EDITORIAL FROM KAUA‘I COUNTY COUNCIL CHAIR MEL RAPOZO REGARDING HB 1665 H.D. 1, RELATING TO THE TRANSIENT ACCOMMODATIONS TAX

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EDITORIAL FROM KAUA‘I COUNTY COUNCIL CHAIR MEL RAPOZO REGARDING HB 1665 H.D. 1, RELATING TO THE TRANSIENT ACCOMMODATIONS TAX

The Hawai‘i Council of Mayors proposed a bill in their 2018 Legislative Package, which was numbered H.B. No. 1665, to amend the amount of transient accommodations tax (TAT) revenue from a specified amount each year to a percentage of the revenues collected.

However, the House Tourism Committee, during its February 6, 2018 hearing, substantially amended the Bill to change the method of allocating TAT revenues to the counties to a county reimbursement process that would be used for specified public services rendered by the county and also capping the amount that would be reimbursed to the counties. The Bill also proposes to create a tax credit program for primary residential property owners who do not provide transient accommodations, i.e., residents who do not utilize their home as a vacation rental.

On February 16, 2018, the House Finance Committee recommended that H.B. No. 1665, H.D. 1, be passed on third reading with no amendments and referred the measure to the Senate.

How does this affect us as a county? The TAT is a tax imposed on the gross income from the rental of a transient accommodation and on the fair market rental value of a time share vacation unit in the State of Hawai‘i. In general terms, the TAT is a tax paid by visitor accommodations (hotel, timeshares, legal vacation rental, etc.), which is paid to the State and allocated to various entities, including the counties, for visitor related expenses such as use of our beach parks and road systems, and also has an effect on public safety services from firemen, lifeguards, and police. A study by the State-County Functions Working Group found that the counties cover 54% of the net expenditures directly related to tourism, as opposed to the State’s 46%.This recent attempt to entirely change the TAT structure would have detrimental effects on the County of Kaua‘i’s budget, as well as the budgets of the other counties in the State.

First, the Bill requires that the counties pay up front for tourism costs and seek reimbursement for these costs within ninety days of expenditure, placing the initial financial burden on the counties as well as creating more bureaucratic work for our already overstretched Department of Finance. If the Department of Finance is not able to apply for reimbursement within a ninety day period, the county would waive its ability to receive the reimbursement.

Second, over a ten year period, the four counties have collectively received only a $2.2 million increase in TAT, while expenses just for fire, police, and park services have increased by more than $220 million during the same period. The counties continue to face large collective bargaining increases for public safety, yet the Bill would only provide for a limited reimbursement related to these vital services.

Third, the measure introduces a primary residential property owner tax credit for homeowners who do not use their homes for transient accommodations.  If the intent is to stop more illegal transient accommodation rentals, why wouldn’t the State instead provide a larger TAT allocation to the counties to increase enforcement efforts?

Over the years, the counties have fought vigilantly to maintain their share of the TAT, which has continually been threatened to be reduced. Now that we are seeing a record number of visitors return to the State, the impacts to our counties have increased, yet again the State House of Representatives’ current actions do not help relieve the burden residents of Kaua‘i County have shouldered in paying for the costs to mitigate the impacts created by the tourists who visit our Island.

While these efforts are occurring at the State Legislature, much of it was done quickly and with very little notice to the counties. This measure has far reaching impacts and we cannot afford to take tax dollars away from county services and programs in order to carry the burden of our visitor related expenses, all while hoping it will be deemed deserving of reimbursement.

I implore the people of Kaua‘i to speak up and contact your State legislators before it is too late.