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Hotel workers to council: Proposed property tax rate hike for resorts ‘punitive’

Panel hears from more than 40 people on property tax rates

Tumpap

WAILUKU — Visitor industry workers and officials came out by the dozens Wednesday night protesting proposed county property tax rates they say are “punitive” and could lead to job cuts for residents and deter tourists during a time when competitive destinations are luring travelers away.

A real property tax proposal by Maui County Council Economic Development and Budget Committee Chairwoman Keani Rawlins-Fernandez this week aims to hike rates for the hotel/resort classifications from the current $9.37 to $14.91, and short-term rentals from the current $9.28 to $15.41. All rates are per $1,000 of net taxable assessed value.

There were little or no changes to residential and homeowner rates.

Pamela Tumpap, Maui Chamber of Commerce president, said some feel the way to manage tourism is to “price ourselves out of the market,” since the tax hike may result in higher room rates that would discourage visitors.

“It’s a slippery slope because even those who will still spend the extra money to vacation here will then spend less money at our small, local businesses such as activities, retail, restaurants and all these companies are already facing a proposed increase to their RPT rates,” she said, adding that increases should be shared by all classifications.

Jana Lynn Arai, a food and beverage sales manager at The Ritz-Carlton, Kapalua testified against raising real property tax rates for hotels and resorts during a Maui County Council committee’s public hearing on real property tax rates Wednesday.­ The Maui News / KEHAULANI CERIZO photos

Tumpap was among more than 40 testifiers who spoke in excess of two hours Wednesday during the council’s real property tax public hearing in Council Chambers.

Many testifiers were representing the hotel and resort industry and about a dozen testifiers were Maui residents and owners of short-term rentals. A handful of residents also testified in support of the large property tax increases for classifications related to the visitor industry to support county needs.

The hearing comes as the council’s Economic Development and Budget Committee is vetting Mayor Michael Victorino’s proposed budget and proposed rates for fiscal 2020, which begins July 1.

The full council has until June 10 to take action on Victorino’s proposed budget, otherwise the mayor’s version becomes law.

The following are the current property tax rates, the rates proposed by Victorino and the rates proposed by the council. All rates are per $1,000 of net taxable assessed value.

Thomas Croly testified Wednesday against proposed property tax hikes for the visitor industry for fiscal 2020, saying “increasing the more than 75 percent real property tax burden bourn directly and indirectly by the visitor industry is going to lead to job layoffs and less tax revenues in the future because of the negative affect to the economy.”

• Residential — $5.52, $5.52, $5.52

• Apartment — $6.31, $6.31, $6.31

• Commercial — $7.25, $7.39, $7.39

• Industrial — $7.45, $7.48, $7.48

• Agricultural — $6, $6, $5.94

• Conservation — $6.35, $6.35, $6.35

• Hotel and Resort — $9.37, $9.60, $14.91

• Timeshare — $15.41, $13.93, $15.41

• Short Term Rental — $9.28, $9.55, $15.41

• Homeowner — $2.85, $2.85, $2.66

• Commercialized Residential — $4.55, $4.55, $4.55

Jason Economou, Realtors Association of Maui government affairs director who lobbied on behalf of its 1,300 members, said: “The measures you’re recommending . . . they’re punitive in nature. Granted, I understand the county’s need for revenue. However, you can’t say that these tax rates are purely designed to generate revenue when there are proposed decreases to already absurdly low property tax rates in other classifications.”

Administrators from Andaz Maui at Wailea Resort, Hyatt Regency Maui Resort & Spa, Sheraton Maui Resort & Spa, The Ritz-Carlton, Kapalua and Grand Wailea spoke against possible rate increases, saying it will cause potential cutbacks to staffing, renovations and community outreach and charity work, among other areas.

Also, hotel and resort staff voiced concern that their jobs will be jeopardized.

The Maui Hotel & Lodging Association said its members together create the largest employer of residents in Maui County, directly employing approximately 40 percent of residents and indirectly employing 75 percent.

“This (industry) has given us an opportunity to buy a home and make a life for ourselves,” said Jana Lynn Arai, a food and beverage sales manager at The Ritz-Carlton, Kapalua.

She and her husband have worked in the visitor industry for 15 years.

On the other hand, many short-term rental owners said they should not have a rate that rivals the hotel and resort industry.

They also decried increases that would burden their legal businesses, saying more can be done to recoup money from illegal rentals.

“I believe residential short-term rental owners, like myself, our property tax should never be the same as a hotel. . . . We should always be less, because we do not have the ability to generate the same kind of income, it’s that simple,” said Maui resident Colleen Medeiros, who owns a short-term rental. “The illegal rentals really ought to be handled first before tax increases come along because that is really skewing things. . . . Who knows what taxes they’re paying or not paying. It’s probably millions of dollars in tax revenue being lost by not enforcing the illegal rentals.”

Kula resident Dick Mayer testified that the real property tax system could be more equitable and progressive by lowering taxes on residents who own the homes they live in or own homes they rent long term to residents, while raising taxes on wealthy investors who own luxury real estate and can afford to pay more.

To make up for the “subsidies” for residents, he suggested raising rates on hotels and homes in the short term, apartment and residential classes not occupied by a resident owner or long-term renter.

“Although Maui hotels have the highest RevPar (revenue per available room) in the state, they have the lowest tax rate,” he added. “Honolulu’s proposed tax rate is 41 percent higher than the Mayor Victorino’s proposed rate (Honolulu $19.30 versus Maui $9.60).”

In a recent report, the Hawaii Tourism Authority showed a lackluster first quarter for the hotel and resort industry. It also included competitive destinations that rank higher than the Hawaiian Islands in RevPar, average daily rates and occupancy. This includes the Maldives, Aruba, French Polynesia and Phuket.

* Kehaulani Cerizo can be reached at kcerizo@mauinews.com.

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