LIHU‘E — As Mayor Bernard Carvalho Jr. and county department heads scrambled to come up with a trimmed-down budget for the fiscal year beginning July 1, 2010, a dark cloud stood over the entire proposal, potentially threatening to wash away revenue representing roughly 8 percent of the $146.29-million county operating budget.
State legislators, faced with similar challenges to try to pare down a state budget shortfall well over $1 billion at present, considered taking away a significant portion of the state hotel-room tax (transient accommodations tax, or TAT) that had gone to the counties since its inception.
State Rep. Roland Sagum, D-Ni‘ihau-Po‘ipu-Waimea, said the House and Senate have finally come to an agreement, deciding to let the counties to keep the TAT. “The House was flexible on several bills. On the TAT we’re standing back to not give in.
“It’s going to take several days to finalize it,” Sagum said, “but the way it is right now there’s no take away.”
Rep. Jimmy Tokioka, D-Lihu‘e-Koloa, said Kaua‘i received somewhere between $11 and 12 million from the TAT last year, representing roughly 14 percent of the TAT. At least half that amount was being threatened to be taken away.
Sagum said the House’s position was to let the counties keep the TAT, with Tokioka and Rep. Mina Morita, D-Hanalei-Kapa‘a, also supporting that idea. State senators representing the Neighbor Islands, including Gary Hooser, D-Kaua‘i-Ni‘ihau, also fought to keep the money flowing to the four counties.
Lawmakers representing O‘ahu, however, wanted to take the funds and add them to the state’s budget for the fiscal year starting July 1, 2010.
Earlier in the week, Carvalho’s Administrative Assistant Gary Heu said the “800-pound gorilla” of raising island property taxes sitting in the County Council chambers would be an alternative to avoid implementing furloughs of Kaua‘i government employees.
Heu said that even with the furloughs implemented, if the TAT revenue is taken away from Kaua‘i the idea of raising property taxes may have to be revisited.
Despite an apparent compromise between the state House and Senate, there is still some confusion and uncertainty about the TAT.
The House had taken a position in establishing a $92-million cap in the TAT for the counties. “Anything after that would go to the (state) general fund,” said Sagum, adding the cap was based on last year’s numbers.
“The Senate position was to take $50 million, roughly,” Sagum said. “All the counties were up in arms.” The four county mayors lobbied and testified against the Senate plan.
After communication between the House and Senate broke down, state Rep. Marcus Oshiro, D-Wahiawa, and the House Speaker Calvin Say, D-Kaimuki, were able to convince the Senate Ways and Means Committee members to accept the House position, Sagum said.
“We still need several more days to work the final details, but that’s basically what it is,” said Sagum, adding that the cap is gone.
Tokioka, however, said the cap remains, at $95 million.
Tokioka said it’s really important that Kaua‘i keeps the TAT, because the county provides essential services to tourists, from keeping beaches safe with staffed lifeguards to search-and-rescue operations, such as this week’s search for Utah visitor Ryan Soper, which ended tragically after his body was found six days after his disappearance in Wailua’s Secret Falls area.
County officials announced Friday that an autopsy revealed Soper died of a massive head injury.
A portion of the TAT goes to pay for the Hawai‘i Convention Center in Honolulu, and a marketing fund. Whatever is left is distributed to each county, according to Tokioka.
O‘ahu gets the most revenue from the TAT, because of its large number of hotels. Kaua‘i, however, gets the biggest percentage per hotel room, Tokioka said. Back when Hurricane ‘Iniki devastated Kaua‘i, legislators successfully lobbied to help the island to receive the extra help from TAT revenues.
Tokioka said if Kaua‘i lost the TAT revenue, it would suffer the biggest hole in its budget of any county.
“We tried to balance the budget with the least amount of pain to everyone, but certainly everyone in the state will be feeling some pain that this financial crisis has bestowed upon us,” Tokioka said.
The legislature apparently agreed on a three-year period in which the counties will receive the TAT revenues. Tokioka said, however, that every year the legislature goes in the rules could change.
“It all depends on the financial stability of the state at that time,” Tokioka said.
The House and Senate were supposed to go into session at 6:30 p.m. Friday to work on the final details of the state budget. The work was supposed to carry on until midnight, well past press time.
Despite that the House and Senate may take several days to fine-tune the agreement, it is expected that the final decision on the TAT may have been made by midnight Friday.
• Léo Azambuja, staff writer, can be reached at 245-3681 (ext. 252) or lazambuja@kauaipubco.com.
