ELLSWORTH — The city wants to get out of the timeshare business. But just how to do so is proving complicated.
Councilors considered two proposals on Monday evening aimed at dealing with the issue.
After lengthy testimony from timeshare owners and staff at Acadia Village Resorts, councilors unanimously agreed to table the proposed adoption of a new ordinance that would have shifted the burden of collecting taxes on the units to the company that manages the property.
The Acadia Village Resort is structured so that each week in each unit is its own individual property with a deed and tax bill, meaning there are more than 2,000 deeds at the 39-unit resort.
Once a way for vacationers to book a guaranteed spot in a desirable destination, the timeshare has been a tough sell in recent years. An increasing number of owners have walked away from their units, leaving municipalities with years of unpaid taxes and, in some cases, forcing city officials to act as real estate agents. This is what has happened in Ellsworth.
Officials foreclosed on another round of units last February. Those units joined a list of hundreds of timeshares owned by the city.
While councilors tabled a vote on the proposed ordinance on Monday, they did unanimously approve a plan that would allow the city to lease the units it has acquired back to Acadia Village and split the proceeds from sales and rentals.
“We own upwards of 300 timeshare units,” said City Manager David Cole. “This is not our business to be in. We’ve found ourselves marketing them on the city website and the scroll. We’re trying to figure out ways to move these units.”
He added: “The primary objective is getting them back on the tax rolls.”
Under the plan approved on Monday, the city would be able to lease the units it owns back to Acadia Village Resorts “so that they can try to sublet those units that the city owns and market them for sale,” said attorney John Hamer, representing Ellsworth.
“You’d still be engaging in the foreclosure process; the management of the units, however, would still be transferred over to Acadia Village.”
If one of the units were to be sublet, said Hamer, Acadia Village would keep 25 percent of the proceeds while the rest would be remitted to the city. That split would be “50/50 in the case of a sale,” said Hamer.
“This would be a long-term type of lease to see whether Acadia Village is able to do better marketing, perhaps, than the city. It’s the marketing effort that’s most important to the city.”
Resort manager Jim Killam told the council he approves of the plan, although he thought it unlikely that there would be much rental income.
“As far as the leasing and renting, I don’t think there’s going to be a lot of that going on. The city doesn’t own a lot of weeks in the summer. You’re talking basically the off season—November, December, January weeks. There may be a couple weeks where the city would see rental income.”
The new lease agreement doesn’t entirely get city staff off the hook: staff will still have to track down delinquent taxpayers and foreclose on the units.
But councilors voted to hold off on adopting an ordinance that would have shifted the responsibility for the tax collection (and making up the difference if owners didn’t pay) from the city onto the managing entity after hearing from timeshare owners and the resort’s manager.
The proposed ordinance would have allowed the city to send a lumped tax bill to the managing entity (which is now Acadia Village Resorts), rather than bills to individual timeshare unit owners. Acadia Village Resorts would be responsible for collecting the money from owners and putting it into an escrow account held jointly with the city.
“If they’re able to collect enough taxes, enough money to cover all the taxes, then everyone’s happy, the taxes are paid,” said Hamer. “Unfortunately, if there’s a case where they’re not able to collect the total amount of taxes due for all the timeshare units, the managing entity would be required to make up the difference.”
But timeshare owners and staff argued that the plan was not only unfair but would ultimately result in more foreclosures as the resort would likely need to raise fees to cover the taxes.
“You’re asking an owner at Acadia Village Resorts who pays his bill, who pays his maintenance fee to pay for his neighbor who does not,” said Rusty Weymouth, president of the homeowners association. “It’s just the wrong way to go.”
He compared the plan to asking the owner of a trailer park to pay taxes for an individual trailer owner who is delinquent.
“It’s morally, it’s ethically wrong to ask me to pay somebody else’s taxes and that’s just what you’re doing here,” said Weymouth.
The logistics also would be complicated, he said.
“You’re asking us — our minimum wage people … to do the job of your professional taxpayers with all the computers and the proper programs and whatnot.”
Opponents of the proposed ordinance also told councilors they believe the units are assessed at a far higher value than what they’re worth.
“The city has 275 weeks they’re trying to sell for $100 but some of them have values of over $5,000 and these valuations have not gone done for over nine years,” said Killam.
“I don’t understand how you can maintain the argument that valuations are not going down when you have weeks you can’t sell for $100.”
City Assessor Larry Gardner agreed that some of the values of individual weeks, which by law must be assessed separately, may be high.
“I will be looking at these values,” said Gardner. “There is going to be a lowering of the assessment. But I have to actually go there and look at that very carefully to see what that is.”
After hearing from residents, councilors said they needed more time to consider the plan.
“When I first heard the proposal I thought this is a great idea,” said Councilor John Moore. “But I think it’s going to take a second look.”
Councilors voted to table the proposed ordinance until a meeting in January.