Ige discusses hotel room taxes, highway woes
KULA — While saying he’s open to “all options” to raise more money needed for Oahu’s troubled 20-mile rail mass transit project, Gov. David Ige expressed support for raising the state’s transient accommodations tax by 1 percentage point while maintaining the counties’ share of hotel room taxes at $93 million.
Speaking with The Maui News on Friday in the Kula Hospital garden after a senior housing blessing ceremony in Pukalani, Ige said that he opposed a 2.75 percentage point increase in the TAT, or hotel room tax, that had been proposed by House and Senate money committees in late April, shortly before the end of this year’s lawmaking session.
The governor said a 2.75 percent increase — from 9.25 percent to 12 percent, bringing in another $1.3 billion over 10 years — would be “too big a burden to be borne by the visitor industry.”
Instead, he said, a 1 percentage point increase, “or something like that, I think would be able to be a reasonable increase, especially if it’s for a specific period of time and would go toward helping to fund the transit project.”
Lawmakers also had considered a 10-year extension (until 2037) of the half-percent excise tax surcharge that has been funding most of the rail project. But near the end of the legislative session, House and Senate conferees settled on the idea of raising the hotel room tax as a way of shifting the cost of paying for the rail project from Hawaii residents to visitors.
That recommendation ultimately was rejected by lawmakers, and the rail issue was left unresolved at the end of the session.
Ige’s comments came the same day lawmakers announced that a special session to address rail funding would be held Aug. 28 to Sept. 1.
A letter to lawmakers from Senate President Ronald Kouchi and House Speaker Scott Saiki said that a poll of legislators’ availability in July or August for a special session found that the latter part of August was “most conducive to members’ schedules.” And, so, subject to agreement on proposed language of a bill for the special session, lawmakers were asked to refrain from making out-of-state travel plans from Aug. 28 to Sept. 1.
“Negotiations between the Senate and House have occurred for some time and are ongoing,” they said. “We are optimistic that the lead committee chairs have held, and will continue to hold productive discussions.”
Kouchi and Saiki have assured the Federal Transit Administration that they intend to hold a special session to resolve the funding crisis for rail, which has had its cost estimate skyrocket from $5.2 billion a few years ago to the current estimate of $10 billion.
Ige said something needs to be done for rail to move forward.
“Ultimately, it is clear that additional funds are needed and so certainly a contribution from the transient accommodations tax for a period of time certainly is something that I would be open to consider,” he said. “One thing that was attractive about that proposal is that it would bring in funds to the project. Any extension of the general excise tax doesn’t bring more revenues to the project until at the end of 2027. So, certainly, the proposal to look at the TAT and add additional dollars to the project as early as next year would certainly add value to reducing the financing cost and the long-term cost of the project.”
When asked what he believes would be an appropriate allocation of hotel room tax funds for the state’s four main counties, which saw their share fall from $103 million to $93 million this year, Ige said he believes the lower amount is “fair.”
(Maui County’s portion dropped from $23.5 million to $21.2 million.)
County officials have been adamant that the counties deserve a greater share of the hotel room tax revenue.
Maui County Council Chairman Mike White has argued that from 2007 to 2015 counties have incurred more than $170 million in additional costs for parks and fire and police services. However, in that time period, the counties have received only another $2.2 million in room tax revenue, while the state has taken in an increased portion of $196.6 million.
Ige said the state also has high costs.
“I just remind people that the state assumes a lot of costs and functions that are normally borne by property taxes all across the country,” he said. “For example, not a single penny of property taxes goes to public schools. We’re the only public school district in the country that gets zero funds from property taxes.”
The state also fully pays for community hospitals and jails, he said.
“The state bears the brunt of the costs of services that in many other jurisdictions are funded by property taxes,” he said.
When asked about the counties’ argument that they need more hotel room tax funding to pay for visitor-related impacts, Ige said: “The county also charges significantly higher property taxes for visitor facilities; certainly they generate a lot of property taxes that can be and should be used to support the industry as well.
“I think it is about finding balance and looking at what is most appropriate,” he said. “The state needs to increase funding for public schools. . . . We have been working to increase funding to schools because we think that’s important to move our system forward. When you look at all of the needs, the state needs far exceed our available funds.
“It’s difficult to see how we would be able to deliver all of the services that the state is expected to deliver without keeping or retaining our portion of the transient accommodations tax,” he said.
Regarding West Maui traffic congestion, the state is moving ahead with the next phase of the Lahaina bypass that extends it 2.7 miles south to the former Olowalu Landfill, according to the state Department of Transportation.
Meanwhile, Ige said the state is trying to balance the need to keep up with traffic capacity problems on nearly every major island with the necessity to maintain existing roadways.
“Just maintaining what we have consumes so much of the available funds,” he said. “Trying to deal with traffic on the west side of Maui, for example, is a challenge. We don’t have enough funds. And, let’s be very clear. We have traffic challenges on the west side of Oahu that is similar. We have traffic challenges on the north shore of Kauai, which is similar. We have traffic challenges on every island because we don’t have sufficient funds to maintain the current infrastructure and, at the same time, add new roadways and highways to expand capacity.”
The Department of Transportation is restripping highways and exploring contraflow traffic routing as ways to ease congestion without costing a lot of money, Ige said.
Unfortunately, contraflow (the opening and closing of lanes in opposite directions to accommodate higher volumes of traffic at peak times) wouldn’t work on the mostly two-lane Honoapiilani Highway that hugs the coastline in many areas, he said. The department is looking at ways to protect the highway that’s vulnerable to erosion and sea-level rise, but those are adding to the costs and challenges of maintenance.
Ige said the department has heard community members’ concerns about hardening the West Maui shoreline with seawalls and is “trying to work through some of their suggestions on how we might realign Honoapiilani Highway to preserve the road and not just harden the shoreline.”
The state has received a federal grant to study the establishment of a ferry system in the islands, and, “obviously, Maui County would have the best opportunity to benefit from that,” he said.
The state has hired a consultant to look at opportunities for a ferry system, and it has provided transportation funds to encourage bikeways and pedestrian paths, he said.
* Brian Perry can be reached at email@example.com.