NAWILIWILI — A threat by state government to take away millions of dollars in the form of the counties’ traditional share of hotel-room taxes almost became reality in this year’s state Legislature session.
After a fierce battle between Honolulu and outer-island lawmakers, the counties got to keep portions of the transient accommodations tax (TAT, or hotel-room tax), at least for another year.
The TAT is a 7.25-percent state tax (moving to 8.25 percent July 1) added to the price of each rented visitor accommodation (hotel rooms, vacation rentals, condominiums, etc.), with percentages distributed to the four counties and the Hawai‘i Convention Center in Honolulu.
Kaua‘i’s portion of it this year is estimated to be $12 million, and not having it would have thrown a major wrench into budget-balancing chores of Mayor Bernard P. Carvalho Jr. and councilmembers.
“I know that a $11- or 12-million hit to you would’ve been huge,” state Rep. James Kunane “Jimmy” Tokioka, D-Wailua-Lihu‘e-Koloa, told Kaua‘i County Council members Wednesday.
Council members Wednesday acknowledged the work done by state lobbyists and Kaua‘i representatives in the state Legislature.
James Pacopac and Ron Kouchi, from SPJ Consulting LLC, together with Tokioka, gave councilmembers a vivid account of how the counties got to keep the TAT for now, in a lobbying effort that included deliveries of gifts of island delicacies to lawmakers and intense lobbying efforts by the four county mayors.
Tokioka said up until the last hour of the legislative session it was still possible that up to 100 percent of the TAT would be taken by the state in an effort to address a budget shortfall surpassing $1 billion.
The state House had previously compromised on a $94-million cap, according to Kouchi, a former Kaua‘i County Council member. The state Senate went as far as being willing to give the counties $50 million, and use the rest to cover some of the state’s shortfall of over $1 billion.
The House and the Senate could not agree on which bill to pass. As a result, the counties got the best of it.
“Having those bills fail actually results in a better financial situation for the county of Kaua‘i,” said Kouchi, adding that now there’s no cap on how much the counties will get from the TAT.
Tokioka said House Speaker Calvin Say, D-Kaimuki, was in a though position. In the prior year, Say had told councilmembers across Hawai‘i that the state would take the TAT in this year’s legislative session.
But Say ended up supporting he counties’ position, said Tokioka, recognizing Say’s efforts.
Say and state Rep. Marcus Oshiro, D-Wahiawa, were instrumental in bridging the House and Senate after all communication broke down between both bodies only a few days before the deadline to approve Gov. Linda Lingle’s operational budget for fiscal year 2011, said state Rep. Roland D. Sagum III, D-Po‘ipu-Waimea-Ni‘ihau, in an earlier telephone interview.
Pacopac said Councilman Derek Kawakami, appointed by other councilmembers to represent the council at the state Legislature, went several times to O‘ahu to lobby for the TAT, providing valuable aid in securing the tax revenues.
The role that lobbyists and state representatives play is an “art and a science,” said Kawakami, thanking them for helping him “navigate” at the state Legislature.
“The art side of it is almost something that cannot be taught, to be able to see the unseen, to be able to hear what’s unsaid, and to be able to act appropriately to capitalize on the opportunity as it presents itself,” he said.
Tokioka also did a “terrific job” in securing the TAT, said Pacopac. “Without his help I don’t know where Kaua‘i County would be,” Pacopac said.
Kouchi said most of the votes to keep the TAT intact came from Neighbor Island lawmakers. Most of them had previously served as councilmembers on their respective islands, which gave them a good understanding on how important the TAT is for the counties.
“It was really a good effort from the Neighbor Island representatives and senators,” Kouchi said.
If the TAT was taken away, Kaua‘i lawmakers would probably have to raise real-property taxes, said Councilman Daryl Kaneshiro, Budget and Finance Committee chair.
“The fact is, we would have no choice,” said Kaneshiro, making a reference to the “800-pound gorilla” of raising taxes that Administrative Assistance Gary Heu said weeks ago was sitting in the corner of the room.
“The legislative body representing the island of Kaua‘i was really the one who helped to lock that gorilla up for another year or so,” Kaneshiro said. “If that wasn’t retained by the counties, that gorilla would be up and running around.”
Tokioka, who had served the Kaua‘i Council for 10 years, said 2010 has been the hardest year for the state Legislature, and that hard choices had to be made. Up until five years ago, no one thought that a furlough option would be considered let alone possible, he said.
Council Chair Kaipo Asing said if the TAT was taken away, the loss would be much higher than the $12 million, because the bill was proposing to take the TAT for a minimum of five years.
Tokioka said the TAT got a big push from Carvalho, who traveled to Honolulu to convince state legislators to let the counties keep the TAT.
Politics wasn’t the only factor used to convince lawmakers to let the counties keep the TAT. Local delicacies, as it turns out, may have been special allies.
“Mayor Carvalho had a special run of kulolo made and delivered to both money-committee chairs, because he found out they like kulolo,” said Kouchi, adding that he personally delivered Hamura saimin to both committees, while Kawakami brought poi.
The work is done for this year, but Kouchi said if the economy does not turn around the threat will be back at the table in the next state Legislature.
“The job to keep next year’s TAT starts today,” Kouchi said.
The $12-million portion of the TAT that Kaua‘i will receive represents more than 8 percent of the county’s $147-million operational budget for the fiscal year beginning July 1. It’s the highest percentage of TAT in any of the counties’ budget.
About one out of four people on Kaua‘i are visitors, according to government sources. This means that the Garden Island has the highest tourist-to-resident ratio in the state.
Kaua‘i’s population, as of July 1, 2009 was 64,529, according to the U.S. Census Bureau. In March, the state Department of Business, Economic Development and Tourism website states 79,586 visitors arrived on Kaua‘i, each spending an average of 7.4 days on the island.
Doing the math, on any given day there were about 20,000 tourists on the island, bumping the population to nearly 85,000.
Councilmembers also acknowledged the work done by state Rep. Hermina “Mina” Morita, D-Hanalei-Kapa‘a, and state Sen. Gary Hooser, D-Kaua‘i-Ni‘ihau, to keep the TAT flowing for another fiscal year.
