The mayors of Honolulu, Kauai, Maui and Hawaii counties told legislators Monday that the state should give them a bigger share of the 9.25 percent transient accommodations tax that it collects from visitors.

The counties currently split $103 million of the hotel tax revenue, and the cap drops to $93 million next fiscal year, which starts July 1.

It’s only been the past five years that they’ve had a cap at all. For three decades the counties received a set percent of the TAT money. When the tourism industry thrived they enjoyed the extra funds, and when it sputtered they got less — just like the state.

Honolulu Mayor Kirk Caldwell says a consensus report by state, county and tourism officials offers a more reasonable tax split for the counties.
Honolulu Mayor Kirk Caldwell says a consensus report by state, county and tourism officials offers a more reasonable tax split for the counties. Cory Lum/Civil Beat

But since the cap’s been in place, the state has been the only one to enjoy the millions of extra dollars from a thriving visitor industry.

A 13-member working group — comprised of state, county and tourism industry representatives — studied the issue for two years and unanimously approved a report calling for the cap to be eliminated.

The group proposed that the state receive 55 percent of the hotel tax money, with the counties splitting the remaining 45 percent. The City and County of Honolulu would get 44.1 percent of that amount, Maui County would get 22.8 percent, Hawaii County would get 18.6 percent, and Kauai County would get 14.5 percent.

Senate Ways and Means Chair Jill Tokuda, left, and House Finance Chair Sylvia Luke ask the mayors questions.
Senate Ways and Means Chair Jill Tokuda, left, and House Finance Chair Sylvia Luke are disappointed that the working group’s report didn’t follow legislative direction. Cory Lum/Civil Beat

That split would come after deducting roughly $113 million from the overall TAT collections — estimated to be $450 million in 2016 — for the Tourism Special Fund, Hawaii Convention Center, Turtle Bay conservation easement and the Special Land Development Fund.

That’s roughly the same deal the counties had before the state capped them at $93 million in 2011 to help the state balance its budget.

The mayors told the House and Senate money committees that they support the group’s findings, and emphasized the fact that it was the Legislature that established the group in 2014.

Hawaii Mayor Billy Kenoi share Big Island priorities with state lawmakers.
Hawaii Mayor Billy Kenoi shares Big Island priorities with state lawmakers. Cory Lum/Civil Beat

“We can live with it,” Honolulu Mayor Kirk Caldwell said of the group’s proposal in his prepared remarks. “It’s fair. It also appears to be a long-term solution. It honors commitments of the past, yet allows for a fair sharing of the TAT revenues going forward.”

The fight between the counties and state over hotel tax revenue is a perennial issue, and this year is shaping up to be no different.

House Finance Chair Sylvia Luke and her counterpart in the Senate, Jill Tokuda, said the working group’s report lacks details on what functions traditionally are the responsibility of the state and which ones are the counties’ kuleana. 

Kauai Mayor Bernard Carvalho Jr. discusses the county's consideration of raising the general excise tax.
Kauai Mayor Bernard Carvalho Jr. says allowing the GET for transportation issues will help Kauai with road problems and traffic congestion. Cory Lum/Civil Beat

“We were kind of taken aback when the report came out and they completely ignored the intent of the Legislature,” Luke said, referring to the State-County Functions Working Group’s focus on the impact of tourists on state and county resources.

“We wanted a broader discussion on roles,” she said. “We’ve come to realize over time that certain functions are better left to the counties.”

The mayors looked somewhat stunned by the line of questioning.

Caldwell said his fear is this becoming such a big issue to tackle that the Legislature does nothing and the counties are down to $93 million to split four ways.

I guess we’ve got to regroup and look at how we can work closely with you folks,” Kauai Mayor Bernard Carvalho Jr. said.

A measure to remove the cap and institute a percentage-based split instead cleared the House last session but stalled in the Senate. House Bill 197 is still alive this year, the second of the biennium, but has yet to be re-referred to committees.

Gov. David Ige’s administration is not necessarily in support of the working group’s report calling for counties to again receive a set percentage of the TAT revenue instead of a capped amount despite the backing of four state departments that served on the working group.

Last session, the mayors did not push the TAT issue as they had the previous years. The focus instead was on whether the state should give Honolulu a five-year extension on its authorization to collect a 0.5 percent surcharge on the general excise tax to fund the 20-mile, 21-station rail project from Kapolei to Ala Moana.

Caldwell thanked lawmakers for ultimately passing that bill last May, which Ige signed into law.

Maui Mayor Alan Arakawa said he wants the state to give the counties more hotel tax revenue.
Maui Mayor Alan Arakawa says he wants the state to give the counties more hotel tax revenue. Cory Lum/Civil Beat

The measure also gave the other counties the same power to levy a 0.5 percent GET surcharge to fund transportation projects, something Carvalho said Kauai is pursuing.

“This will enable Kauai County to address major issues for residents and visitors who rank the ‘condition of roads’ and ‘traffic congestion’ at the top of their list of concerns,” Carvalho said, noting that the Kauai County Council will be taking the GET issue up on Wednesday.

Maui Mayor Alan Arakawa said his administration forwarded the information to the Maui County Council about the state law giving the counties the authority to levy a GET surcharge but the council has yet to take it up.

Honolulu City Council is expected to vote on a bill Wednesday that would authorize the five-year extension on the surcharge — moving the sunset date to 2027 from 2022 — but limit the amount of funding that can go the rail project at $1.1 billion. Council members are frustrated that the project is $1.4 billion over budget; the initial price tag was $5.2 billion.

Read the mayors’ testimony to lawmakers below.

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