Lawmakers gave final approval Tuesday to a package of bills that will wring more cash out of the rapidly recovering tourism industry while simultaneously scaling back on the sums the state spends each year to market Hawaii to visitors.
The House and Senate also gave final approval to bills that would defer scheduled pay raises for lawmakers, judges and members of Gov. David Ige’s cabinet, and gave final approval to a new $31 billion budget for the next two years.
However, several measures were killed by the state House at the last minute on Tuesday, including a measure dubbed Breonna’s Law that would have prohibited police from executing so-called “no-knock warrants.”
Lawmakers staged mostly brief floor debates Tuesday morning and voted to pass more than 180 measures in preparation for Thursday’s scheduled adjournment of this year’s session.
Hotel industry representatives staged a last-minute lobbying push in an effort to block House Bill 862, which would authorize the counties to impose a new hotel room tax of up to 3%.
The bill would also allow the state to seize $103 million in transient accommodations — that is, hotel room taxes — currently distributed to the counties, and would reduce funding for the Hawaii Tourism Authority.
The hotels’ lobbying push was ultimately unsuccessful as the House approved the measure 45-6 while the Senate approved it on a 23-2 vote.
House Finance Committee Chairwoman Sylvia Luke said the House was determined to “hold HTA accountable, and to set a vision for HTA which was not specifically industry-driven, but really was state-driven.”
She cited what she described as a disturbing trend in recent years when visitor spending did not grow nearly as rapidly as visitor arrivals, which peaked in 2019 at more than 10 million.
If the counties actually impose the new 3% hotel room tax increase, that would increase the hotel and transient vacation rental tax from 10.25% today to 13.25%.
Lawmakers also voted Tuesday to increase the rental car surcharge from $5 per day to $8 per day in a series of steps over the next six years, and gave the state Department of Land and Natural Resources more flexibility to set or raise fees for the use of state parks.
“This is all part of the big plan — how do you have tourists pay for their fair share of using natural resources in the state of Hawaii?” Luke said.
HB 862 would also reduce funding for the Hawaii Tourism Authority from $79 million down to $60 million, and would reduce funding for the Hawaii Convention Center from $16 million down to $11 million.
The tourism industry has pushed back against the proposals to cut HTA’s budget and to allow the counties to increase the hotel room tax. Former Starwood Hotels & Resorts executive Keith Vieira said the bill is a disaster for the industry on several levels.
The potential increase of 3 percentage points in the hotel room tax amounts to almost a 30% bump in the overall transient accommodation tax rate, which is “ridiculous,” Vieira said. He predicted it will drive visitor traffic to cheaper, illegal vacation rentals that don’t pay the tax.
“I just think legislators are being greedy, and taking the easy route, and like always, it’s ‘screw the visitor’ — always,” Vieira said.
The abrupt rebound in tourism Hawaii is enjoying is from pent-up demand after a year of lockdowns and other pandemic travel restrictions, and “pent up demand cannot be confused with long-term marketing success,” he said.
The state will still need HTA to sell Hawaii as a destination in the years ahead, and “this is going to make it more difficult to grow the pie,” said Vieira, who is now principal in the hospitality consulting firm KV & Associates.
Honolulu Mayor Rick Blangiardi said in a written statement Tuesday that “the Legislature is attempting to pass a law which completely overhauls the current TAT disbursement to each of the counties.”
“Pushing a major TAT initiative in the 11th hour, and in this economic climate, is not the way to create a law this important and impactful to all of our counties,” Blangiardi said.
The Senate spent more than half an hour debating House Bill 499, a measure that would allow the state land board to extend 40-year leases to current state tenants so long as they have made improvements to those properties.
A group of 40 organizations including Native Hawaiian and environmental groups opposed the measure over worries that it amounts to a land grab by the state and its lessees. Proponents of the measure say it could create job opportunities and make funds available for public housing.
Part of the worry, opponents say, is that leaseholders may start to feel entitled to the land they are on.
“Such a long-term and uninterrupted leasehold interest will inevitably result in an expectation by a lessee that their control of leased public lands will be continued indefinitely,” a letter from the organization to lawmakers explains.
The measure cleared the Senate on a 17 to 8 vote and the House 36 to 15.
Sen. Kurt Fevella, the Senate’s only Republican, proposed amending the bill to carve out lands leased by the state Department of Hawaiian Home Lands from the bill.
“As a Native Hawaiian, and as anyone in this chamber who is Native Hawaiian, and anyone in the chamber who cares at all about Native Hawaiians — I can tell you that Prince Kuhio, 100 years after the passage of the Hawaiian Homes Commission Act, would be embarrassed,” Fevella said.
His amendment failed with 20 senators voting no and only he and Sens. Laura Acasio, Les Ihara, Gil Riviere and Joy San Buenaventura voting in favor.
When it came time to vote on HB 499, Sen. Riviere argued that the state should reopen leases to allow competition between potential new tenants.
Sen. Michelle Kidani noted that DHHL did not testify on the bill, and said that a developer in charge of building DHHL housing in Moiliili supports the measure because it would need a lease extension to make the housing options viable.
Sen. Lorraine Inouye also supported the measure.
“The burden of improving leased properties lies on the lessee, many of whom are willing to make the investment in exchange for lease extensions,” she said. “This is not a bill to deny benefits for beneficiaries, it is a bill about jobs, economic stability, opportunities, sustainability, vitality and community improvement.”
A measure to delay pay raises for the governor and his cabinet, lawmakers and state judges easily cleared the Legislature on Tuesday by unanimous votes in both the House and Senate.
However, some senators expressed their displeasure with the way Senate Bill 1350 moved through session.
SB 1350 began as a bill to create an Office of Public Accountability, an idea to consolidate several state watchdog agencies into one entity; it received backlash from all the agencies that would have been impacted.
Senators gutted the bill in early March and replaced it with language on state redistricting.
SB 1350 made it through committee hearings in the House with slight changes and appeared headed for conference committee to sort out provisions on state reapportionment, which is expected to begin in the fall.
But on April 13 at a key legislative deadline, House Speaker Scott Saiki removed the redistricting language completely and replaced it with a proposal to defer pay raises set to take effect July 1.
Good-government groups have long chastised the Legislature for using gut and replace tactics to advance bills. Common Cause Hawaii and the League of Women Voters of Honolulu have even sued the Legislature over the issue in a case that has reached the Hawaii Supreme Court.
“I have voted against gut and replace bills in the past, and to be consistent I should vote no on this one as well, except because it is our pay raises, it would be misconstrued,” Sen. Donna Kim said on the Senate floor. “It’s obvious our legislative watchdogs are only interested in gut and replace when it suits their interests.”
Sen. Jarrett Keohokalole also questioned why plaintiffs in the gut and replace lawsuit, including Common Cause and the League of Women Voters, have not raised concerns over the process by which SB 1350 advanced in the Legislature.
“That tacit acceptance of this bill should render the lawsuit moot, and their appeal should be withdrawn, and we should not utilize any further taxpayer money to argue this matter before the (Hawaii) Supreme Court,” Keohokalole said.
Earlier in the session, Common Cause noted that it had “grave concerns” with how the reapportionment language was inserted into SB 1350, that the title of the bill was too vague and that the public was given less than 24 hours to look at proposed drafts of the measure.
“In sum, these raise issues of constitutionally questionable gut and replace,” Sandy Ma, the organization’s executive director, said, adding that the organization recognized the need for senators to address reapportionment.
SB 1350 ultimately cleared the Legislature with much of the Senate’s redistricting language intact.
Under a schedule approved by the state Salary Commission in 2019, lawmakers would have seen their pay increase from $62,604 now to $70,584 effective Jan. 1, 2022, while the House speaker and Senate president would have seen an increase from $70,104 today to $79,044.
However, with passage of the bill those raises will be delayed until Jan. 1, 2023.
Lawmakers on Tuesday also killed several measures via legislative maneuvering.
Among those was a bill that would ban county police departments from executing warrants in which officers don’t knock and announce their presence. The public defender’s office, state attorney general and county prosecutors have previously raised concern over a provision that required officers to wait 30 seconds before breaking into a residence or office.
The House also killed a measure that would limit the governor’s emergency powers and require the Legislature to approve extensions of emergency declarations. While the Senate voted to move the bill forward, measures must pass a final reading in both chambers to advance to the governor.
A separate bill that would have banned the governor and county mayors from suspending the open records law also died last week in conference committee.
However, legislators on Monday voted to allow government meetings to be conducted remotely.
Ige has until June 21 to let lawmakers know what measures he intends to veto. And he has until July 6 to veto bills, sign them into law or allow them to become law without his signature.
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