Mayor Mitch Roth will ask Gov. David Ige to veto a pending bill in the state Legislature that would allow the state’s four counties to levy their own hotel taxes.
House Bill 862, which passed Tuesday, would, if signed by the governor, simultaneously end the state’s allocation of Transient Accommodation Tax revenues to the counties while allowing them to impose their own additional TAT at a rate of up to 3%.
The bill, which was amended without warning and without public testimony after conference committee hearings last weekend, has left Hawaii County officials concerned about its implications.
“It’s really put the county between a rock and a hard place,” Roth said Wednesday.
Roth said the bill places an intolerable strain on the island’s hospitality industry, which already has been pushed to its limits by the COVID-19 pandemic. The hotel industry represents a large percentage of the county’s working population, he said, meaning Big Island residents will suffer the most if visitors stay away to avoid higher taxes.
“We’ve got a lot of people still struggling here, including our hotels,” Roth said. “It feels like (the bill is) gambling with their futures.”
If the bill becomes law, and the county chooses to impose a 3% TAT, it could generate more funds than the statewide TAT allocation, said Steven Hunt, deputy director for the county Department of Finance.
Based on a hypothetical 2020, where visitation rates remained consistent and unaffected by the pandemic throughout the year, Hunt said a countywide 3% TAT could have generated about $22.5 million, an increase from the $19 million in statewide TAT revenue that would be allocated to the county should HB 862 fail to become law.
The county could, of course, choose to impose TAT of less than 3%, Hunt said, but a county TAT below 2.58% would generate less revenue than the statewide TAT allocation.
However, whether the countywide TAT would benefit the county depends on several unknowable factors, Hunt added. Visitation rates remain far lower than they were pre-pandemic, he said, and it is impossible to tell when they will fully recover.
An additional tax on hotel rooms could potentially delay that recovery further, Hunt said.
Between the existing statewide TAT of 10.25% and the county’s General Excise Tax rate of 4.7%, a visitor’s hotel bill is already increased by almost 15%. With a county TAT potentially adding another 3% to that bill, prospective visitors might decide to take their business to less expensive destinations.
“You have to ask, at what point do we become noncompetitive?” Hunt said.
Craig Anderson, chairman for the Hawaii Lodging and Tourism Association’s Hawaii Island chapter, said the state already has some of the highest visitor taxes among U.S. destinations, “which is not a great place to be.”
“People generally have a budget when they plan a vacation, and something like this is going to price some people out,” Anderson said.
Anderson also decried another part of the bill, which would entirely remove the Tourism Special Fund, the primary funding source for the Hawaii Tourism Authority.
With the tourism industry in a fragile state thanks to the pandemic, Anderson said the bill is coming at exactly the wrong time and, therefore, the HLTA vehemently opposes it.
But should the bill become law, Hunt said there would still be “more questions than answers.”
For one thing, he said, the bill does not describe the mechanism by which the countywide TAT would be imposed, nor whether the county would be responsible for conducting audits.
Roth said he will formally request that Ige veto the bill, although he added that he is unsure how the other mayors feel about the bill.
The final date for Ige to announce which bills he intends to veto is June 21.
Email Michael Brestovansky at mbrestovansky@hawaiitribune-herald.com.
