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Mayor may seek increase on hotel room tax

A hotel and tourism official says ‘now is not the time’

The Hyatt Regency Maui Resort and Spa in Kaanapali is pictured in February. State lawmakers passed a measure that would take transient accommodations tax revenues – which are collected from hotels and other lodgings – away from the counties but allow them to increase the current 10.25 percent rate by up to 3 percent. As the bill awaits the governor's signature, Mayor Michael Victorino said he is considering the increase to make up for the funds that Maui County stands to lose. — The Maui News / COLLEEN UECHI photo

With Maui County possibly set to lose out on $23.5 million annually in hotel room tax revenue from the state, Mayor Michael Victorino may seek an additional surcharge to make up for the lost funds.

Victorino announced his intentions on Tuesday as state legislators approved a measure that would take transient accommodations tax revenue shares away from the counties but allow them to implement an additional surcharge of up to 3 percent on the existing 10.25 percent rate.

House Bill 862 is now awaiting Gov. David Ige’s approval. A spokeswoman on Friday afternoon did not immediately respond to a question on Ige’s intentions for the bill.

Saying he disagreed with the Legislature’s decision, Victorino said Tuesday that he was considering the tax increase.

“I’d like to see 1 percent go toward the development of affordable and attainable workforce housing, 1 percent for emergency services including ocean, land and air rescues, and 1 percent to fund visitor education and cultural restoration throughout Maui County,” he said in a statement.

The Maui Coast Hotel in Kihei is pictured in March. Mayor Michael Victorino is considering a surcharge on top of the current 10.25 percent transient accommodations tax rate if the governor signs a bill that would take TAT revenues away from the counties. — The Maui News / MATTHEW THAYER photo

Collected from hotels and other lodgings that host guests for fewer than 180 days, the transient accommodations tax — sometimes called the hotel room tax or TAT — had been split among the counties and the state to fund things like state parks and trail maintenance and marketing for the Hawaiian Tourism Authority. The remainder goes into the state general fund.

Maui County’s share of the TAT is around $23.5 million, per state law.

“The loss of TAT funding is a blow, especially since the counties provide services for millions of visitors each year including police and fire protection, parks and road maintenance, and waste disposal,” Victorino said. “A new county tax surcharge can help to offset some of these costs.”

A county spokesman did not immediately respond on Friday to questions about how the surcharge would work or when it might take effect.

Victorino’s announcement and the possibility of an additional surcharge did not sit well with Mufi Hannemann, CEO and president of the Hawai’i Lodging & Tourism Association.

“We know that there are differing opinions among the four county mayors on HB 862. We had hoped that Mayor Victorino would have delayed any announcement regarding the enactment of a county surcharge because, if Governor Ige vetoes this measure, any planned surcharge would be on hold,” Hannemann said in an email Friday afternoon.

He added that his organization’s position is clear that “now is not the time to increase the cost of doing business in Hawaii.”

He pointed to the state ranking among the most expensive places to visit in the nation and the state having the highest unemployment rate.

“An additional 3 percent surcharge would make Hawaii the state with the highest hotel-related taxes in the country. And this doesn’t take into account airline ticket prices or pandemic-related costs,” Hannemann added.

He said raising travel costs will turn travelers away and hurt the small business economy.

“As Maui is the local county most reliant upon tourism, it doesn’t seem prudent to threaten the most dependable sector of their economy,” Hannemann said.

Victorino said Tuesday that he would work with the Maui County Council on the surcharge.

Council Chairwoman Alice Lee said Friday morning that “Number one, we need a firm commitment from the state, that (revenue from the increased surcharge) is not going to be taken from the counties as well as other monies that they have, over time, slowly but surely used for their purposes.”

“Maui being one of the most popular destinations in the world generates a good share of that transient accommodations tax,” Lee added.

As for Victorino’s proposals on use of the extra revenue — housing, emergency services and visitor education — Lee said, “those are three good choices for starters.”

However, she is thinking of having 1.5 percent be dedicated to affordable housing as well as infrastructure, noting that infrastructure is needed to have the housing. A half percent could go toward emergency rescues and the other 1 percent to visitor education and cultural restoration.

“We look forward to our conversation with the mayor. As far as the council is concerned, we may have other suggestions on how the tax is allocated,” she said.

Lee said she also awaits the details on how the tax collection will be done and the assurance that the revenues will come to the county in a timely manner.

* Melissa Tanji can be reached at mtanji@mauinews.com.

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