×

State House passes measure to increase TAT for counties

Bill returns to state Senate, where outlook is more uncertain

Scott Saiki

A bill that would increase Neighbor Island counties’ share of transient accommodations tax revenue by $36 million a year through 2030 passed the state House of Representatives on third reading Tuesday, according to House Speaker Scott Saiki.

Under the House version of Senate Bill 648, Maui County’s annual share would go up by $14.8 million from $23.5 million to $38.3 million. Hawaii County’s allotment would rise $12 million from $19.2 million to $31.2 million, and Kauai County’s share would grow $9.5 million from $14.9 to $24.4 million.

With 47 House members present for Tuesday’s vote, it passed 44-3, Saiki said, with dissenting votes coming from Democratic Oahu Reps. Ken Ito and Calvin Say and Republican Rep. Bob McDermott, also of Oahu.

Absent at the time of voting were Central Maui Rep. Joe Souki, Oahu Reps. Isaac Choy and Linda Ichiyama, and Kauai Rep. James Tokioka.

Saiki said he was unsure about the bill’s chances of passage in the Senate, but “Neighbor Island senators probably have an interest in some form of financial assistance to their respective counties.”

West and South Maui Sen. Roz Baker said she supports the House version because it provides additional resources to the counties, especially Maui, for “needed infrastructure, housing, roadways and other important projects.”

But she said it was “too early to tell” Tuesday what the Senate reaction might be.

“Presumably, the bill will go to conference (committee) to work out any differences between the House and Senate versions,” Baker said.

The Senate Ways and Means Committee “would need to take this new version into account in their financial plan, as it would represent a shortfall for the state general fund even with a sunset date,” she said.

Maui County Council Chairman Mike White, who has been fighting for more hotel room revenue for the Neighbor Islands, released a statement saying that he was pleased that “the House has voted to provide an equitable adjustment to the counties’ share of the TAT, which is severely needed.”

“The hope is that the Senate will support this measure in conference committee,” he said. “The Neighbor Island counties will continue to have conversations with senators on the importance of this bill.”

The House-revised bill comes in the wake of last summer’s special session passage of a compromise measure to bail out the City and County of Honolulu’s cost overruns on its rail mass transit project. The bill raised what’s also called the hotel room tax — assessed on hotel guests in all counties — by 1 percentage point and increased Maui County’s share of revenue by $2.3 million per year.

The room tax hike sunsets Dec. 31, 2030, which would be the same expiration date for Senate Bill 648.

Saiki told The Maui News that, after last year’s special session, the House leadership recognized that there were some “unresolved issues” involving the counties, and the distribution of hotel room tax funding was a “major one.”

Tuesday’s passage of the revised Senate Bill 648 reflects the “acknowledgement of the House that Neighbor Island counties have experienced increased tourism numbers and as a result an increase in tourism-related expenditures,” he said.

From the perspective of the House, it’s appropriate to distribute the increase in TAT funding to the counties to “offset tourism-related expenses,” he said.

The bill tries to provide some structure in the way additional funds would be distributed, by authorizing expenditures for projects funded under a county general plan, development plan or tourism strategic plan, Saiki said.

He acknowledged that those are broad categories.

“It provides the counties with a lot of flexibility in how to spend funds,” he said. “It’s a reflection of the House making an attempt to provide some fairness to Neighbor Island counties.”

If it enables Neighbor Island counties not to raise property taxes, then “that’s a benefit for all Neighbor Island residents,” Saiki said.

The measure passed by the House is a “clean bill” for the Senate to consider, meaning that if the Senate approves the House changes, the bill would not need to be reviewed in conference committee and could go directly to Gov. David Ige after Senate passage, he said.

Saiki said he has not spoken to Ige about the bill, but he thought the governor could be persuaded to approve it.

The governor’s director of communications, Cindy McMillan, said it was premature for the governor to comment on the House bill before the Senate takes action.

“If it is passed by the Legislature, the subject-matter department, the office of the Attorney General and Budget and Finance will review the bill and make a recommendation to the governor,” she said.

West Maui Rep. Angus McKelvey said he was “ecstatic” about passage of the measure, which he said is something the counties have sought from the Legislature since he began serving in 2006.

Getting state lawmakers, the majority of them from Oahu, to agree to give the counties more TAT funding has been difficult, he said.

“It’s been a slog for one reason or another,” he said.

McKelvey said the money allows the counties to invest in tourism-related services, like expanding ocean lifeguard services, enhancing parks, improving the Waiehu Municipal Golf Course and doing more to develop bicycle paths and greenways.

Neighbor Island lawmakers raised objections last year when the transient accommodations tax was raised by a percentage point (9.25 to 10.25 percent) for 13 years to pay for Honolulu’s rail project, he said.

Now, with the passage of the Senate bill Tuesday, there’s “something that comes back to us,” he said. “It helps offset revenue that should have stayed in the Neighbor Islands.”

As for how the measure will fare in the Senate, McKelvey was less certain.

“I hope that those in the Senate will see what we’re trying to do and see it as a great idea,” he said. “This is what the counties have wanted forever.”

The House revised version of the Senate bill is a change of course from House Bill 1665, which began as a proposal from the Hawaii Council of Mayors to restore the counties’ allocation of hotel room tax revenue to 45 percent of the total. As revised in House Finance Chairwoman Sylvia Luke’s committee this session, the bill would require the counties to request reimbursements for various expenses and justify each request to receive any share of transient accommodations tax revenue.

Neighbor Island leaders came out firmly against it, with Hawaii County Mayor Harry Kim saying it would require a process for the counties that would be a “bureaucratic nightmare.”

Saiki said the bill remains alive in the Senate, although it has been referred to three committees, including the key Senate Ways and Means Committee, and has not been scheduled for any hearings.

“The majority of the House feels that an outright increase in TAT allocation (for the Neighbor Island counties) is a good way to proceed,” he said.

Under the bill, the City and County of Honolulu’s share would be unchanged at $45.4 million per year.

Currently, the counties receive percentage shares of $103 million in room tax revenue, with Maui County receiving 22.8 percent.

* Brian Perry can be reached at bperry@mauinews.com.

NEWSLETTER

Today's breaking news and more in your inbox

I'm interested in (please check all that apply)
Are you a paying subscriber to the newspaper?
     
Support Local Journalism on Maui

Only $99/year

Subscribe Today