LIHU‘E — The county administration is pushing forward two bills targeting the visitor industry: one establishing its own transient accommodations tax and another creating a new tax class for vehicle rental operations to be reviewed at first reading next Wednesday, July 21, by the County Council.
“While we could maintain a balanced budget via an increase in real property taxes, it is clear that the policy of burdening residents and commercial enterprises with funding the impacts of tourism activities on island is inequitable,” County Finance Director Reiko Matsuyama states in a July 8 memo to the council for Bill No. 2829, implementing a county TAT.
Matsuyama said the average daily census of visitors on island has accounted for nearly 30% of the county’s serviceable population, and that, “our tax policy should reflect recouping this impact proportionally to the burden on County government.”
Officials can do this with the passing of House Bill 862, now Act 1 of the 2021 Special Session, which eliminated the distribution of TAT revenue to the counties.
In the past, the county has been able to garner close to $15 million per year in general fund revenues from the state’s TAT, which stopped once the pandemic hit in fiscal year 2020, affecting the following years’ budgets.
“When our share was suspended this last year during the pandemic, we utilized our Reserve Fund to balance the budget for FY21 and FY22. It is essential that we now fill the TAT revenue gap to avoid the prospect of future financial shortfalls,” Matsuyama said.
Where the county’s reserve is still to be determined.
As of June 30, 2020, the county had about $50 million in the reserve fund balance, according to officials. More accurate estimates on how much is in the reserve balance will not be available until late summer or early fall, officials said earlier this week. However, since March 2020, the county has tapped into at least 40% of its reserve fund, mostly to cover the lack of TAT.
This proposed bill establishes a 3% TAT on all gross rentals, gross rental proceeds and fair market rental value considered taxable to be collected each month. The proposed bill also applies to visitor brokers, travel agencies and tour packagers who arrange transient accommodations at noncommissioned contracted rates, the bill states.
In a previously reported projection, per every one percent increase, the county would see about $6 million in revenue.
In a second proposed amendment to the charter, Bill No. 2828, the administration seeks to add a new rental car real property tax class.
Pointing to the “direct and indirect impacts to county infrastructure and the general welfare as a consequence of the over-abundance of vehicular car usage on the island of Kaua’i,” Matsuyama said, that “Rental car activities facilitate a high volume of movement and human impact across the island.”
Matsuyama directly points to the car rental app Turo.
“Recently we have seen an increase in the use of Turo, an online platform to rent personal vehicles,” Matsuyama said in a July 8 memo. “We do not want to discourage a reasonable use of Turo but want to be able to limit car rental operations in residential neighborhoods.”
Currently, rental car activities are classified as the Industrial class but, “It is clear the impacts of that real property usages facilitating more vehicular usages on the island of Kaua‘i does not remain within the confines of the parcel taxed,” Matsuyama said.
“Most other industrial usages typically sit within that particular parcel, and do not drastically spread its impacts to municipal services with such broad geographic reach and frequency. It is clear that rental car usage must be distinguished from the Industrial class to provide for more fair analysis in setting tax rates as part of the County’s obligation to more fairly distribute the cost burden of municipal operations and services based on the impact of activities facilitated by a property’s type of usage,” Matsuyama said.
The bill quantifies a Commercial Vehicular Rental operation as one with more than 10 rental vehicles and would supersede any other home-use tax exemptions.
The council will next meet Wednesday, July 21 at 8:30 a.m.
I am sure I’ll figure the guest 3% tax is once I read through the article one more time. I’m sure this will keep the tourist away.
As a frequent visitor I am in favor of both a TAT and a fee for rental cars. It is more than reasonable for visitors to assist in maintaining the beauty of Kaua’i and not cause their visit to be a burden on the island residents.
Hi Karol,
Thank You for your response. I agree 100% with your comments, if the visitors choose to enjoy our island, let them pay for the privelege.
It will be most difficult to implement the 3% tax and put this on the guest. And the increase in tax for the car rental property tax also would definitely defer guest from renting a car. I don’t see how any discussions would meet the $6 million dollar goal even if the company did meet its rental requirements.
that sounds appropiate tax the visitors, they are willing to pay to come to such a beautifull place, that is safe,clean free water, lifeguards, police, roads, parks, rainbows,bus service, and the most priceless ,is the aloha,
Lastly I want to say, the hotels will be half full all the way to December. Bit implementing a 3% tax on rooms to increase revenue for the county remains a null effect. The rich get richer. And the poor get poorer. In this case, the county get poorer. And the guest go back to wherever they were from.
It’s about time! And have every arriving visitor sign a paper like the agriculture questionnaire or modify the existing one saying they are responsible for emergency services provided and stay away from our federally protected monk seals after they have watched a video on the plane. Anyone dealing with tourists knows how incredibly ignorant some visitors arriving here are. Not stupid but ignorant
“visitors on island has accounted for nearly 30% of the county’s serviceable population”
And yet each and every property that houses visitors already pays a higher property tax rate than resident properties. This is simply the government overspending and then trying to milk visitors even more. It amounts to double-taxation, since the public good services supposedly consumed by tourists are funded through property taxes. And lets not forget that these transient visitors don’t consume a lot of local services that property taxes pay for, such as schooling and other public goods.
Kauai is trying its hardest to kill the goose that lays the golden eggs.
Hello?!? You obviously don’t pay real property taxes on Kauai. Real property taxes by state constitution are for the counties only.
The county does not run the school education system and real property taxes do not pay for schooling.
Stop spreading misinformation and creating hysteria.
“While we could maintain a balanced budget via an increase in real property taxes, it is clear that the policy of burdening residents and commercial enterprises with funding the impacts of tourism activities on island is inequitable,”
Of Course it is! Rescues of these people alone cost taxpayers a bundle!
“Matsuyama said the average daily census of visitors on island has accounted for nearly 30% of the county’s serviceable population, and that, “our tax policy should reflect recouping this impact proportionally to the burden on County government.”
Yes it should! Amazing that we would actually require tourists to pay for their vacation! For example, County beaches cost them nothing yet we have to pay to clean up after them, that needs to change.
It should not even be 10 cars allowed. I’m not sure any rental of cars should be allowed in residential areas, but certainly if the county is going to allow it should be capped at 2. Parking is already hard in certain areas, when I have to go up and down a street to find parking to visit a friend what is 10 added cars going to do to that neighborhood? What about the keiki that like to play in the neighborhood, all that extra activity of cars that are strangers to the neighborhood makes it less safe. And who wants noisy tourists showing up for cars at 11:00 at night? We need a much lower limit than ten and we definitely need to raise the tax rate on any rental car, we are too congested already. $25 a day for home rental or a rental car agency rental for non residents would help us pay for the costs of tourists.
And by the way, they might complain but they are obviously willing to pay it as we are overrun with tourists and they are paying high prices to rent cars right now, higher cost is not chasing away tourists.
The current taxes 14.5%. 3% increase would make Kauai the highest taxed visitors in the industry, talk about killing the goose that laid the golden egg. Why not just close the island again like mayor did during COVID, the solution is to get the TAT returned from Oahu and their extravagant spending machine.
great start. One thing is the threshold for the rental car tax. If it only applies to those that are renting out ten cars or more you still could end up with too many people renting out on Turo or other ways and too many cars on the road. Will Turo comply with data requests like Air BNB? Just like adding an additional 3% on accommodations will create more vacation rentals in the VDAs, adding tax on rental cars will create more enterprising folks turning a buck with a few cars and staying legal and below the threshold.
Good points to your analysis. But does it produce any results if this was given to your county council?
Still remains, how will the county collect on the deficit? Unknown.
With this extra money will the county please have soap and better toilet paper in the park restrooms.
3% is too low.
Have we started billing visitors for rescues yet???
How about exempting Hawaii residents from this additional TAT? We already pay our share of taxes to support county services.
All] locals need do to not pay TAT is don’t stay in a vacation rental or hotel. Simple enough. Raise the rate. It won’t stop them coming. Who’s going to pay for a wider highway or mass transit?