LIHUE — Hawaii counties will soon be seeing a $10 million decrease in their allocation of Transient Accommodations Tax funds.
Usually, the counties get $103 million in TAT funds to share between them. Under the existing law, it is scheduled to shrink to $93 million after Fiscal Year 2017, said Carolyn Tanaka, spokeswoman for the House of Representatives.
Some Hawaii lawmakers are unhappy with the decrease.
“Our county is shortchanged by the Legislature on the TAT for the fifth-consecutive year,” said Ross Kagawa, Kauai councilman. “Even though the state collects significantly higher income and GET taxes, they still refuse to share the TAT with the counties.”
Mel Rapozo, council chair, said there are two options now — increasing revenue or reducing spending.
“Hopefully we can accomplish working on the decrease without any tax increases,” he said. “I’m optimistic we can absorb it and not increase taxes.”
The decrease may not seem like a lot, but Kauai’s budget will take a significant loss, Rapozo said.
“Hopefully we can find some room in the proposed budget. The good thing is that the mayor has a few days to address it in his supplemental budget, and that will tell a story of what council is going to do,” he said.
In a statement, the Hawaii Association of Counties, which is made up of leaders from four counties, said the cut will burden taxpayers.
“This cut will most definitely hurt the counties financially, particularly with us already providing much needed fire, police and parks services to serve and protect our tourists,” according to the statement.
During the 2017 Legislative session, which ended on Thursday, the House of Representatives and State Senate could not agree on amendments to Senate Bill 1183, which proposed to reduce TAT allocations from $90 million to $83 million to fund Honolulu’s rail project. The measure also sought to increase hotel taxes from 9.25 percent to 12 percent over the next 1o years.
“Th Legislature really crippled the counties, especially Honolulu,” said Jimmy Tokioka (D-15). “In current form SB1183 zeroes out TAT for all of Honolulu City and County, which is loss of $45 million.”
Ron Kouchi, Senate president, said bills introduced to handle Honolulu’s rail project were testing.
“The rail proves to be very challenging. With all of the turmoil that went on, it made it challenging to get to finish line,” he said. “It was very challenging and incredibly interesting last few days.”
On Thursday, the House deferred the measure, and the Senate recommitted it, effectively killing it for the session, Tanaka said.
HSAC was disappointed at the state House’s decision not to settle their differences with the Senate on SB 1183.
The measure can be taken up again next session, Tanaka said.
In 2014, the Legislature capped county appropriation of TAT funds to $103 million. Currently, Kauai gets $14.9 million in TAT revenue.
The allocation of TAT monies has been a hot button agenda item for the state Legislature this session.
In January, the state Senate introduced SB 1290, which sought to maintain the $103 million allocation, but it was killed in during the session.
The House of Representatives introduced a bill that would phase out TAT appropriation over a period of three years, hoping to shift the burden of high property taxes from residents to non-residents who own property in the state.
That measure was denied by the House Finance Committee in March.
HSAC plans to push for a bigger TAT cut for the counties. In January, HSAC proposed a 55-45 split between the counties and state, which was recommended by comprehensive research from the State-County TAT Functions Working Group.
If passed, it would give Kauai’s revenue to $23.5 million.
“We will continue to fight for a more equitable share of the hotel tax during the next legislative session for the benefit of local residents and visitors,” the statement said.
Rapozo said he wants to work with Kouchi and others to convene a special session to hammer out the details.
“I’m cautiously optimistic we can get $103 million. I’m hoping the counties can work with the state and resolve the issue without sacrificing $10 million,” said Rapozo. “It benefits all counties — not just Kauai,” he said.
Tokioka said he plans to try to get the TAT allocation back up to $103 million next session.
“I want to find someone close to the leadership to introduce it. I can then sign off on it, to say for the record I support it,” he said.