Lawmakers desperate for ways to make up the state’s shortfall are leaving open the option of taking a larger share of Hawaii’s hotel room tax, a nightmare for county mayors.

While lawmakers deferred House Bill 795 Tuesday, a similar Senate bill is still alive. It would temporarily limit how much the counties would get from the tax.

The House version would have capped the amount of revenues the counties would get from the Transient Accommodations Tax at 2010 levels, or “the lesser of 44.8 percent or $101,978,000 of the transient accommodations tax revenues collected in a fiscal year.” The bill was essentially killed Tuesday following a joint meeting of the Senate committees on Tourism and Public Safety, Government Operations and Military Affairs.

Mayors of all four counties submitted written testimony in opposition, noting the cap wouldn’t allow for TAT revenue growth should the visitor industry strengthen. They also said residents may face higher taxes or service fees to make up any drop in TAT revenues.

Honolulu Mayor Peter Carlisle testified in person, saying, “We need the transient accommodations tax to be able to carry out our mission.”

Sen. Donna Mercado Kim, who chairs the Tourism Committee, recommended the House version be shelved in favor of Senate Bill 1186, which she introduced. That bill has cleared the Senate and been referred to the House Finance Committee.

The state Department of Taxation previously testified that its cap would generate tens of millions of dollars for the state:

  • $10 million in fiscal 2012
  • $16.5 million in fiscal 2013
  • $23.3 million in fiscal 2014
  • $30.7 million in fiscal 2015

Unlike the House version, SB 1186 does not include a dollar amount at which to cap the counties’ shares.

“It was originally based on 2010 levels, but it could be less or it could be more considering what’s happening with the economy,” Kim told Civil Beat after the hearing.

Under current law, 44.8 percent of TAT collections goes to the counties. Of that amount, the counties receive:

  • 44.1 percent for Honolulu
  • 22.8 percent for Maui
  • 18.6 percent for the Big Island
  • 14.5 percent for Kauai

Carlisle said Honolulu’s share helps the city cover services that tourists use, including water, roads, police and fire. He said resident taxpayers could see increases in their property taxes, increases in user fees or a decrease in services if the state limits its share of the tax.

Maui County Councilman Danny Mateo made similar comments in written testimony: “Maui county’s primary source of revenue is derived from real property taxes. Therefore, any limit placed on the amount of TAT revenues distributed to Maui county could unfairly burden property tax payers should there be an increased need for infrastructure improvements and public safety services as a result of increased tourism activity.”

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