Opponents of vacation rental tax bill renew push for a veto

The operator of the state’s largest homeless shelter and one of the isles’ most powerful labor unions, along with several advocacy groups, are making one last push to get Gov. David Ige to veto a controversial vacation rental bill that only narrowly advanced through this year’s legislative process.

Ige has until Monday to put House Bill 1850 on his intended veto list. The bill allows transient accommodations brokers, such as the vacation rental website Airbnb, to register as tax collection agents to collect and remit general excise and transient accommodations taxes on behalf of operators.

Proponents of the measure say it would make it easier for the state Department of Taxation to collect from the vacation rental market, which has been ramping up since online travel sellers entered Hawaii. The bill’s biggest supporters have been Airbnb and the Maui Hotel &Lodging Association.

But opponents say the bill doesn’t guarantee payment, and they fear its effects on housing availability, rent prices and homelessness. It also helps unauthorized vacation-rental businesses circumvent state and county laws, they said.

It’s been a passionate and high-stakes debate. Airbnb hired seven lobbyists in the hopes that Hawaii legislators would pass the bill, which is similar to legislation that the company has championed across the nation. It spent $37,000 on that effort, according to state Ethics Commission filings from May 2015 to April. Airbnb’s most recent filing isn’t due until next year.

Bruce Coppa, former chief of staff for Gov. Neil Abercrombie; and Blake Oshiro, who served as Abercrombie’s deputy chief of staff and spent 11 years in the state House of Representatives and was majority leader from 2008 to 2011, were on Airbnb’s payroll along with John Radcliffe and George “Red” Morris of the influential firm Capital Consultants of Hawaii.

Opposition forces have formed their own powerful hui, which includes the Institute for Human Services, the Kailua and North Shore neighborhood boards, the Hawaii Appleseed Center for Law &Economic Justice, Faith Action for Community Equity, SONHawai‘i, Keep It Kailua, and Aloha Aina No Koolauloa. Numerous private individuals also testified against the measure, which they said could change the fabric of isle neighborhoods.

Honolulu City Council members Ron Menor and Joey Manahan also opposed it.

Recent feedback on the bill has been evenly split. Jodi Leong, Ige’s deputy director of communications and press secretary, said the governor has received 205 emails or letters in support of the bill. He’s received about 208 comments from the opposition side, including phone messages.

While the governor has not revealed his position, the Department of Taxation has supported the intent of the legislation.

“It will ease the burden of reporting and remitting taxes for operators and plan managers, and will facilitate collection at the source for the department,” Maria E. Zielinski, tax department director, said in her testimony.

But Paola Rodelas, Unite Here Local 5 spokeswoman, said the measure doesn’t help the state improve its tax program.

“It doesn’t hold companies like Airbnb responsible for making sure their vacation rental listings are legal or illegal. It would allow companies like Airbnb to collect and remit taxes without any way of verifying that the amount they remit is anywhere near what the vacation rental owners owe,” Rodelas said.

Connie Mitchell, IHS executive director, said negative implications to the bill are broader reaching than just taxes.

“At first look the bill seems like it’s of benefit for the state because of the tax revenues, but it hurts long-term housing,” Mitchell said. “As a homeless-services provider, I believe that we will lose more housing inventory with the passage of this bill. It encourages more illegal bed-and-breakfasts or transient vacation accommodations by providing cover.”

KC Connors said she opposes the measure because the preponderance of vacation rentals in her North Shore community has led to skyrocketing rents.

“A few years ago you could get a room or studio for $600. Now it’s hard to find one for $1,200,” Connors said. “In some neighborhoods, house after house has been turned into a minimotel. We are losing housing, and we are losing the traditional culture of our neighborhoods. More and more people are becoming homeless.”

If the measure advances, Airbnb said Hawaii would become one of many jurisdictions across the world to have passed similar legislation.

But Rodelas said there have been reports from other cities that have passed such laws and have struggled with getting Airbnb to remit the correct amount of taxes owed and release host data verifying that they’re paying their fair share of taxes.

“HB 1850 is flawed and can be fixed, but the Legislature failed to do its due diligence in fully unpacking the depth and scope of the impact HB 1850 will have on the viability of our industry,” said Unite Here Local 5 spokesman Cade Watanabe.

Barry Wallace, executive vice president of hospitality services for Outrigger Enterprises Group, agreed that the bill’s language should be improved to reduce shielding for illegal vacation rental owners and to even the playing field for hospitality businesses. However, he’d like to see Ige sign it anyway.

“I want him to know that we recognize that this is not a perfect bill, but that we need to get a start on this. It’s better to get more tax accountability now and work on the language next session,” Wallace said.

Vacation rental advocate Will Page called HB 1850 a positive step toward allowing vacation rentals and bed-and-breakfast homes to participate in Hawaii’s economy.

“Maybe some operators that were afraid to pay their taxes will be able to pay now,” Page said.