like, for example, when Hawaii Kai was being built because there was a lot of zoning changes when the Hawaii Kai development was going up. And a lot of litigation happened back then. Well, you know, one problem with the Lahaina thing is that people are homeless and this has to be this can't take forever to find new homes for people. Gary, Gary Kubota, former star bulletin, star advertiser, router, he wrote a really great column on Tuesday and the star advertiser, an opinion column, and he was the title was Rebuild Lahaina Town Soundly and as Quickly as Possible. I loved what he was saying. He says, let's not get caught up in the global warming discussions and pushing back the locations of homes and businesses from the shoreline in Lahaina, when it was a fire that destroyed the town, not the ocean, taking away the use of the Harborfront property would be government overreach. And then he says if Amsterdam and Venice can find solutions to keep existing businesses in or near structurally in near areas in structurally sound buildings, so can Lahaina. So again, I'm wondering how much leeway the county is is what going to be willing to give local homeowners and businesses to rebuild their homes quickly, which would require, I think, some exemptions from those from the zoning codes, waivers of fees that will that cost money and other things to kind of get in the way of doing things quickly around here. Jonathan, what do you know about how the governor's emergency proclamation applied to his housing proclamation versus what's going on at the county level from Mayor Richard Bison? Yeah, I want to get into that, but real quick, just by way of comparisons, so the the the Paradise Fire in California in 2018, that happened in November of 2018, and the first certificate of occupancy was issued in July of 2019. So it was less than a year after that fire that people were able to start rebuilding to some extent. Now I need to look further into whether or not the state of California or the local government provided any sort of waiver or incentive for quick rebuilding. But obviously it's possible. But to comment on the emergency proclamation, so the second emergency proclamation that Governor Green issued in October, he did specifically exempt Lahaina. And on the other hand, Mayor Bison's emergency proclamations, he's issued several of them and they're not they're not just specific to housing. They cover a lot of different things. But right now, those emergency proclamations at the county level are not going to have much of an effect on rebuilding because no one's allowed to rebuild anything right now. As far as I know, EPA, Army Corps of Engineers, the county, they haven't even cleaned up the entire burn zone. So those emergency proclamations would not really have a real effect until the cleanup is finished. Yeah, nobody's issued any building permits at the moment, right? Yeah. Tom, what I what I read in the papers just the other day was thousands of Maui property owners, primarily in Lahaina, haven't yet given government permit, haven't yet been given government permission to clear their debris. Altogether, three hundred and five thirty five hundred homes were lost in Lahaina and upcountry Maui and only about nine hundred people have been able to get government permission to remove debris. I mean, this whole thing is like being run by. It's a snail fest, practically. I don't even know that I remember one of the early complaints was that the insurance adjusters weren't allowed to even go in there and assess what's what's happening. I don't know where that stands now. But so the and one of the rules that Mayor Bison talked or the County Council approved the debris removal bill in mid-October, just about a month ago. And and I think and part of that was that had to do with. Under the bill, homeowners could offer a government program of removal administer by the federal emergency management agency. And then there was another one, an alternative of which they hadn't really explained yet. But according to one article I read, it costs thousands, tens of thousands of dollars get this stuff removed. And so I don't know. It's a really complicated situation. What do you think about that? Well, you've got to start somewhere. If you have like toxic substances on the on on your property, you've got to get rid of them first. Is there is there? Well, I'm just wondering if there's a quicker way to do things it does seem terribly complicated and there are safety considerations. Jonathan, what's your take on that? I think the county is currently looking at a place they can put a landfill in order to put some of this toxic debris. Because again, this goes back to the building code discussion. You had a lot of materials that were used in houses built 60, 70 years ago, I think asbestos that are not allowed today because they can be hazardous. And so all of that's burned. And you don't want that getting into the ocean or the drinking water. And so even trying to figure out a place to move these debris to does take consideration. We can't put this in a normal landfill. Obviously, you wouldn't want any of that sapping into the drinking water. So it is complicated. And I don't have a clear answer for exactly how you run a cleanup of a burn zone. And so my focus is my research on what happens, what once people are allowed to rebuild, how do we make that as streamlined as possible so people don't have to move to the mainland or another island? Yeah, Tom, you were talking about that in your article about how once let's just say the debris did get all removed and people were allowed to proceed, we would have the issue of zoning, maybe possible waivers of zoning codes so people could rebuild similar to what they used to have. But also you were suggesting that there's the issue of infrastructure, the roads and the water lines. And the electrical power. Yeah, the problem is that cities don't exist by themselves and they don't exist in a vacuum unlike maybe rural properties. You need to have some form of sewer. You have to have some water lines. You have electric for the more enlightened lighting. You'd need cable TV or other kinds of communications infrastructure. And that's something that government has to do. Well, behind it probably grew organically. You know, it was not a master plan community like they've been trying to do with Kakaako, for example, on Oahu they didn't go in and kick out everybody and then start laying in the sewers and with the long range futuristic vision of a community. That sounds like one of the options that a lot of the visionaries for Lahaina want to do. You know, they didn't eminent domain people, the town burned down. So it's a similar situation. It's a clear piece of property now, except that there are individual property owners there. So that's the quandary, isn't it? You just can't walk in and start planning a way to your heart's content to meet whatever vision you might have about restoring. Yeah, I mean, when you plan a planned unit development like Mililani, you basically have the developer own all of the land first and then they can, you know, they can make all the decisions at that point. That's fine. They can create rules on what kind of houses you can have, what kind of houses you can't have, what kind of setbacks you can have, what your floor area is, what your ratio is. And all of that they can put into a document called CCNRs, Covenants, Conditions and Restrictions, which new buyers in the property either sign up for or they don't get in. But at least at that point there's an element of choice as to whether you're going to accept those restrictions or not. Right, kind of like private zoning in a way. Yeah, but the big difference is that for the folks in Lahaina, they own the property already. Yeah, yeah, yeah. And it didn't have those restrictions before. People are proposing restrictions now. And I mean, is that really fair to them? Yeah, Jonathan, what would you suggest should be, you know, what would you recommend for the future of Lahaina? Some of the, in terms of zoning waivers or changes or whatever. So to begin with, you have to, if the county has plans for the houses that were burned down, they know what the density was. They know what the setbacks were. They know the floor area ratio and all of that. So what the county could do is, if they don't want everyone in Lahaina to rebuild exactly with the same density that it had, you know, because of the, because zoning codes have been updated, they could allow people to sell that additional density somewhere else or add it to their home in a different manner. Alternatively, they could simply allow people to rebuild to the previous density level they had. You know, a lot of the businesses and shops on Front Street probably were not built with modern zoning code. They didn't have setbacks or parking requirements that you would have to have now. And the county could waive that if it has the building plans. Obviously, if it doesn't, that's another issue. But in addition to zoning, you also have to think about special area management permits, and you have to deal with those. And because so much of Lahaina was near the ocean, that may factor into the situation. I don't know what the answer is there. Well, certainly, one possibility is for Lahaina to be designated some kind of special district like Waikiki is now. And I don't know whether that's helpful or hurtful, but it certainly makes the rules different and uniform within, you know, within the community, but maybe non-uniform everywhere else. Yes, that could help. Well, yeah, there's so many competing visions for the place. It reminds me of the protests that we're trying to keep tourists out. And a lot of those people weren't even from Lahaina. They weren't even from West Maui. We have all kinds of visions to preserve the waterfront, setbacks, kind of what Gary Kubota was talking about, what you were talking about. But ultimately, I think it's going to be up to the property owners and working closely with the county. Is your sense, Jonathan, that the county is open to waivers and working along the lines you suggested? I think the county is going to be open to some changes. Just yesterday, the council was having a meeting about trying to make it easier for prefabricated homes to be assembled. There was a company there presenting, trying to ask the county about emergency shelter on county-owned land. All of that would be built with prefabricated homes. So they'd panelized homes, they'd come in, and they'd be able to put them up in days. Whether or not that materializes, that's a different question. But it does indicate that there are conversations going on about some more innovative ways to address, at least the temporary, housing needs. Yeah, and when the economists weighed in on this, they kind of raised another issue in that they thought that if the same density levels were maintained, the property values would escalate well beyond what the workforce needed in the city could afford. So I think it was Carl Bottom who suggested that density levels should be allowed to rise. That we should have some high-rises, maybe off the, you know, back toward the hills. Maybe a low-rise apartment, right? Perhaps. Lower high. A multi-story building. Yeah, you pointed that out. And I think that's an excellent idea, frankly. If property owners are, I mean, they're in a real bind. A lot of them might sell, are probably going to sell. They can't afford to stay here in Hawaii, you know. So, or in Lahaina anyway, maybe they'll have to move in with family elsewhere throughout the state. So they have those funds now. There's a government proposed fund set up. Tom, you heard about that, where they want to maybe offer a certain amount to victims that apply. Yeah, that's our next article. Yeah, you wrote about that already. You suggested that idea. And then, boom, that came out from the governor's office a little bit, you know, more than one. Well, they said they were thinking about it for three months prior to that. Yeah, well, they would be exonerating. They would be letting go of any future claims, you know, in terms of lawsuits and whatever. Does that, how about that as an idea to help out the people in the short run? Does that make sense? We think it's a great idea, but it deserves a lot more discussion than we're able to give today. Yeah, I'm just worried that the folks there are going to be living in hotel rooms or shelters on the beach or whatever for a lot longer than it then should be because of all of the concerns, all of the restrictions on home building in this state. Jonathan, have you got any last thoughts about what could be happening over there? I'd like to give kind of a PSA later today, the Maui County Council, or I guess later on Wednesday or Thursday, whichever day this is, I guess I'm lost. The point is, Maui County Council is considering a bill related to property tax relief, and that factors into this as well because individuals who might be looking at a high property tax bill otherwise could consider selling because their home's not there anymore. Their property taxes go up, they don't have an income, they don't have a home, so I'm glad that the council is looking at the question of how do we provide relief to people so they're not forced to sell or the county even comes in and forecloses on the property because they couldn't pay the property taxes. Absolutely. So a lot of that conversation is happening. Yeah, me too. And Tom, I wish we had talked a little bit more about property tax relief. They have been doing a good job, I think, trying to address that issue even at their own expense, or at least in terms of the county coffers. But you know, Tom, you closed your article. We definitely need a careful, well thought out community design that older and newer property owners and renters can choose to participate in. That's about the way, that's about it, right? Well, yeah, that's the best of all possible outcomes. I don't know if it's going to happen, but that's what we need. Well, let's hope it does. For the sake of Lahaina and Hawaii in general, it's a real sad situation and we need to see the best of it come out. Thank you, everybody. Thank you, Jonathan, for being here. Thank you, Tom. Good to see you again. And we'll see you all again in about two weeks. I hope here on taxing, talking tax on think that Hawaii. Aloha.