New rental car tax proposed to help fund Lahaina, Paia bypasses

$4.50 per car, per day fee would help build state projects stalled in county

Traffic, including a heavy mix of rental vehicles, backs up outside Paia on Wednesday morning. Maui lawmakers are seeking an increase in the state rental car tax to be used for Maui County road projects, including the Paia and Lahaina bypass. The Maui News / MATTHEW THAYER photos

LAHAINA — Some of the projects that matter most to West Maui residents — the north connector of the Lahaina bypass and the realignment of Honoapiilani Highway — are expected to cost hundreds of millions of dollars.

And, as West Maui residents have heard time and again, the money just isn’t there.

That’s why Maui lawmakers hope a supplemental rental car tax in Maui County will generate funding for local projects.

Senate Bill 3009 and House Bill 2601 propose adding a new, separate rental car tax of $4.50 per vehicle, per day to the existing $3 per vehicle, per day fee, with the additional money earmarked for the Lahaina and Paia bypass projects. Taken together, the two charges would be $7.50 per rental vehicle, per day, in Maui County.

The House bill has a hearing at 10 a.m. Friday in the Transportation Committee.

Rental Jeeps are lined up outside Kahului Airport last month. The county reported in July that there were 20,000 registered rental cars on Maui. Lawmakers are hoping to increase the state tax on renting vehicles to pay for major highway improvements in Maui County.

“The visitors have a huge impact in our community with the rental cars,” said West Maui Rep. Angus McKelvey, who introduced the bill with Upcountry Rep. Kyle Yamashita and House Finance Chairwoman Sylvia Luke. “I don’t think it’s much to ask them to help us. And they’re going to benefit too. The bypass is going to go to the resort areas.”

The bills and West Maui projects were the subjects of a Maui Metropolitan Planning Organization meeting in Lahaina Tuesday night. The organization is seeking public input on the projects that should receive a share of $124 million in funding from 2019 to 2022. West Maui projects include realigning Honoapiilani Highway, improving rockfall protection along the pali, replacing Honolua and Kahana Nui bridges, improving and paving Lower Honoapiilani Road and upgrading the signal at the intersection of Papalaua and Wainee streets.

However, some of the priorities for West Maui residents either aren’t on the list or not ready to be funded.

“All the things on the list are of big importance,” Napili resident Amy Stephens said. “The thing that gets all of us down here and the most important thing for quality of life on the west side is getting funding for the extended bypass to Kaanapali.”

Stephens said she knows it’s not on the list to be funded in the near future, but said that “2022 is a long time to wait for a change.” Residents before and after the meeting also mentioned the bypass as a priority, along with the realignment of the highway, which is on the list and is expected to cost $150 million.

Every year the state gets $180 million from the federal government for highway projects, explained Lauren Armstrong, MPO executive director. Maui County gets about $25 million. Matched with local funds, that gives the county $31 million to use each year.

Now, the Maui MPO is holding hearings around the island to get residents’ input on the projects. More hearings will be held in April. Once a list is adopted in June, it will be placed into the Statewide Transportation Improvement Program. In September, the state will submit its plan to the federal government to be approved before the 2019 federal fiscal year starts Oct. 1.

“Once that happens, we have a program, and we can start spending money,” said Patrick Tom, Statewide Transportation Improvement Program manager for the Department of Transportation.

Last year, the Lahaina and Paia bypasses were among the many Neighbor Island projects that were put to the side because there wasn’t enough revenue available in the state highways fund, McKelvey said.

Armstrong said many of the revenue sources the state relies on for highways, such as fuel taxes and vehicle weight and registration fees, “have remained flat even as our demands have grown.”

So, Maui lawmakers came up with the bills to raise rental car taxes for companies at the Kahului Airport, though McKelvey said the bill might be amended to include rental car companies countywide. The idea was pitched to increase the tax statewide, “but the numbers just don’t add up for the other Neighbor Islands” that have fewer rental cars than Maui, McKelvey said.

Maui County saw 2.7 million visitors in 2017, according to the Hawai’i Tourism Authority. In July, the county Department of Motor Vehicles reported that Maui had 20,000 registered rental cars, Armstrong said. Lisa Paulson, executive director of the Maui Hotel & Lodging Association, said in September that there were 740,434 car rentals in 2016 — not the number of rental cars, but the number of times people rented cars.

McKelvey saw the bill as an alternative to Gov. David Ige’s proposal (House Bill 1146) to increase gas taxes and vehicle registration and weight fees.

“That will never fly in the Legislature, to just continue to dogpile on our local residents when you have all of these rental cars,” McKelvey said.

He added that the rental car fee bill would free up funding for projects across the county and state.

Rick Tholen, owner of Maui Car Rentals and No Ka Oi Motors, said a tax increase probably wouldn’t hurt his business, but he was opposed to it because it seemed like just “one more way to kill the goose.” He said the current tax that the state collects from rental cars generates plenty of money — the fruits of which residents are still waiting to see.

“Our rental car prices are on the lower side, so our customers are kind of price sensitive,” Tholen said. “So we do hear about it. They feel like they’re taxed to death.”

Council Members Mike White and Elle Cochran, whose districts include Paia and Lahaina, respectively, were split on the tax increase. White, also the general manager of the Ka’anapali Beach Hotel, opposed it. He said the state increased the transient accommodations tax and has pushed the county to also increase the general excise tax.

“So this seems to be another way of making Maui only pay for Maui projects,” he said. “I think that this really puts us on a slippery slope. If we want a project, does that mean we have to come up with the money ourselves?”

Cochran, however, was all for it.

“We don’t have many options for revenue generation, so I can go with this one,” she said.

Both thought the county could pay for these projects if the state hadn’t capped the counties’ share of the TAT. However, McKelvey countered that the bypasses were state projects.

To view the bills or submit testimony, visit capitol.hawaii.gov. For more information on the list of projects up for funding, visit mauimpo.org.

* Colleen Uechi can be reached at cuechi@mauinews.com.

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