HILO — Having heard the message loud and clear that hotels and transient rentals on all islands will help bail out Honolulu’s troubled rail project, Big Island officials Saturday were looking for a silver lining in the lengthy bill that passed a contentious legislative session Friday.
Mayor Harry Kim wasn’t finding it.
“It’s disappointing,” Kim said. “I’m disappointed in all of us for what was committed. … I was waiting for people to question within the Legislature the fairness of this. … Somebody tell me how it’s right.”
Senate Bill 4, expected to be signed by Gov. David Ige by Tuesday, hikes the transient accommodations tax by 1 percent, which will be combined with a three-year extension of Oahu’s half-percent general excise tax surcharge to raise $2.4 billion for the project. The rail is 40 percent built, and the cost has almost doubled over the past three years to $9.5 billion.
The increase takes the TAT to 10.25 percent of the hotel bill, plus GET.
A similar bill including the 1 percent TAT hike was approved by all seven Big Island House members on the last day of the regular session in May, but died when the Senate disagreed with it, according to legislative records.
This time around, four Big Island House members voted no, and three voted yes. All four Big Island Senate members voted no.
County Council Chairwoman Valerie Poindexter, who testified against the bill in Honolulu and then watched as it passed the House on final reading, said she talked with Ige after the session.
”I shared my concerns of having to raise our property taxes to take care of our county’s expenses — yet Oahu is allowed to have a state-ordered bail-out that impacts the neighbor islands — and legislators fast-tracked it without any input from taxpayers before they crafted the bill,” Poindexter said.
Poindexter said she also met with Rep. Mark Nakashima, whose district she lives in, and they “agreed to disagree.”
”All things aside, we are committed to working together,” she added.
Nakashima, a Hamakua Democrat who voted yes, did not return calls and texts for comment. He didn’t speak on the floor Friday, but submitted written comments to the House Journal. The Journal hadn’t been updated Saturday.
Rep. Richard Onishi, D-Hilo, who voted yes, said he had reservations about the bill because it didn’t include a sweetener he wanted added: money to go to the hotel and tourism industries for projects to offset the impacts of tourism. Onishi said giving the industry money to match with private funds could be used to address parking along roadways, litter and trespassing, for example.
“Because we’re taxing the tourist industry, we should provide them with funding to help deal with the impacts,” Onishi said. “There’s a whole bunch of different issues. People are getting upset with the amount of tourists coming.”
The bill also gives neighbor island counties the authority to raise their own GET by one-half percent if they do it by March 31. If approved, the new tax would go into effect Jan. 1, 2019.
The GET surcharge can be used only for operating or capital costs for public transportation systems, including public roadways or highways, public buses, trains, ferries, pedestrian paths or sidewalks or bicycle paths, according to the bill.
The optional GET increase for the neighbor islands was approved by legislators even as they justified the TAT increase by saying it is preferable to the Honolulu GET because it is less regressive and doesn’t hit the poor the hardest.
Joy San Buenaventura, D-Puna, voted yes on SB 4, although she stated she had reservations. She says an Oahu GET still hits neighbor islanders because so many goods stop on Oahu first.
“Oahu, having more legislators, is going to pass a rail bill, so a more equitable rail bill was better than the ones the counties want us to pass,” she said in a letter to the editor. “The current 0.5 percent GE on ‘Oahu’ is more of a neighbor island tax than the TAT.”
The Legislature has previously given the neighbor islands the opportunity to raise their GET, and the Hawaii County Council has rejected it.
Poindexter said that option “is hard to swallow when we already increased the fuel tax for county roads and also raised property taxes to balance our budget.”
“We keep taxing our people instead of looking for other alternatives,” she said.
The bill also raised the cap on the amount of the TAT the counties share, increasing the $93 million TAT cap for counties to $103 million and making it permanent.
That raises Hawaii County’s share from $17.3 million to $19.2 million. That still falls far short of the amount the counties used to share before the amount was temporarily capped during the Great Recession. The Legislature’s intent at the time was to return to the original formula once the economy stabilized, according to records.
Under the old formula, Hawaii County would have received $37.2 million for the 2015-16 fiscal year, according to calculations based on the state Department of Taxation’s 2016 annual report. In response to a $20 million budget shortfall, the Hawaii County Council and Kim raised both property taxes and gas taxes this year.
Kim recalled the days the counties’ share of the TAT went from 95 percent of the revenues to 45 percent and now to a fixed amount that won’t increase as tourism increases, even though the impact of tourism will continue to rise.
The TAT was created to help deal with tourist impacts. It was passed on to counties because they’re the ones paying for police, firefighters, parks and other infrastructure feeling impacts from tourists.
“If anyone can tell me how the distribution of TAT is fair, I’d like to hear it,” Kim said.
The bill also reduces how much the state takes as administrative fees from GET and requires an audit and more oversight for the rail project. The city has a Sept. 15 deadline to present a financing plan to the Federal Transit Administration, which could require the city to return more than $800 million already spent of a total $1.5 billion in promised federal dollars.
