Counties face taxing situation

With today’s opening of the Hawaii State 2016 legislative session, county officials are setting their sights on reclaiming what they say is their fair share of the transient accommodation tax.

Mike White, chairman of the Maui County Council, recently presented his research on the recent developments on the TAT to the Kauai County Council.

“In our legislative package, we’ve asked the state to consider giving counties more of the TAT,” said Council Chairman Mel Rapozo. “I’ve invited Mr. White to do a presentation on the work he’s done (with the TAT).”

A working group has produced a report for the Legislature, recommending that the Department of Land and Natural Resources, the North Shore land purchase, the Hawaii Tourism Authority, and the conventions center on Oahu, all take their share of the TAT first.

The remaining amount of the tax would be split with 55 percent going to the state and 45 percent to be divided among the counties.

“We do have a resolution on the floor today that encourages the state to accept the recommendations of the working group, hopefully to create a little more revenue for the counties,” Rapozo said last Wednesday.

White believes the counties shouldn’t accept anything less than half of the TAT revenues, after payment to the four entities that also have a stake in the tax.

Right now, he said, the state is encouraging counties to make up the losses they’ve been taking because of the TAT cap, with a surcharge on the General Excise Tax.

That’s already a 4 percent charge on all purchases statewide, and the state is allowing counties to raise that by one half of a percent.

“GET funds came with a requirement for transportation and infrastructure, though, and you can’t use GET money to pay for visitor costs for the counties,” Rapozo said.

Kauai officials haven’t decided if they’re going to raise the GET.

White, whose background is in hotel management, said he supported the creation of the TAT in 1987 because it was because it was supposed to support county and state services that visitors use. Those services include things like parks maintenance, police and fire services, and rescue.

“If we’re putting money into something that’s supposed to support state and county services provided to the visitors, than I want to make sure, as the payer of those funds, that they are coming to the county more than to the state,” White said.

Originally, counties received 44.8 percent of the TAT, which amounted to $188 million, White said.

Because most of that money went to the convention center on Oahu, White said representatives from the neighbor islands asked the Legislature for a larger share.

Now, the working group’s proposal, based on 2015 revenues, brings $138 million to the counties, with the state keeping $464 million.

Trouble for the counties started in 2009, when the state capped their portion of TAT revenues at $93 million. The state raised the cap to $103 million for fiscal years 2014-15 and 2015-16.

“The state took the counties’ TAT money to cover losses when times were challenging, but failed to make significant adjustments when county property values dropped by a greater percentage,” White said.

State revenues have rebounded by 34.4 percent, or nearly $1.8 billion over their 2010 level, White said. The cumulative revenue increase from 2010 to 2015 for the state has been $6.8 billion.

The counties have had an 8 percent increase in tax revenues and together they are now at $122 million, “even though property values remain about $4.5 billion lower than in 2010,” White said.

From 2007 to 2015 the state’s share of the TAT has gone from $8.3 million to $205 million, an increase of $196 million.

“With the cap and everything else that’s gone on in the last eight years, you can see that the state has taken the lion’s share,” White said. “Comparing the state’s share again, their increase is almost a 2,400 percent increase, while the state has given the county 2.2 percent of an increase.”

White said that Maui County has a resolution that will be heard on their floor either at the last meeting in January, or at their first February meeting. That resolution states that the counties should receive 50 percent of the total TAT.

“It is extremely important to remove the cap on (the) TAT to the counties, so that Kauai County gets its fair share of visitor taxes,” said Councilwoman JoAnn Yukimura in an email to The Garden Island. “The county incurs many costs in supporting and protecting visitors (and) at a minimum, the amount recommended by the state-county working group, about $9 million more, should be granted to Kauai County.”