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Honolulu stands to lose millions of hotel-tax dollars from the state under a measure the House passed Tuesday, which could put city officials in the difficult position of cutting programs or raising property taxes to make up the lost revenue.
That was one of hundreds of bills ranging from an ivory ban to gun control that the House and Senate approved during an hours-long voting session called second crossover. These are bills that first cleared their originating chamber, then crossed over to the other chamber for its consideration, and are now being sent back in an amended form for final approval.
If the House doesn’t like what the Senate has done with its bill — or vice versa — then the legislation goes to conference committee. That’s the period over the next couple weeks when a handful of lawmakers from each chamber are appointed to resolve the differences between the versions of the bill. If a compromise can’t be reached, which often happens, the measure dies.
“These bills represent a broad range of concerns for the state, from affordable housing and homelessness to interisland transportation,” House Speaker Joe Souki said in a statement. “They address the needs of our keiki, victims of crime, medical patients, and our kupuna, and go a long way in making life and lives better in Hawaii.”
Senate Bill 2987 initially set out to make permanent the $103 million cap on state transient accommodations tax revenues to the counties.
But the House Finance Committee, chaired by Rep. Sylvia Luke, amended the measure last week to change what percent of hotel tax money each county receives.
Honolulu had received a 44.1 percent share of the amount the state gives the counties. The latest version of the bill knocks that down to 30 percent while boosting the portion each neighbor island county receives. Kauai would get 20 percent instead of 14.5 percent; Hawaii County would get 25 percent instead of 18.6 percent; and Maui would get 25 percent instead of 22.8 percent.
If the cap is $103 million, Honolulu would lose $14.5 million under the new allocation model.
The Finance Committee blanked out the amount of the cap. That’s a detail that House and Senate lawmakers are expected to negotiate in conference before the session ends May 5. If they do nothing, the cap will fall to $93 million next year.
The version of the bill that senators approved in early March set the cap at $103 million, but they didn’t touch the percent each county has long received.
County officials have said their preference would be to remove the cap altogether and return to a system where the counties receive a percent of the overall hotel tax revenues, an amount that ebbs and flows with the strength of the tourism industry — which has been thriving of late. For 30 years, the counties split 44.8 percent of the overall amount of TAT revenue collected.
As Maui Council Chair Mike White pointed out in his testimony on the bill, the cap allowed the state’s annual share of TAT revenue to increase by $196.6 million from 2007 to 2015, while counties only received an additional $2.2 million.
“During the same period, counties have incurred $170 million in cost increases in fire, police, and park services,” he said. “County expenditures for tourism-related services continue to rise at a pace far exceeding the distribution of TAT revenue. This places the burden of paying for visitors services on our local residents. Sound fiscal practices favor a policy that automatically increases the distribution of TAT revenue to the counties at the same rate that revenues grow.”
Legislators aren’t so sure that’s sound fiscal policy, at least for the state. They see a cap as appropriate, and want the counties to provide better accounting for how they use their share of hotel tax revenues.
Honolulu Mayor Kirk Caldwell said in a statement that with infrastructure spending on rail, sewers and road repaving, significant spending on Oahu is generating general excise tax revenues that benefit the entire state.
“I hope the House will reconsider its position on the City and County of Honolulu’s portion of the Transient Accommodations Tax,” Caldwell said. “Nearly two-thirds of Hawaii’s visitors come to Oahu, and a majority of those stay in Waikiki. The visitor industry revenue generated on Oahu supports the entire state in many different ways, not just with the TAT but with GET spending as well.”
Officials from all four counties have said they want the Legislature to approve the recommendation made in December by a working group that state lawmakers created two years ago. That recommendation calls for lifting the cap and giving the counties a 45 percent share to split so their funding can grow as the tourism industry does.
Lawmakers have discounted the working group’s report though. They had wanted a broader discussion on what roles the counties play and what functions are better left to the state so as to determine what share of hotel tax money should be allocated.
The bill had called for convening a working group again, but Gov. David Ige’s administration opposed it and Luke took it out of the latest version. State Budget Director Wes Machida called it “unnecessary,” and said increasing the counties’ fixed share of TAT revenues is preferable to replacing the cap with a set percent.
“I hope the Legislature will support all of the counties, including Oahu, by approving the TAT working group’s recommendation to fund the counties’ share of the TAT at 45 percent,” Caldwell said.
Following some discussion on the House floor, Senate Bill 2987 passed 45-5, with Reps. Ken Ito, Bob McDermott, Calvin Say, Andria Tupola and Gene Ward voting no. Rep. Cynthia Thielen’s absence was excused.
Say, the former House speaker and an Oahu resident, questioned how Honolulu would make up the lost revenue. “Property taxes? That’s the only recourse.”
Souki, of Maui, said the measure “provides some equity to the neighbor islands.”
The House celebrated passage of a bill to address Hawaii’s longstanding issue of being the No. 3 market in the country for illegal ivory.
Rep. Ryan Yamane said Souki tasked him at the beginning of session with coming up with a comprehensive bill that the Senate and House could both get behind.
Yamane underscored the seriousness of the “blood ivory trade,” and how it funds terrorist groups in Africa.
He said a key part in getting the bill this far was a compromise to allow an exception for guns, knives and instruments, as long as they are less than 20 percent ivory by volume. That exception also applies to antiques.
“It is time that Hawaii steps forward and addresses this black market,” Yamane said.
Souki called it a “wonderful bill,” and the House passed it unanimously.
Senate Bill 2647 now heads back to the Senate, which can accept the measure from the House in its amended form and send it on to Gov. David Ige for his signature, or the Senate can take the measure to conference committee to continue fine-tuning it.
The House also passed a bill that would require the Department of Health to conduct annual unannounced inspections during the relicensing of long-term care facilities.
Fourteen representatives had reservations about the measure but voted in favor of it. Reps. Nicole Lowen, Joy San Buenaventura, McDermott, Tupola and Ward voted against it.
“It’s an added burden with no added purpose,” San Buenaventura said. Just because the rest of the country is doing it doesn’t mean Hawaii should, she added.
Rep. Cindy Evans’ focus was more on the residents receiving care in these homes, not the operators.
“You have to really be careful about the kind of standard that you want for people in these facilities,” she said.
The home care industry has long objected to surprise inspections and thwarted efforts over the years to mandate them.
Senate Bill 2384, which also requires unannounced inspections for medical marijuana dispensaries, is headed to conference committee.
On the Senate side, lawmakers passed gun-control bills to disqualify those convicted of stalking or sexual assault from purchasing a gun, and require people diagnosed with mental illnesses to immediately turn over their firearms.
Senators also passed House Bill 1907, which is aimed at reducing the inventory of untested rape kits.
The House approved one police-reform measure that would create a statewide standards and training board for police officers and another bill that would set the stage for the state to create an independent review board to oversee the criminal investigations into officer-caused deaths and injuries.
The House also passed Senate Bill 2411, which establishes requirements, restrictions and implementation timelines for body-worn cameras and vehicle cameras for county police departments. Reps. Derek Kawakami, Sam Kong, Bob McDermott and Andria Tupola voted no.
Senate Bill 2439 cleared the House with just Tupola voting against it. The measure addresses the issue of people using cell phones to record police, trying to strike a balance between the First Amendment and obstruction of justice.
The full Senate approved House Bill 1700, the overall state budget bill, which includes millions of dollars for housing and homeless programs.
The Ways and Means Committee, chaired by Sen. Jill Tokuda, appropriated $7.3 million in the state budget for homeless programs. That includes $3 million for the Housing First program, $1.1 million for homeless outreach services, $2 million for rapid re-housing services, $450,000 for a new homeless shelter in Kakaako and $200,000 for a stored property program.
The House spent a chunk of time talking about a bill to ban smoking in vehicles if minors are present.
Rep. Gene Ward, one of seven Republicans in the 51-member House, asked how far government was going to go to try protecting people from themselves.
“Where does the nanny state stop?” he said. “Any parent should know they shouldn’t be smoking in front of their kids.”
Rep. Karl Rhoads, a Democrat, said it’s completely unfair for a minor who has no say in being subjected to cancer-causing second-hand smoke while riding in cars.
“If adults would act like adults, we wouldn’t have to do this,” he said. “But they’re not.”
Ward voted in favor of the bill, but with reservations. McDermott and Tupola cast the lone no votes.
The House also passed a bill to create a task force to study the state lobbyist laws, which state Ethics Commission Executive Director Les Kondo has said need a complete overhaul. Organizations spent nearly $1 million on lobbyists to influence state lawmakers during January and February alone.
Lawmakers also passed a bill to study an interisland — and intraisland — ferry system. Rep. Angus McKelvey was particularly keen on the intraisland aspect, noting the potential to significantly reduce traffic.
Rep. Chris Lee spoke in support of a bill to cool classrooms while creating a net-zero energy goal by 2035 for the Department of Education also cleared the House. He said the goal is “totally doable,” and noted that the University of Hawaii has already embarked on a similar one.
The House and Senate have different ideas over how to fund air-conditioning and other heat-abatement efforts to cool down public schools. That’s an issue to be resolved in conference committee.
Senate Bill 1374, introduced by Sen. Donovan Dela Cruz, also passed the House. It required the Department of Agriculture to negotiate land exchanges with Dole Food Company. The measure tasks the department, working with the Agribusiness Development Corporation and other appropriate state agencies, to report to the Legislature on the feasibility of a land exchange and what it would take to make it happen before the next session begins in January.
“We attempted to move forward measures we felt reflected the priorities of the Senate,” Senate Majority Leader J. Kalani English said in a Senate press release. “There are a number of areas in which the House and Senate share a mutual concern. We’ll work on the details in conference and I’m hopeful the outcome will be responsible bills.”
– Courtney Teague contributed to this report.