Counties’ haul of hotel taxes falls short of their goal

The state’s four mayors and County Council leaders failed in their full-court press to get the state Legislature to lift the cap on their share of hotel room tax revenues Friday, but they walked away with $10 million more for their troubles.

For each of the next two years, the counties will get $103 million from transient accommodations taxes, $10 million more than the $93 million annually they have received since 2011.

That comes out to $4.4 million more for Hono­lulu, $2.3 million more for Maui County, $2 million for Hawaii County and $1.5 million for Kauai County.

The new money will help a little, county officials said. But it’s significantly less than what they had hoped for and will leave them with fewer options as they make tough choices on programs and taxes as they wind down their budget proceedings in the coming weeks, they said.

Historically, county mayors and County Council leaders have argued they deserve a greater share of hotel tax revenues because they are burdened with providing the police, fire, road, water and sewer services used by tourists.

On Oahu, lifting of the cap would have netted the city nearly $32 million more than the $41 million it now gets to help with a $2.1 billion operating budget.

Hotel and resort officials have asked City Council members to reject Mayor Kirk Caldwell’s proposal to raise property tax rates to $13.40 per $1,000 of valuation, $1 more than the current rate. The plan would provide the city about $8.2 million in new revenues.

"We were hoping to get enough new TAT to somehow offset the property tax rate increase for hotels and resorts," Council Budget Chairwoman Ann Koba­ya­shi said Monday.

One possibility now may be to impose a 50-cent hike for the class, to $12.90 per $1,000, Koba­ya­shi said.

Council Chairman Ernie Martin said the additional bump approved by House-Senate conferees last week could help stave off Caldwell’s controversial plan to allow advertising on the sides of city buses, at least for the coming budget year. Members of the Outdoor Circle have staunchly opposed exterior bus advertising.

While bus ads have been projected to bring the city $8 million more annually, an anticipated delay in the startup of the program led the mayor’s budget officials to program only $1.5 million in revenues from the ads for the coming year.

Martin said the plight of hotel and resort owners is also a concern, especially since experts are projecting a slowdown in the visitor industry. Reducing the tax hike on hotel-resort owners "is still a possibility … but that would take additional cuts to the budget."

Caldwell said he’s grateful for any new revenues, but the mayors had hoped for a larger share. The mayors had also pitched a bill giving them each the option to add a surcharge to the state’s existing excise tax, a plan shot down early in the session.

The administration has proposed a series of revenue-generating ideas including bus advertising, trash pickup fees and higher tax rates for the new "Residential A" tax class, composed of owners of properties valued at $1 million or more, and the hotel-resort class tax hike, Caldwell said.

"They’re all tools in the toolbox they can move forward with to help fill the gap," he said while acknowledging that the proposals have met with controversy.

In Kahului, Maui County Mayor Alan Ara­kawa had earlier proposed property tax rate increases in all categories, which averaged out to about a 6.5 percent hike overall. Ara­kawa said the only way to avoid the tax hikes was for the Legislature to lift the TAT cap, which would have boosted Maui’s share to $37.6 million from its current $21.2 million.

On Saturday he issued a statement saying the extra TAT funds, "along with some creative cuts from the council," should eliminate any need for a property tax increase for fiscal year 2015.

On Monday, Council Budget Chairman Mike White outlined to colleagues a new budget plan that trims about $28 million from Ara­kawa’s proposed $622.6 million operating budget by eliminating all planned new employee positions and reducing other operations.

White’s budget plan, in fact, actually proposes a drop in tax rates, arguing that the county should reduce tax rates and provide relief to taxpayers. White, in a prepared release, said he was puzzled that Ara­kawa had changed his position when he had previously insisted the county would need substantially more TAT dollars to stave off a tax rate hike.

House Bill 1671 initially called for lifting the $93 million cap on the counties’ share of TAT first imposed in 2011. The counties’ share of 44.8 percent of the TAT revenues would give them an additional $72 million to divvy up, or 77 percent more than they are currently getting.

With Senate leaders balking at the plan, House officials entered Friday’s conference committee talks suggesting that restoration to the previous arrangement be phased in over four years, said Rep. Tom Brower (D, Wai­kiki-Ala Moana-Kaka­ako), head House conferee on the bill. But that also fell by the wayside, leaving instead what amounts to a ceiling that’s $10 million more, he said.

"The money really wasn’t there for the state to give," Brower said.

He noted that the bill now calls for creating a community working group to examine the correlation between county operations and the visitor industry.

If the counties end up with a larger share of TAT in the future, those extra dollars likely will come with a stipulation ensuring the money is used to pay for county operations used by visitors, Brower said. "There are people who are interested that (the money) goes to the right places," he said.