Hotel tax proposal from OK to Oahu by city council committee

A measure that would establish a 3% hotel tax was put forward for final reading at a meeting of the Honolulu city council budget committee on Wednesday. Under Bill 40, the revenues from the new tax would be divided among the city’s general fund, rail and to support parks, beaches and other natural resources affected by tourism.

The proposed 3% temporary accommodation tax would be in addition to the state’s current 10.25% hotel tax.

The legislature this year ended the sharing of portions of the state TAT through which the four counties received a total of about $ 130 million per year, with Honolulu receiving 44%, or about $ 45 million. However, the measure adopted by state lawmakers allows counties to recover these funds by implementing their own TAT.

Honolulu’s bill would levy a 3% tax on gross rental income from housing, including vacation rentals, hotels and timeshares. It would also apply to commission-free accommodation brokers, travel agencies and tour operators.

Honolulu is the latest county in the state to adopt its own TAT. Discussion in Council revolved around the lack of clarity on how revenues would be distributed between general fund, support for natural resources and, more controversially, rail.

The Budget Committee approved a project that allocates the TAT of 3% with 1.75% of revenue going to the general fund, 1% to rail and 0.25% to natural resources. After two years, the formula would be readjusted to allocate 1.25% to the general fund, 1.5% to rail and 0.25% to natural resources.

Projections of how much revenue the city would derive from the new TAT will vary based on the number of visitors, but according to July figures, city manager Mike Formby predicted the tax would generate around $ 86 million per year. year.

The rail transit fund is projected to see around $ 28.6 million in the first two years the TAT is imposed. Over the next few years, that number will grow to around $ 43 million.

The latest discussion of the proposed TAT split came as the acting CEO of the Honolulu Rapid Transit Authority, Lori Kahikina, informed members of the budget committee on Wednesday that the deficit estimated at $ 3.5 billion. dollars to complete the 20.2-mile rail project connecting East Kapolei to the Ala Moana center could be reduced to about $ 1.97 billion.

Reasons for the decline, Kahikina said, include an extremely conservative initial cost estimate, faster-than-expected collection of state general tax and TAT revenues, and HART’s efforts to seek efficiencies in the massive construction project.

Council member Esther Kiaaina expressed support for a key provision of the proposed city’s TAT ​​that would help ease the burden of tourism on Oahu’s natural resources.

“If we want to do something to help our natural resources in our parks, that’s an avenue,” she said. “The intention behind the TAT is to respond to the impact of our visitors. So I don’t think there is a more meritorious provision to be part of this measure. “

According to Formby’s projections, the special account for natural resources could see $ 7.1 million in perpetuity.

The remainder of the TAT’s new income would go into the city’s general fund to support city operations. The city would receive about $ 50 million for the first two years, then about $ 36 million per year.

The proposed TAT would add another source of revenue to the city budget. Currently, the city relies heavily on property taxes for its funding.

Bill 40 was rejected by the budget committee, with five council members voting in favor of the measure. Council member Heidi Tsuneyoshi registered the only “no”. She said she wanted all proposed TAT revenues to go to general fund and natural resources, not rail.

“I apologize that all of this information and discussion has been focused on rail, but it is not something of our doing. It’s something of the administration to say they wanted one percent of our TAT to go to rail, ”Tsuneyoshi said.

Bill 40 is expected to be heard at the city council plenary meeting scheduled for December 1. If approved by a majority of the nine members, he will go next to Mayor Rick Blangiardi for his signature.