For Maui legislators, rail fix a mixed bag
Members in the Maui County legislative delegation were of different minds on the proposed measure to help Honolulu fund cost over-runs on its rail transit project, which is being considered in a special session that opened Monday.
Last week, House and Senate leaders announced a compromise measure, which was introduced in the Senate in the special session Monday, that called for advancing the half-percentage point general excise surcharge on Oahu for another three years to Dec. 31, 2030, and increasing the hotel room tax statewide 1 percentage point to 10.25 percent to make up the shortfall in the $9.5 billion rail project.
In a sweetener for Neighbor Island lawmakers, the measure increases the counties share of the hotel room tax, or transient accommodations tax, by $10 million to $103 million — with Maui County’s share increasing from $21.2 million to $23.5 million. The proposed measure also calls for stricter controls on the disbursing of the funds and for audits.
The special session became necessary when the House and Senate could not agree on a funding plan for the rail project at the end of the legislative session in May, which put $1.5 billion in federal funds in jeopardy.
Five of Maui County’s nine House and Senate members responded Monday afternoon to requests for their positions on the rail transit measure.
Former Speaker Joe Souki and West Maui/North Kihei Rep. Angus McKelvey said they would vote in favor of the measure because a no vote could jeopardize federal funds. Both don’t really like the hotel room tax increase — which also would affect Maui County visitors — and prefer Honolulu county’s proposal of only extending the general excise tax surcharge, which businesses pay and often pass on to customers, for 10 years.
“It’s kind of hold your nose and vote for it,” McKelvey said. “This is a compromise. I am not going to do cartwheels down the street.”
McKelvey takes solace in the fact that “we get something out of it” — the hike in the counties’ share of the hotel room tax — and that the rail project will benefit the state economy.
In his address to the Legislature as speaker at the start of the last session, Souki expressed his support for the extension of the general excise tax to pay for the rail system. On Monday, he said that he intends to support the measure “with reservations” because of the hotel room tax.
“The question is do you go against the 1 percent (increase in the hotel room tax) and the bill dies?” Souki asked. “It’s a compromise version, and nobody is really happy with it.
“I would prefer the excise tax (but) . . . if we can’t get it, the bill dies.”
Sometimes, lawmakers have to accept compromises to get key legislation passed, he said, noting that there was a compromise on the amount of the hotel room tax, which started off at a more than 2-percent hike.
The tax “will not affect the average person on Maui,” and he believes the cost will be minimal to tourists and not hurt the tourism industry, said Souki, who lost the speakership at the end of the session.
He does worry about the “volatility” of the hotel room tax revenue stream, compared to the general excise tax. If there is a disaster or a downturn in in the economy, the revenue stream will decline because “you don’t have to travel, but you have to eat,” Souki said.
Rep. Lynn DeCoite, who represents Molokai, Lanai and East Maui, was noncommittal Monday, saying “I am going to reserve my final judgment for after all of the hearings and all of the testimony has been submitted.”
“Even then, once the bill goes to the House floor, I am wary of any floor amendments,” she said.
DeCoite said she wanted to make sure the bill went through a transparent process and that it provides enough funds to complete the project. Honolulu Mayor Kirk Caldwell has said that the city needs $3 billion more, but the measure only provides $2.4 billion for the 20-mile rail project.
“For me to decide before all the facts have been presented and the public has had a chance to weigh in would be premature and disrespectful of the public legislative process,” she said in an email.
Kahului Rep. Justin Woodson said he has “strong reservations” and is “leaning” voting no. He would like to see more concessions for Maui County, such as more hotel room tax money for the counties.
“One hundred and three million (dollars) is good, but if we can increase it a little bit more, that would be helpful to get more Neighbor Island lawmakers on board,” he said.
While the hotel room tax revenues for the counties is significant, the 1 percent increase in the tax is a negative because it could hurt the tourism industry. But the impact of the hike is tempered by the amount more visitors would have to pay for a room, which is $4 to $10, he said.
Having no bill coming out of the Legislature would hurt all the islands, especially when it comes to garnering federal transportation funds, Woodson said. Hawaii competes with other states for federal money and the failure of the Honolulu rail project would put Hawaii at a disadvantage in the future, he said.
“It puts us in a precarious position,” Woodson said. “We have to figure out how to fund the project.”
Sen. Roz Baker, whose district includes the resort areas of Wailea, Kaanapali and Kapalua, said she is listening to her constituents and will be voting no. She made clear that she supports Oahu’s rail project but not the raising of the hotel room tax on the Neighbor Islands.
“I support rail,” she said. “I don’t support this funding mechanism.”
She explained that Hawaii vacations are “price sensitive.” Other tourist destinations may have higher hotel room taxes but visitors can drive to them. Visitors to Hawaii have to pay the airfare.
In addition, the voters of the City and County of Honolulu voted to build the rail transit project and to raise the general excise tax surcharge to pay for it, though she did note a lack of transparency on the city’s part when it came to the Legislature for the funding authorization.
She gets annoyed by her Oahu colleagues who say that the Neighbor Islands should help fund the rail project through the hotel room tax because Oahu revenues end up paying for many Neighbor Island projects and programs. It is true, she said, noting for example that state budget officials say that Maui County generates $11 million in hotel room taxes but takes back $21.2 million. Still, “we are a state,” she said.
“We don’t expect every place to pay for their own,” Baker said.
In testimony before the Senate Transportation and Energy and House Transportation committees Monday on Oahu, Maui County Mayor Alan Arakawa said that he is united with other county mayors who believe that extending the half-percent general excise tax surcharge for another 10 years is the best way to fund the rail project.
“We believe that it would be blatantly unfair to increase the TAT by 1 percent to pay for the rail as this additional charge would be paid for by visitors to all of our islands, despite the rail to be used exclusively on Oahu.”
The mayor complained that while the state seeks more money from Neighbor Island counties, “it continues to reduce services to the counties.” He noted the “increasing traffic and dangerous conditions” in West Maui with the state choosing not to fund the Lahaina bypass extension to Kaanapali, the state removing liability projections from county lifeguards and the school bus driver shortage that has led to suspension of services at three Maui schools.
“Why are we seeing less services and more taxes? The situation is intolerable and cannot continue,” he told lawmakers.
If all goes according to plan, the measure will be passed out of the Senate to the House on Wednesday with third and final reading of the bill in the House on Friday. The bill would then head to the governor’s desk.
* Lee Imada can be reached at email@example.com.