Hawaii climate impact fee becomes law

Everyone who stays in a Hawaii hotel, cruise ship or other lodging beginning Jan. 1 will pay an extra $3 for every $400 in overnight costs — or an additional $30 for every $4,000 spent to stay in the islands — to help Hawaii pay to address climate change and reduce the risk of future wildfires.

Gov. Josh Green signed Senate Bill 1396 into law as Act 96 on Tuesday while surrounded by representatives of Hawaii’s tourism and lodging industries who cheered on the new law, along with state legislators who navigated the bill through the legislative session that just ended.

Hawaii needs to reduce the risk of wildfires, especially following the deaths of 102 people that devastated Lahaina in 2023 and nearly shuttered Maui’s tourism industry, which continues to struggle, Green said.

He called the new law the first of its kind in the nation and encouraged communities on the mainland to look at it as a possible funding road map for them to also mitigate against wildfires and climate change.

Future wildfires, beach erosion and other damages from climate change, Green said, mean “people will stop coming. … We have to show that we’re all in this together. … I hope that the world is watching.”

For tourists who will pay higher room taxes, Green said “they will see benefits that will far exceed their expense. … I’m grateful.”

State Sen. Lynne DeCoite chairs the Senate Economic Development and Tourism Committee and represents Upcountry Maui-Molokai-­Lanai.

She called the new law common sense and a “fair process to those who come to visit.”

Rep. Adrian Tam chairs the House Tourism Committee and represents Waikiki where he sees beaches “eroding rapidly every year,” jeopardizing Waikiki’s attraction as a tourist destination.

“The visitor industry will struggle if we do nothing now,” Tam said, especially if beaches “are decimated and fires take towns.”

The higher room tax has been projected to generate an extra $90 million to $100 million annually devoted to climate change and wildfire prevention.

Green previously told the Honolulu Star-Advertiser that Hawaii needs $500 million to $600 million annually to appropriately protect Hawaii against future wildfires and mitigate against climate change, which continues to erode beaches, send oceanfront homes crashing onto beaches and expose visitors to risks that could discourage them from returning or endangering their safety.

At the start of the legislative session, Green had asked that the Legislature also dedicate all of the $60 million or so interest on the state’s $1.6 billion to $1.7 billion rainy day fund to also respond to climate change.

But the Legislature shot down the rainy day interest proposal as a financial cushion against the threat of the Trump administration’s cuts to federal programs like Medicaid and food stamps and other services that remain unknown, along with the impacts of lost federal grants to Hawaii nonprofit organizations.

Uncertainty over President Donald Trump’s tariff wars also continues to bring uncertainty for Hawaii businesses as the threat of a recession lingers.

So Green appeared to agree with the Legislature’s plan to resist tapping into the rainy day fund or using its interest amid an unpredictable economic future.

“We’re going to need to have some security,” he said on Tuesday.

Even though Green’s hopes of generating close to $200 million annually died, Green said Tuesday that he will not propose any other additional mechanisms to increase funding to combat climate change and reduce wildfire risks.

Instead, he hopes to use the projected $90 million to $100 million in annual new revenue to leverage it to sell bonds to fund expensive projects that could cost $300 million to $500 million, such as restoring beaches around Hawaii hotels and resorts.

He also plans to ask philanthropic organizations and donors to match hotel and cruise ship revenue to provide even more funding to “magnify it greatly … to protect the aina.”

At one point, Green turned to the state seal hanging behind him and the state’s Hawaiian motto, “Ua Mau ke Ea o ka ‘Aina i ka Pono,” which translates into “The life of the land is perpetuated in righteousness.”

As the additional lodging tax revenue begins flowing on Jan. 1, nonprofit organizations battling climate change, beachside hotel resorts and others can begin applying for funds, Green said.

A portal will be created to accept community ideas for funding, but everyone will have to detail how the projects will benefit Hawaii, Green said.

“There’s no shortage of input to me, I can tell you,” Green said. “Any way you can bend my ear, I’ll listen. Get ready to give us input. … We need to get this right and set the model for the nation.”

The new revenue also might help Hawaii stabilize its insurance costs, Green said.

It represents “another driver of costs across the country and we’re ahead of it,” he said.

Under Act 96, Hawaii’s Transient Accommodations Tax — more commonly known as the hotel room tax — will increase Jan. 1 by 0.75% — to 11% up from 10.25%.

In addition to each county’s 3% TAT, the result means locals and visitors who stay in hotels or other accommodations will soon pay an overall TAT rate of 14%.

Green said the formula means local residents — at least those that don’t pay for overnight lodging — will not bear the financial brunt of having to replenish beaches, prevent erosion and other effects of climate change.

At a time when the Legislature and Green began delivering on their promise this year to reduce state taxes, Green said, “We can’t just tax the local people anymore.”

Instead, visitors will have to pay less than 1% more to keep them coming back to the place that attracted them in the first place, Green said.

Tuesday’s bill signing represented a three-year effort by Green to find a new revenue stream to respond to climate change that began when he took office.

Several versions have been proposed in the first two years and took on more urgency in the 2024 session following the Aug. 8, 2023, Maui wildfires that cost $13 billion.

Still no plan emerged following the 2024 session.

“We couldn’t get it across the finish line,” Green said.

But consensus finally focused on raising the TAT this session.

Green thanked tourism and hotel leaders for their “absolutely incredible partnership” before they surrounded him for photographs following Tuesday’s bill signing.

“They looked at the greater good,” Green said.