The Hawaii State Teachers Association wants to generate education funding through a statewide surcharge on hotels and vacation properties, an idea that has people in the visitor industry divided.
The Hawaii State Teachers Association wants to generate education funding through a statewide surcharge on hotels and vacation properties, an idea that has people in the visitor industry divided.
HSTA, the union that represents Hawaii’s public school teachers, is asking lawmakers to approve a constitutional amendment to create an “education surcharge” on residential investment properties and visitor accommodations.
The surcharge would apply to timeshares, hotel rooms and other vacation units. People who own one home would not pay an increase, nor would those with a second home who rent out properties for less than $1,500 per month.
Low-income households, seniors on fixed incomes, people with disabilities, wounded veterans, Hawaiian homesteaders and charities and schools also would be exempt.
The surcharge could generate about $500 million per year, the union says, which would be used to help fund four high-need areas of public education: recruiting and retaining teachers, lowering class sizes, bolstering special education staffing and resources, and adding instruction in career and technical education, arts, music, theater, dance, Hawaiian studies and Hawaiian language.
The amendment also would require voter approval in 2018.
HSTA President Corey Rosenlee said up to 30 percent of homes in the state are owned by nonresidents, which makes it “harder for (residents) to live here.”
According to a union poll, residents overwhelmingly support the concept, Rosenlee said, and Hawaii is the only state in the nation which doesn’t fund schools through property taxes.
“Every single time people buy a house and don’t live in it, it takes up supply,” Rosenlee said. “And at the same time, our schools need funding. So, this is a great way to lower the cost of living and at the same time, fund our schools.”
Not everyone agrees.
Jeana Jones, East Hawaii director of Hawaii Life Vacations, which manages about 30 properties in East Hawaii, said most visitors who book vacation rentals already pay nearly 13.5 percent in taxes. That includes the 9.25 percent transient accommodations tax and a 4.166 percent general excise tax.
Jones called the proposal a “quick and easy alternative for the state to collect money” and said it didn’t seem fair to property owners who already pay.
“Of course, we all support public education … however, the vacation rental industry is already heavily taxed,” Jones said in an email. “… There’s so much money out there that isn’t being reported properly. The state needs to find a way to go after that money — those vacation rental owners who don’t … pay.”
Others told the Tribune-Herald they worry the surcharge could impact tourism.
“The higher the cost of providing accommodations, the higher we have to charge,” said Richard Standke, who manages seven vacation rental properties on the Big Island.
“When visitors come and they’re spending (even just) five nights here, I have to charge them 13.5 percent (in taxes) already,” added Jasper Moore, owner of Hilo-based Lotus Garden, which rents out short-term apartments, rooms and vacation cottages. “When they (raised taxes) the first time, tourism fell off, families couldn’t afford to come over.
“I wholeheartedly support teachers, and they’ve been underpaid for way too long,” Moore added. “(But) I’m not sure how I’d feel about (this proposal). I’d have to think about it.”
Don Inouye, business owner of Reeds Bay Resort Hotel in Hilo, told the Tribune-Herald he wouldn’t be opposed to the idea. He said he agrees education should be funded through property taxes because “on the mainland it’s that way.”
The proposal was introduced as two bills. Senate Bill 686 would establish the surcharge which would be deposited into an “education special fund.”
For residential investment properties, that would amount to a yearly $3.50 per $1,000 of taxable value, for properties under $500,000. The charge increases to $4.50 for properties valued up to $750,000 and $5.50 for those up to $1 million. Properties valued more than $2 million would pay $7.50 per year per $1,000 of value.
Visitor accommodations would pay each year a surcharge amounting to $3 per day for those which charge up to $150 per day. Those charging more than $150 per day would be levied $5 per day.
Senate Bill 683 would allow the Legislature to set and determine the amount.
Both bills are backed by eight lawmakers, including state Sen. Kai Kahele, D-Hilo, and state Sen. Lorraine Inouye, D-Hilo, Hamakua, Kohala, Waimea, Waikoloa, Kona. As of Friday, both bills cleared a first reading and were referred to committees.
Email Kirsten Johnson at kjohnson@hawaiitribune-herald.com.