The Hawaii Tourism Authority is finally getting its first transient accommodations tax distribution since the pandemic, but now is rushing to commit to spending the $35.5 million to ensure federal requirements don’t interfere with its ability to use the funds.
The projected spending, which includes $16.5 million for the Hawai‘i Convention Center, is on top of a decision made by the HTA board last month to encumber some $12 million in leftover tourism special funds and about $6 million that has been parked for years in a special fund created for the Hawaiian Music and Dance Center.
HTA has until June 30, the date when the agency could lose access to carryover money in its special fund, to create purchase orders to buy goods and services or sign contracts that commit to purchases. That doesn’t necessarily mean that HTA will spend the money, which will be subject to certain benchmarks that are established by the HTA board.
“This is not a credit card,” said HTA Vice Chairman David Arakawa.
The move to obligate the spending of these funds is an administrative-supported end run around pending legislation that HTA says puts its future in jeopardy and takes away the kind of autonomy that has made it possible for the agency to execute multiyear projects and move nimbly. It also makes it harder for state lawmakers to interfere with HTA’s destination management priorities and ensures that the agency doesn’t run into difficulty spending federal funds on foreign marketing and the Hawai‘i Convention Center.
Gov. David Ige on June 1 approved a recommendation from state Director of Finance Craig Hirai to restart HTA’s transient accommodations tax distribution. HTA hasn’t had access since May 2020 to its share of TAT funding, which is a statewide lodging tax.
House Bill 862, passed this legislative session, takes away the dedicated transient accommodations tax funding HTA has had since its founding. The bill replaced HTA’s normal $79 million annual TAT distribution with $60 million in funding from this year’s American Rescue Plan Act.
If the governor signs HB 862, HTA’s fiscal year 2023 budget starts at zero, and the agency would have to justify to legislators why it should receive general funds. HTA also would lose its procurement exemption, a move that would require state approval for all future contracts and purchases.
Ige has until June 21 to release his intent-to-veto list. However, in this case his hands might be tied.
Legislators left HTA funding out of House Bill 200, the state’s finance bill. If Ige vetoes HB 862, the federal funding that lawmakers allocated to HTA for fiscal year 2022 disappears, without any special funds to replace it.
An earlier version of HB 862 would have refocused the agency and its funds on its original marketing and branding functions, one of its four “pillars,” instead of prioritizing new pillars like Hawaiian culture, the environment and the community.
HTA’s pillars were left intact in the version of the bill that was forwarded to the governor. Still, if HB 862 and HB 200 are signed by Ige, state legislators would decide annually how much funding HTA should get, and it’s unclear whether the agency could count on future support for its pillars.
HTA President and CEO John De Fries said Friday that the status on the usability of the American Rescue Plan Act funds remains in a state of uncertainty for many of HTA’s programs.
“We have submitted requests for clarification to the U.S. Treasury, which we are awaiting a response. Specifically, we are concerned about our ability to contract with corporations that may not be based in the United States,” De Fries said in a Thursday memo to the HTA board and staff. “This would include branding contracts for all our primary international markets which play a significant role in our recovery efforts.”
De Fries said HTA will continue to work diligently to process and encumber existing fiscal year 2021 funds to address and mitigate the uncertainty associated with the use of federal funds. De Fries said HTA’s TAT encumbrances will prioritize items like international marketing where ARPA funding may not be able to be used.
HTA board member Ben Rafter said HTA staff has been directed not to spend international marketing dollars until the markets have reached high enough benchmarks to begin recovery efforts. Rafter said the HTA board does not anticipate spending down all the money that has been committed.
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HTA’s encumbrance plan
The Hawaii Tourism Authority expects to receive $19 million and another $16.5 million for the Hawai‘i Convention Center from a June transient accommodations tax distribution.
Hawai‘i Convention Center: $16.5 million
HTA: $19 million to be committed as follows:
Japan marketing $9 million
China $1.2 million
Korea $1.4 million
Oceania $1.9 million
Canada $800,000
Island chapters $3 million
Visitor assistance programs $650,000
Safety and security $30,000
Board minutes $20,000
Total $35.5 million
Source: HTA
