Lawmakers tap hotel tax for rail

Lawmakers plan to increase the state’s hotel tax to pay for Honolulu’s rail project while leaving counties with a smaller share of the pie.

The tax agreement calls for increasing the transient accommodations tax from 9.25 percent to 12 percent, with the additional revenue going toward the rail project and an education special fund.

Oahu will also be required to chip in $13 million of its hotel tax revenue to rail, according to a state House press release.

While other counties would be spared paying for the project, they still will see a drop in revenue.

Lawmakers failed to reach a deal Friday for maintaining the amount they share at $103 million, according to Sen. Kai Kahele’s office. The cap will drop to $93 million next fiscal year, meaning an approximately $2 million loss for Hawaii County.

Kahele, D-Hilo, introduced a bill that would have eliminated the counties’ cap on hotel tax revenue but it faced opposition in the House.

That would have raised approximately another $10 million for Hawaii County.

Kahele said the counties should see the result as a warning, and they may have to consider raising their own taxes.

“I think it’s only going to get worse,” he said, regarding their share of the hotel tax.

Kahele said his bill to provide funding for the University of Hawaii at Hilo’s rat lungworm disease research efforts also died Friday.

Email Tom Callis at tcallis@hawaiitribune-herald.com.