State Affairs Update

State Affairs Insider – Volume 3, August 15, 2007

California

What started out as a potential earth shaking legislative year for the timeshare and resort development industries has since slowed to a mere rumble. Since ARDA-California is not sponsoring legislation this year, its main focus has been centered on preventing bad legislation from affecting the timeshare industry. This included working to defeat AB1459, which, as drafted, would prevent the development and sale of timeshare interests along the Californiacoastline. Fortunately for the timeshare and greater real estate development community, this bill has stalled and will not be taken up by the legislature this year.

However, the issue did not go away quietly as it has focused the spotlight on real estate and resort development interests along the coastline. On a positive note, one piece of legislation that was recently signed into law by Governor Schwarzenegger was AB432. This enabling legislation allows the California Department of Real Estate to work with other state regulatory agencies in order to develop a universally accepted public offering disclosure document that can be used in multiple states. Even prior to the passage of this legislation, the DRE had already begun working with the State of Florida in order to develop an offering document that would be acceptable to both the California and Florida timeshare regulators. The industry applauds the efforts of the California Department of Real Estate and the Florida Department of Business and Professional Regulation and we hope to see similar efforts by other regulatory agencies around the country.

In addition to our legislative activity, we have been forging new relationships with the California Hotel and Lodging Association, the California Tourism Industry Association, the California Restaurant Association and other related industry groups.  ARDA-California has also been working with the legislature to setup events at timeshare resorts in California to allow members of the legislature to experience the timeshare product.  The first of several such resort tours will take place on June 22, 2007, at the Marriott Newport Coast Villas in Newport Beach, CA.

Connecticut

An ARDA Task Force is working with ARDA-New England members and the Connecticut Department of Consumer Protection to provide comments on a proposed new timeshare act. The Department hopes to see introduction of the proposal during the 2008 legislative session.

Florida

While Florida’s legislative season ended on May 6, 2007, May 24th marked the true day of celebration for ARDA-Florida. On this day Governor Crist signed two important pieces of legislation (HB405 and HB411) sponsored by ARDA-Florida into law. HB405 is a comprehensive 38 page timeshare bill which included the addition of landmark insurance reform providing much needed relief for timeshare developers and associations, provisions to provide for a short-form registration for marketing out-of-state timeshare interests to a developer’s current owner base, a change to the definition of one-to-one purchaser to accommodation ratio in order to recognize the evolution of the timeshare product, and provisions to protect timeshare owners identities from being inappropriately obtained and used by resale companies.  HB405 went into effect on July 1, 2007. HB411 helped to create a license for timeshare developers, exchange companies, and managing entities to offer a limited form of travel insurance. The effective date of HB411 was delayed until January 1, 2008, in order to allow the regulatory agencies to implement the necessary processes and procedures to accommodate this new license. Full versions of both of these bills can be obtained from www.myflorida.com or by contacting the State Affairs office in Orlando.

In addition to these two key victories, ARDA-Florida worked throughout the session to modify or otherwise exempt the timeshare industry from condominium legislation, potentially harmful tax legislation, as well as various bills that would affect the operation of home owners associations.

Hawaii

During the first week of Hawaii’s legislative season, ARDA-Hawaii and its professional lobbying team hit the ground running. ARDA-Hawaii was called to present an overview of Hawaii’s timeshare industry before the Senate and House Tourism Committees. The presentation included an explanation of timeshare ownership, an industry snapshot, economic impact, and breakdown of taxes paid. The presentation served as an educational tool which was well-received by the both Committees.

Shortly thereafter, ARDA-Hawaii successfully killed measures to raise the TAT upwards of 400%! It is likely that similar measures will resurface next session. ARDA-Hawaii also lobbied in support of a bill that would remove timeshares from the Land Court System. While the bill did not make it through the legislature this year, the fight will most likely continue next year.

Finally, ARDA-Hawaii supported a resolution that asked the state auditor to perform a sunrise analysis of the regulation of destination clubs and those who market them. ARDA HI felt it was imperative to be included in this resolution because of its previous involvement with the Department of Commerce and Consumer Affairs on the regulation of Destination Clubs. ARDA-Hawaii worked to add ARDA-Hawaii and the DCCA as participants in the process. The resolution was adopted in final form with the ARDA HI submitted amendment.

We anticipate next session will bring with it attempts to increase the tax that timeshare owners pay in Hawaii.  We will monitor this issue as well as continue to monitor legislation regarding the regulation of Destination Clubs.

Missouri

SB 166 Update – Governor Matt Blunt recently signed ARDA-Missouri endorsed SB 166 into law. The previous Merchandising Practices Act clearly outlined what disclosures resort developers were required to provide prospective buyers, but the act was vague as to how it applied to promotional disclosures involving multiple mailings. The new act clarifies that a resort developer must provide a prospective timeshare buyer full promotional disclosure in writing or electronically at least once within a reasonable time period before a scheduled sales presentation.

ARDA’s state affairs team would like to thank five individuals who played a critical role in passing this bill- Ryan Rowden, Principal, The Rowden Group, Chuck Hatfield, Stinson, Morrison, Hecker, Bob Collier, Meadows, Owens, Collier, Reed, Cousins & Blau, David Mattix, former Director of Sales, Sunterra Resorts (Fall Creek Plantation) and Sam DePoy, VP of Federal and Regulatory Affairs, ARDA.

TaneyCountyProperty Tax Update – In February of this year the Taney County Assessors office took an aggressive new position that any lodging facility renting or advertising rooms for transient use for even one night of the year will be reclassified on a commercial property tax basis. This position was based on an erroneous and broadly interpreted Supreme Court decision. Consequently, many resort developers doing business in TaneyCountyreceived commercial reclassification notices which would have effectively raised timeshare property taxes by 13%.  In response to this action, representatives of ARDA’s State Affairs team and members of ARDA-Missouri working in concert with outside counsel, scheduled personal meetings with the Taney County Assessor’s Office, the MO Tax Commission and the Taney County Clerk’s Office to challenge their analysis of the law in this area and to prepare affected members for the Board of Equalization (BOE) appeals process. We also developed a variety of memos for members that provided relevant information ranging from the property tax appeals process and timeline to important legal analysis. Last, in an effort to streamline the appeals process and maximize the industries message, we successfully negotiated a “timeshare BOE appeals day” where all related appeals were heard on the same day.

Through our collective actions, the BOE reversed the Taney County Assessor’s position by passing a motion that overturned assessments for timeshares for 2007 in the following manner:

1. If a taxable parcel has nightly rentals of 50% or more of the time, it will be assessed 100% commercial.
2. If a taxable parcel has no nightly rentals, it will be assessed 100% residential.
3. If a taxable parcel has less than 5% nightly rentals, it will be assessed 5% commercial and 95% residential.
4. If a taxable parcel has more than 5% nightly rentals and less than 50% nightly rentals, it will be assessed commercial for its percentage of nightly rentals and residential for the remainder.

We would like to thank everyone for their participation, collaboration and leadership throughout this entire process. In particular we would like to thank Sunterra Resorts for bringing this issue to our attention and Chuck Hatfield and William F. Koenigsdorf, Stinson, Morrison, Hecker for their counsel and advocacy.

While we celebrate this short-term victory, ARDA-MO’s legislative priorities seem fairly certain as the MO Tax Commission will most likely pursue clarifying statutes in 2008. ARDA-MO will regroup in September to begin outlining a legislative and PAC giving strategy to prepare for this possibility.

Nevada

After some seven years of working on litigation, proposed legislation, rules and ordinances, ARDA-Nevada finally achieved its goal of preventing taxation of timeshare owners and exchangers in Washoe County. On July 24, the Washoe County Commission passed the transient lodging tax ordinance amendment clarifying how transient lodging taxes apply to timeshares. The effort received substantial financial support from ARDA-ROC and ARDA-ROCPAC.

The language in the Washoe ordinance states that “transient lodging” does not include “any unit within a time-share project occupied by an owner, or the nonpaying guests of an owner, of a time-share in the time share project, or in the timeshare plan of which the time-share project is a part, who has the right to use or occupy a unit, pursuant to (a) a time-share instrument or (b) a time-share exchange program.”  This language is substantially identical to the language ARDA had proposed in bills which did not pass in the state legislature in 2005 and 2007. ARDA-Nevada is now working with ClarkCounty to include similar language in its transient lodging tax ordinance.

Nevada developers also saw enactment of several key bills, including the long-sought after provisional timeshare licensing bill, SB 477, which is now in effect. Timeshare sales licensees will now be able to obtain a provisional sales license pending review for the final license by the Division of Real Estate. Previously, the industry had faced three to six-month delays in obtaining licenses for new timeshare sales people.

The Nevada legislature also passed a condo hotel bill (AB 431) which becomes effective January 1, 2008. AB 431 was patterned after the current common interest community law with several important distinctions. The management contract of the hotel brand cannot be terminated without cause after developer control turnover, among other key features.

The other ARDA issue before the legislature was the attempt to limit delegate voting (AB 396) in common interest communities. ARDA carved out an exception for timeshare projects governed by master associations which are under NRS 116. The bill passed both houses with ARDA’s amendment, but was vetoed by the Governor. A similar bill is expected in 2009, the next year the Nevada legislature meets

New England(Massachusetts)

The ARDA-New England legislative committee will meet on August 27th at the offices of Marcus, Errico, Emmer and Brooks located in Braintree, MA to begin work on a multi-state, multi-year legislative plan. The committee is also contemplating the filing of non judicial foreclosure legislation during the next legislative cycle. A second round of proposals submitted by lobbying firms interested in advocating this issue were recently received by ARDA-New England’s Search Committee. The Legislative Committee will make a final decision regarding this representation in the coming weeks.

Tennessee

DOR Will Pursue Comprehensive Timeshare Tax Reform in 2008 -  In April, representatives of ARDA’s State Affairs team and members of ARDA-Tennessee met with Governor Phil Bredesen, state regulators representing the Department of Revenue, Tennessee Real Estate Commission, Department of Commerce and Insurance and the Sevier County delegation to tout the growing economic impact of the timeshare industry on Tennessee’s economy. During these meetings we learned that the Department of Revenue will pursue aggressive new timeshare tax reform measures in 2008.

In June representatives of ARDA-Tennessee met in Nashville with representatives of Waller, Lansden, Dortch and Davis to begin outlining a legislative and PAC strategy to defeat any DOR bill that may be introduced in 2008. An ARDA-Tennessee conference call will be scheduled in August to seek consensus on the final 2008 legislative action plan.

HB 1016 Passes with ARDA Proposed Amendments – On April 4th Governor Phil Bredesen signed HB 1016 into law. This new law will subject the rental of cabins in Sevier and BlountCounty to the transient occupancy tax. It will also apply to the transient rental of time share units. Members of ARDA-Tennessee worked with bill sponsor Representative Joe McCord (R- Sevier County) to offer an amendment that would ensure this expanded tax would not apply to the occupation of a timeshare project pursuant to an exchange of one timeshare interval for another timeshare interval through an exchange program. Our amendment was intact when the Governor signed the bill into law.

Pennsylvania

Like Missouri, members with interests in Pennsylvania are supporting efforts to amend the Real Estate Licensing Act to clarify disclosure requirements. The new act would clarify that a resort developer must provide a prospective timeshare buyer full promotional disclosure in writing or electronically at least once within a reasonable time period before a scheduled sales presentation.

Protracted discussions with the Office of the Attorney General regarding the intent and language of our proposed legislation have recently concluded with a favorable outcome. The AG believes our legislation is consumer friendly, therefore the AG’s legislative director has agreed to abet our lobbying efforts throughout the legislative process. Our bill sponsor Senator Charles McIlhenny (R) introduced and referred SB 886 to the Senate Consumer Protection and Professional Licensure Committee on May 21st where it was heard and passed as an amended bill. On August 2, Representative Mike Sturla (D), Chairman of the House Consumer Protection and Professional Licensure Committee, held a follow up hearing where representatives of ARDA’s state affairs team testified in support of the bill. We are waiting to learn whether or not this bill was favorably passed out of committee.

Rhode Island

For the third year in a row, Newport, Rhode Island legislators introduced and saw passage in June of an ill-considered timeshare real property tax bill, H 5941. Also for the third year in a row, Governor Donald Carcieri vetoed the measure. Local developers, associations and timeshare owners contacted legislators and the Governor opposing the measure, which was an undisguised attempt to increase real property taxes on timeshare resorts.

ARDA representatives have agreed to meet with all the parties to attempt to work out mutually acceptable tax legislation for introduction in 2008.  ARDA-ROC funding was instrumental in the successful effort to defeat the bill.

Rockies(Colorado)

The ARDA-Rockies Legislative Committee has agreed to pursue non judicial foreclosure legislation in Colorado during the 2008 legislative session. Five proposals submitted by lobbying firms interested in advocating this issue were recently received by ARDA-New England’s Search Committee. The Legislative Committee will make a final decision regarding legislative representation in the next several weeks.

South Carolina

Similar to California, ARDA-Carolinas focused on defensive legislative work. The first challenge of the legislative year came form Representative Chip Limehouse who introduced a bill in early January that proposed to increase the timeshare rescission rate from 5 days to 10 days. Fortunately the bill did not make it to its first committee hearing.  So for now the issue is not a pressing one. A second and equally alarming bill was put forth by Representative Bowers who proposed legislation that would apply a $5 a night tax on all non-owner occupied timeshare units. As expected, this bill was met with strong opposition by the timeshare industry and the bill did not get heard in committee. As is the case with both pieces of legislation, they may very well resurface in 2008. ARDA-Carolinas will make sure to do everything in its control to keep these pieces of legislation from becoming law.

Wisconsin

Wisconsin is no longer the only state to prohibit right-to-use timesharing due to enactment of S.B. 11. Sponsored by Senator Julie Lassa (D-Stevens Point), the bill was signed by Governor Doyle on July 17, 2007. Senator Lassa said, “Streamlining the process for tourists to utilize timeshares in Wisconsin is an important step in growing our state’s tourism industry. Wisconsin joins all 49 states in attracting individuals and families who want the flexibility to spend their timeshare occupancy in more than one location.”

Family Travel With Resorts Rescued!

Whether you want to enjoy the beach, a snowy winter ski
break, a pampering spa retreat, a Caribbean cruise, or an annual Thanksgiving reunion for
three generations at a favorite resort, you can choose the vacation option that works best
for you. As always continue to have “A Lifetime Of Vacations”