The Hawaii 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 Hawaii. 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 percent of the net expenditures directly related to tourism, as opposed to the State’s 46 percent.
This recent attempt to entirely change the TAT structure would have detrimental effects on the County of Kauai’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 90 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 90-day period, the county would waive its ability to receive the reimbursement.
Second, over a 10-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 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 Kauai to speak up and contact your state legislators before it is too late.
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Mel Rapozo is the Kauai County Council chair.
I totally agree. The State is with its overblown and expensive public employees system (salaries, retirement benefits, healthcare, etc.) is adding insult to injury by keeping way too much of the TAT generated by the counties. The State bullies the counties because of its own inefficiencies and now wants to make it harder and more expensive for the counties to collect their fair share and then reduce the taxes that residents pay the counties for their homes. Can the state legislature really be this clueless? H.B. No. 1665 proves it can.
All the “Taxpayers” want is TRANSPARENCY.
There is no way, on God’s green Earth, that any TAT money has been allocated to beach and park bathrooms. They have remained an embarrassment for years.
I’d love to see where we spend Kauai’s share of the TAT. Wouldn’t it be great to have an article in TGI that breaks down the last 10 year’s of TAT income, and where it went? Might be the “Article of the Year”.
I’m not sure our TAT should be supporting “firemen”. I don’t understand the overlap with EMS. I’m going to assume EMS is paid via insurance, and in its absence, Medicaid. The county should take a risk and privatize or make it a volunteer “fireman” structure. Federal requirement to have Firemen at airports. Centralize the manpower, and decentralize the support equipment. Very low return-on-investment with the current set up.
Mr. Rapozo, many of us would like to help, especially by contacting our state elected representatives; trouble is we do not know all of their names or email.addresses. Could you make another article follow up with the phone and email contact for our elected officials, including local on Kauai, that way we can print and hang the list up on the wall and we can write you and tell you what a good job you have been doing for us.
Mahalo,
Charles