UPDATED 9 a.m., 9/17/2014

County officials agree on at least one thing as they prepare to lobby the Legislature next year: They want more funding for local government services ranging from roads to rescues.

But Kauai, Maui, Big Island and Honolulu council members and mayors have different ideas on how to go about boosting their revenues.

Council members plan to ask state lawmakers for a bigger share of hotel taxes. The mayors, although not opposed to more Transient Accommodations Tax money, may double down on new revenue proposals with a request for the authority to levy up to a 1 percent county surcharge on the General Excise Tax.

HSAC Anderson and Rapozo

Hawaii State Association of Counties member Ikaika Anderson, center, speaks as HSAC President Mel Rapozo, right, listens Monday at Honolulu Hale.

Nathan Eagle/Civil Beat

The counties’ success in getting either through the Legislature next session, which starts in January, could make a difference in the number of lifeguards at beaches or the amount of potholes that get filled. It could also determine whether the counties have to increase property taxes — the only tax they have direct control over — or raise other fees to maintain their current slate of services.

In the case of Honolulu, Mayor Kirk Caldwell wants to keep the county’s 0.5 percent GET surcharge that it’s using to fund the 20-mile-long rail project. The surcharge, which voters approved, is set to expire in 2022 but Caldwell says Honolulu would like to keep it in perpetuity to provide for future work on the rail system.

The neighbor-island counties passed up the opportunity to levy a similar surcharge for transportation projects when the Legislature offered it to them a few years ago. But now some of the other mayors would like the option.

The Hawaii State Association of Counties, a group of council members from each county, decided to move ahead Monday while the mayors figure out what they want to do.

Maui Mayor Alan Arakawa apologized for the Maui County Council undermining the counties’ efforts last session by passing a property tax cut while the Legislature was deciding what to do with the hotel tax bill. 

HSAC voted unanimously to include a bill in its 2015 legislative package that would remove the cap that state lawmakers have imposed on the counties’ share of the TAT, a 9.25 percent tax hotels charge guests.

The Legislature last session increased the cap to $103 million — a $10 million bump for the counties to split — for the 2015 and 2016 fiscal years. 

Prior to the cap, the counties received 44.8 percent of all hotel tax money the state collected. With the tourism economy reaching record levels, the state expects to collect $380 million this year in TAT revenue. That would mean $170 million for the counties to share.

UPDATE Maui Mayor Alan Arakawa apologized at HSAC’s August meeting for the Maui County Council inadvertently undermining the counties’ efforts last session by passing a property tax cut. 

Maui County Councilman Mike White proposed a 9 percent average property tax cut in late April while the Legislature was in final decision-making mode on what to do with the TAT bill.

Arakawa told HSAC members that he does not plan to lobby for the TAT next year because it is hard for the counties to make the case in light of Maui cutting its taxes and the state doing a two-year study on the TAT.

Kauai County Council members Jay Furfaro and JoAnn Yukimura have testified that Kauai needs both the TAT and GET, which is 4 percent on the neighbor islands and 4.5 percent on Oahu.

Yukimura said the counties need to be clear that they need a portfolio of taxing powers and not let the Legislature try to trade funding sources or use the study as an excuse.

A 0.5 percent GET surcharge would raise only $8 million for Kauai, Furfaro said, basing that on $1.5 billion in total GET revenue. He said this would not make up for the $23 million a year Kauai needs in TAT money to fund ocean rescues, park maintenance, public safety officials and other services.

Mayors, Councils Struggle to Reach Consensus

The mayors and councils tried hard last year to go into the 2014 session with a unified voice on a few priority items, but were ultimately unable to reach a consensus on TAT and GET proposals.

The HSAC went for removing the TAT cap and the mayors’ similar lobbying group, the Hawaii Council of Mayors, tried for the GET power. Neither was successful and the mayors’ GET bills didn’t even receive a hearing. 

The effort to combine forces is being attempted again this summer, but appears off to a rough start.

Still, Caldwell has told HSAC members that getting a buy-in from the councils is important because legislators would want to know where the councils stand on particular issues, including extending Honolulu’s GET surcharge in perpetuity, according to the August meeting minutes.

HSAC President Mel Rapozo, a Kauai County Council member, said after the meeting Monday that the counties hope to be more successful next year.

In the meantime, HSAC’s legislative package, which also includes bills relating to the Hawaii Health Systems Corporation and domestic abuse, goes back to each council for its approval.

HSAC did not adopt a bill relating to the GET, but it is on the list of legislative priorities.

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