Vacation rentals tax measure among 9 bills that governor intends to veto

Gov. David Ige expects to veto a hotly contested bill that would allow transient accommodations brokers, such as Airbnb, to act as tax collection agents for the state, as well as eight other bills that he’s determined to be legally questionable, fiscally unsound or generally problematic.

That includes Senate Bill 2077, which would allow employees at the state-run Maui and Lanai hospitals to tap severance payments and special retirement bonuses if the Ige administration succeeds in privatizing those hospital operations. The measure, backed by Hawaii’s largest public workers union, would apply to workers at risk of losing their jobs and could cost the state $40 million or more.

Ige said during a Monday news conference that the bill is still undergoing “fiscal, legal and policy” reviews.

The governor faced a Monday deadline to inform the Legislature of the bills that he intends to veto. He can still change his mind about the nine bills on his veto list, but he can’t decide to veto any additional bills.

He has until July 12 to sign off on an additional 263 bills that passed the Senate and House this year or allow them to become law without his signature.

He’s already signed some of the measures, including House Bill 2501, a controversial bill that allows Alexander &Baldwin to continue diverting water from streams in East Maui while challenges to its state permits are resolved.

The measure is opposed by East Maui taro farmers, Native Hawaiian legal advocates and environmentalists who have fought the company for years to restore stream water.

Ige told reporters during the news conference that he had signed the bill earlier in the day.

“I do have significant reservations on this measure. I do understand how taro farmers on Maui and others in similar situations would advocate for a veto,” he said. “We do know that the water in our community is a precious commodity and is essential for so many things. Our constitution requires that it be managed as a public trust and that any diversion can meet the public purpose of the trust doctrine.”

Ige said it was clear that the “current process of providing leases for water and revocable permits for water does not work” and that HB 2501 would give the state and water permit holders, such as A&B, time to come into compliance with state statutes.

Opponents of the bill swiftly rebuked the governor’s decision in a news release.

Mahealani Wendt, an East Maui resident who has fought for years against A&B’s stream diversions, accused politicians of “siding with the corporation that has been harming us for so long.”

Marti Townsend, director of the Hawaii Sierra Club, said the governor “had failed to achieve the right balance in this situation.”

“His decision unnecessarily favors profit-driven water diversions above the best interests of the public,” she said in a statement.

A&B officials have maintained that they need continued access to the stream water as they close down their Maui sugar cane plantation and try to shift the fields to diversified agriculture.

Illegal vacation rentals

Ige said he intends to veto a bill that critics have decried as special-interest legislation that would benefit Airbnb at the expense of local residents struggling to afford the state’s high rents.

In passing HB 1850, Senate and House leadership said the measure would help the state collect millions of dollars in unpaid taxes, while leaving enforcement against illegal short-term rentals up to the counties.

The measure became known as the “Airbnb bill.” The company, which operates an online booking serv­ice for short-term rentals, enlisted the help of seven lobbyists to push the measure this session, including members of the high-powered firm Capital Consultants of Hawaii.

The bill narrowly passed the Senate and has elicited a cascade of criticism from neighborhood boards and groups such as the Hawaii Appleseed Center for Law &Economic Justice and Unite Here Local 5, which represents hotel workers. They’ve argued that the bill will aid the proliferation of illegal vacation rentals, abet housing shortages and contribute to the state’s high rental housing costs.

Ige said he was concerned about the bill’s “unintended consequences.”

He said the bill will undermine Act 204, which was enacted last year and requires owners and managers of Hawaii vacation rentals to post their general excise and transient accommodations tax numbers on their online advertisements or face stiff fines.

The law is aimed at cracking down on operators of vacation rentals who aren’t paying their taxes and is also supposed to give the counties an added tool to rein in the thousands of illegal vacation rentals that are marketed throughout the islands, aided by websites such as Airbnb and VRBO.

Under HB 1850, operators and managers of short-term rentals could list Airbnb’s tax identification numbers instead.

“There are those in the community that felt that those provisions would provide a shield for anyone who would want to operate an illegal activity,” Ige said. “And so from our perspective, we thought that it would be better for us to defer action on the bill and make sure that we can work with the counties to come up with a measure that allows us to collect taxes owed and … facilitates the development and completion of county rules and regulations to stop illegal vacation rentals.”

Also on Ige’s veto list:

>> HB 1747: Would authorize police officers to have motor vehicles towed if a driver is arrested for driving under the influence.

The Honolulu Police Department maintains that it already has wide discretion to have vehicles towed, Ige said, and that the measure could have the effect of actually limiting this authority.

>> HB 1739: Would prohibit employers from accessing or obtaining employees’ social media accounts and passwords via coercion or other means.

Ige said it’s unclear whether such a practice is occurring in workplaces at a level that requires state intervention.

>> HB 2016: Would require the Employees’ Retirement System to transfer contributions by retirees and beneficiaries to the Hawaii Employer-Union Benefits Trust Fund for health insurance payments.

Ige said the ERS would have to comply with the Health Insurance Portability and Accountability Act, which protects health insurance information, and that the ERS would need time and resources to upgrade its IT systems to process such payments.

>> HB 2277: Would clarify the membership and mission of the King Kameha­meha Celebration Commission.

Ige said the measure created legal ambiguity as to how the commission would make decisions. The bill deleted the specific number of commission members, making it impossible to determine a quorum for the purpose of conducting business.

>> SB 2542: Would establish a full funding policy and budgetary procedures for routine repair and maintenance of state-owned buildings.

Ige said the measure is still undergoing fiscal, legal and policy reviews.

>> SB 3102: Would require state agencies to enter into interagency agreements, as opposed to memorandums of agreements or memorandums of understanding.

Ige said it is not clear why state agency interdepartmental agreements would be more efficient or effective in directing resource allocation.

>> HB 1370: Would authorize the Employees’ Retirement System to make direct payments to a divorced spouse of an ERS member or retired ERS member upon court order.

Ige said the state currently lacks the resources to modify the ERS’ information technology systems so that such direct payments can be made.