House and Senate conferees reached an agreement Friday afternoon that would raise the state’s hotel room tax by 2.75 percent to fund Honolulu’s mass transit rail project while leaving the counties’ share of visitor revenue untouched, according to an announcement from the Senate.

Senate Bill 1183 still needs final approval from both houses of the Legislature and the signature of Gov. David Ige.

The amended bill calls for the City and County of Honolulu to contribute $13 million of its $93 million share of the room tax, technically known as the transient accommodations tax, to fund the rail project, a House announcement said.

Currently under construction, the rail project would take an estimated 40,000 car trips each weekday off of Oahu’s congested streets and highways, running passengers 20 miles between east Kapolei and Ala Moana Shopping Center, according to the Honolulu Authority for Rapid Transportation.

“The City and HART have been telling us over and over again that the cost of rail should be put on tourists and the visitor industry,” said state Rep. Sylvia Luke, chairwoman of the House Finance Committee. “We have taken them to heart, and we have done that today without imposing a further tax burden on the citizens of the state.”

An earlier version of the bill proposed a two-year extension for Honolulu’s increased general excise tax for rail, from 2027 to 2029.

Senate Majority Leader Sen. J. Kalani English, who represents East Maui, Upcountry, Molokai and Lanai, called the agreement a “grand compromise,” overall.

“We’ve given the city more money upfront and (that) provides a pathway to do bonding,” he said. “Essentially, we’ve given the city a lot of tools to work with to finish the rail project without impacting the low-income and elderly citizens of our community through general excise tax extensions or property tax increases.”

The hike in the hotel tax from 9.25 percent to 12 percent for 12 years from Jan. 1, 2018, to Dec. 31, 2027, was estimated to raise $1.3 billion by 2027. Of that, $50 million annually would be set aside for schools in a new education special fund.

Central Maui Rep. Justin Woodson, who represents Kahului, Puunene, Old Sand Hills and Maui Lani, said the education fund is “a huge accomplishment and a great step toward creating the best education system possible for our keiki.”

Woodson chairs the House Education Committee.

Another bill, Senate Bill 1290, originally called for increasing the hotel room tax allocation to the counties to 45 percent.

Currently, Maui County receives $23.5 million in transient accommodations tax revenue, under a $103 million cap for the counties. In the original bill, Maui County’s share would have risen to $34.2 million.

Maui County Council Chairman Mike White has lobbied for more county funding from the hotel room tax, arguing that the money pays for the county’s tourism costs, such as police and fire services.

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