State lawmakers should kill the legislation proposing to take back the counties’ portion of the transient accommodations tax revenue. TAT money supports essential public services such as police, fire rescue and lifeguards, not to mention infrastructure improvements including parks and
State lawmakers should kill the legislation proposing to take back the counties’ portion of the transient accommodations tax revenue.
TAT money supports essential public services such as police, fire rescue and lifeguards, not to mention infrastructure improvements including parks and roads. Snatching these funds to add about $100 million a year to the state’s multi-billion dollar budget pales in comparison the crippling effect it would have at the local level.
County Finance Director Wallace Rezentes Jr. says Kaua‘i’s funding share of the TAT collection has been some $14 million annually. Over the past two fiscal years, TAT revenues made up 13.4 percent of the county’s general fund revenue sources.
“County revenues generated from real property taxes and other sources are not sufficient to cover our operating budget,” Rezentes said in his March 27 testimony to the Legislature. “The complete elimination of TAT revenues will have catastrophic consequences on our operating budget and result in the need to curtail and possibly eliminate services that will negatively impact the public health, safety and welfare of our residents and visitors.”
We hope state lawmakers listen as they enter this session’s homestretch.
The bills that would create this “catastrophic” change are HB1744, HB1605, SB1111 and HB1747, which advanced Tuesday at the Capitol.
The transient accommodations tax is imposed only on gross rental income derived from the renting of transient accommodations in Hawai‘i, such as hotel rooms, apartments, condos or beach houses. Kaua‘i receives 14.5 percent of the 44.8 percent of the total TAT revenues the state doles out to the counties.
We understand that the state has to find a way to close a budget shortfall projected to be about $2 billion less than the previous two-year state budget. While the proposed legislation would allow counties to increase the TAT up to 5 percent and implement a 1 percent sales tax on retail purchases, this is not the solution. Take a closer look at trimming the extra fat before devastating local communities.
The Hawai‘i Mayors Council also opposes the state’s attempt to effectively steal from the county coffers for six years.
“The hotel room tax is a significant source of revenue for all the county governments. The counties provide the critical security, transportation, water and sewer infrastructure, parks maintenance, and other services that support the visitor industry and this revenue-sharing was established in recognition of the importance of the counties to the prosperity of Hawai‘i’s leading industry, and to replace the grant-in-aid program that had preceded it for many years,” the council, which includes Kaua‘i Mayor Bernard Carvalho, said in its April 6 testimony to the Legislature.
We also don’t buy the state’s lame justification that “this direct tax allocation to the counties is really a windfall.” Lawmakers should stick to the “economic downturn” motive.
Senate Ways and Means Chair Donna Mercado Kim said in a committee report on the proposed state retention of TAT collections that “During these tough economic times, the Legislature needs to balance the needs of the counties against the state’s programs and expenses that are supported by the general fund. …
“In these difficult times, your committee recognizes that county governments have not experienced the tremendous decline in revenues experienced by state government,” the committee concluded.
The audacity.
Clearly, as Carvalho indicated in his budget message this year, counties are feeling a proportional financial pinch and have less options on the table to handle a projected $11.8 million loss if TAT funding is pulled.
The Legislature and Gov. Linda Lingle have myriad options for garnering additional revenue — raising taxes on gas, cigarettes, general excise taxes, raising travel fees, selling bonds. They also could cut programs, a move that could be politically unpopular but may be necessary.
County Council Budget and Finance Committee Chair Daryl Kaneshiro said this week that he believed many county departments and agencies had already cut as much as they could manage.
To the governor and lawmakers, we understand you’re in a tough spot right now and we don’t envy you. However, in our opinion, the state should be employing a buck-stops-here mentality and should not be making the counties raise taxes on its own people to support the state’s operations.
