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Council mulls tax tiers for hotels and resorts

Tiers would set different rates for properties of higher values

The Marriott Maui Ocean Club in Kaanapali is pictured in August. The Maui County Council is considering a bill that would establish property tax tiers for hotels and resorts. If the bill passes, the rates would be set during the annual budget session in the spring. The Maui News / COLLEEN UECHI photo

A Maui County Council committee is considering a bill that would create property tax rate tiers for hotels and resorts, potentially setting the groundwork for higher taxes for pricier properties.

Council Vice Chairwoman Keani Rawlins-Fernandez, the author of the bill and chairwoman of the Budget, Finance and Economic Development Committee, said the idea of establishing tiers came about during last budget session, when some testifiers raised the issue of smaller hotels being taxed at the same rate as larger hotels.

The bill would only establish a tiered system for the hotel and resort category but would not set the rates, which are hashed out during the council’s annual budget review in the spring.

Rawlins-Fernandez deferred the measure during a budget committee meeting on Wednesday to get more information from the administration.

Currently, the hotel and resort category has the second-highest rates in the county, with fiscal year 2022 rates set at $11.75 per $1,000 of net taxable assessed valuation. The timeshare category is the highest taxed at $14.60.

A Maui County Council committee is considering a bill that would create property tax tiers for hotels and resorts, allowing the county to potentially charge higher rates for higher-valued properties. Hotel values can vary widely, with the Grand Wailea (pictured in June 2020) valued at an estimated $391 million on the higher end and other hotels valued in the $2 million to $3 million range. The Maui News / MATTHEW THAYER photo

Rod Antone, executive director of the Maui Hotel & Lodging Association and one of two testifiers on the bill Wednesday, said the county already assesses the value of hotels and resorts differently depending on the size and value of its property.

“To create a tiered system for hotels and resorts is unnecessary and somewhat punitive, especially so soon after the pandemic shut down tourism for the state just a year ago,” he said.

Antone, who is also an industry lobbyist, pointed to the recent decision by the state Legislature to take millions of Maui County’s share of the transient accommodations tax away, forcing the county to charge its own transient accommodations tax up to 3 percent. Antone called it “too much too soon.”

He said the surge in tourists to Maui is only temporary and asked that council members wait until international travel opens up again, which will likely lead to a decline in visitors and large airplanes to Maui.

Maui Meadows resident Tom Croly didn’t take a position on the bill but noted that hotels are valued differently from properties such as homes, and that some hotels may have units that are defined as condominiums rather than part of the larger hotel.

Council Member Tamara Paltin, who holds the West Maui residency seat, called the measure to establish tiers just another “tool in the toolbox.” She and other council members also said there was a reduced assessment of around 20 percent last year for hotels and resorts.

Gery Madriaga, real property tax assistant administrator for the county, noted at the meeting that hotel values can vary widely, with the Grand Wailea’s total value at $391 million on the high end and some hotels valued in the $2 million to $3 million range on the lower end.

Some hotels have units that are condominiums, and in that case tiered rates may not achieve the type of tax revenue results council members are looking for, Madriaga explained. Those condominium units are valued separately from each other instead of under one whole hotel property.

When asked if hotels could separate rooms into condominium units and pay less in property taxes, Madriaga said not necessarily, comparing condo units to pieces of a pie that eventually add up.

In recent months, the council has been considering multiple measures aimed at offsetting the impacts of tourism on Maui County. On Wednesday, the budget committee elected members and reviewed the duties of a temporary investigative group that will look into tourism management, economic development and diversification in the county.

The group is being set up in response to a bill proposed by Rawlins-Fernandez that would maintain the number of current tourism accommodation units on Maui until the council passes legislation implementing recommendations presented by the group, or in two years, whichever is sooner.

The bill has been referred to the Maui Planning Commission and will be heard by the council following the commission’s review.

Rawlins-Fernandez has said she would quickly set up the group to move the process along, and that it probably wouldn’t take two years for the council to implement the legislation.

She will be the chairwoman of the investigative group, with Lee as vice chairwoman and Paltin and Shane Sinenci as members.

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

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