LIHUE — County officials across the state may have to wait a little longer to get more of their share of tax revenues charged to most visitor accommodations throughout the state. State lawmakers gave the OK on Tuesday night to
LIHUE — County officials across the state may have to wait a little longer to get more of their share of tax revenues charged to most visitor accommodations throughout the state.
State lawmakers gave the OK on Tuesday night to slightly increase the capped amount of transient accommodations taxes, commonly known as the TAT, now allocated to the state’s four counties over the next two years.
These changes will amount to a nearly $1.4 million bump in revenues for the County of Kauai each year — a far cry from the nearly $10 million that county officials had been pushing for.
“We’re not very happy about it but there’s not that much we can do right now,” said Kauai County Councilman Mel Rapozo, who serves as the president of the Hawaii State Association of Counties. “We appreciate what they gave us, but I still believe it falls short of what the counties need for the services we provide to our visitors statewide. We’re not very happy but we know that they were in a bind as well.”
State House and Senate lawmakers unanimously approved the measure, House Bill 1671, on final reading Tuesday. The bill now heads to Gov. Neil Abercrombie’s desk for his signature.
News of the move was only a small consolation for some state legislators and county officials who were seeking to remove the tax cap, which was instituted in 2011.
“Many hours were spent at the State Capitol by members of the council and the administration making our case and providing ample justification for what we feel is our fair share of the transient accommodation tax,” Kauai Mayor Bernard Carvalho wrote in an email. “Obviously we are disappointed with the outcome.”
Others, however, said the concession, reached by a joint conference committee consisting of House and Senate lawmakers, is a step in the right direction.
“I think this is a great compromise,” Rep. Daynette “Dee” Morikawa, D, Koloa-Niihau, wrote in an email Tuesday. “Setting a cap will help us determine a set amount of funds.”
A breakdown in revenue
Transient accommodations taxes, according to state tax documents, are imposed on gross rental income collected by accommodation providers who rent and furnish hotel rooms, apartments, condominiums, houses and beach houses for people staying on island for less than 180 consecutive days.
Those tax rates, last changed in July 2010, are currently set at 9.25 percent.
Before the Legislature imposed a cap on how much of those taxes should be distributed to all four counties statewide in 2011, the local governments collectively received a 44.8 percent share of all TAT revenues.
The tax cap, however, placed a $93 million limit on the proportional amount of TAT revenue that each county can collect: 14.5 percent for Kauai County; 18.6 percent for Hawaii County; 44.1 percent for the City and County of Honolulu; and 22.8 percent for Maui County.
Under current state tax laws, a majority of TAT revenues collected monthly are deposited into several state funds that support the tourism industry in Hawaii.
Whatever tax revenue is not deposited into those funds or distributed to the counties is placed into the state’s general fund.
In all, about $368.5 million in TAT revenue was collected during the 2013 fiscal year alone, according to Hawaii Tourism Authority documents.
That amount, according to the state-funded agency, is expected to reach $403 million this year.
The compromise
At the start of this year’s legislative session, many county officials and some state lawmakers voiced their support for removing the TAT cap.
Doing so, county officials said, would help them address projected budget shortfalls during the next fiscal year.
If the cap for the counties was removed and the TAT rate remained at 9.25 percent, the County of Kauai would have received about $10 million in additional revenue for county services.
Council Chair Jay Furfaro said this new revenue would have also helped to offset a $8.9 million shortfall projected for the county’s general fund during the 2014-2015 fiscal year.
Some state tax officials and others, however, said county officials have other sources of revenue to draw upon, such as real property taxes, and contended that removing the cap would have a significant impact on the state’s financial plan.
What came out of a conference committee last week, after it was approved by House lawmakers and sent to the Senate, was a new version of the bill that garnered mixed reactions from state and county officials.
Under the amended changes, a total of $103 million in capped TAT revenue would be divvied up between the state’s four counties using the current distribution formula in place.
This amounts to about $14.9 million in tax revenues for the County of Kauai.
The county currently receives about $13.5 million in TAT revenues under the current cap that allocates $93 million for all four counties.
The bill also establishes a working group to evaluate how the duties and responsibilities of rendering public services should be divided between the state and counties.
This group, according to the bill, would also be charged with recommending “the appropriate amount of transient accommodations tax revenues to be allocated to the counties.”
These new changes, however, did not spell out how many people would be in the working group; specific eligibility requirements; and what interests group members may serve.
Mixed responses
While some lawmakers see the newest version of the bill as a compromise, other lawmakers and county officials say they are disappointed by the outcome.
“It was not as much as we hoped for but it is a first step toward lifting the cap and restoring a more equitable share for the counties,” Carvalho wrote in an email. “We strongly feel that the counties are entitled to a much larger share of the TAT revenues and we will continue to fight for that.”
Sen. Ron Kouchi, D, Kauai-Niihau, said the Legislature’s decision was not an easy one. He is thankful, however, that counties statewide will at least see some increases.
“There was some talk about whether we would have any funds available because of the negative impact on (the state’s) budget,” Kouchi said. “I’m just happy we were able to give them something.”
• Darin Moriki, county government reporter, can be reached at 245-0428 or dmoriki@thegardenisland.com. Follow him on Twitter at @darinmoriki.
