Most — if not all — County Council members support tacking an extra 3% tax on hotel, timeshare and transient vacation rental charges, but a bill to do that was postponed two weeks by the Finance Committee on Tuesday to work out more of the details.
The state Legislature paved the way for the new tax earlier this year, when it took away the counties’ share and gave it to the state, while allowing the counties to pass their own local-option tax up to 3% on top of the state’s 10.25% for up to 10 years.
While the lodging industry opposed the state’s action, representatives have changed their focus now that it’s become law. Hamakua Councilwoman Heather Kimball, sponsor of Bill 81 setting the 3% tax to start Jan. 1, said she also opposed the Legislature’s action, but the county needs to make up the lost revenue.
Kimball said the average room rate on the Big Island is $280 a night, so the impact would be just $9 nightly, much less than parking or resort fees.
“As much as we all hate raising taxes, it is a pretty nominal fee,” she said.
Other council members agreed.
“Nobody likes to raise taxes. Nobody likes taxes to begin with. … However, this is the means to raise funds for our municipality,” said Kona Councilwoman Rebecca Villegas, calling the state’s action,”another nail in the coffin of our budget.”
“Everybody else is doing it throughout the state. We can’t hamstring ourselves,” said Hilo Councilman Aaron Chung. “We should be uniform throughout the state.”
While there was general agreement on raising the money, how to spend it remained a sticking point. The bill directs the money into the general fund, where it can be used for any county purpose. That decision was based on the fact the approximately $19 million share the state previously sent the county was used that way.
Finance Director Deanna Sako reminded council members the new tax won’t provide new money, but replacement money.
“This is money the state took away and we’re not paying all our bills this year because we didn’t have that money,” Sako said.
Council members and two testifiers from the lodging industry said the money should be earmarked so it truly addresses visitor issues.
Stephanie Donoho, administrative director for the Kohala Coast Resort Association, urged the county to establish a special fund to ensure transparency and to direct the funds to support infrastructure that benefits residents and visitors such as roads, park maintenance, lifeguards and sewer systems and to address larger-scale infrastructure needs such as mass transit and workforce housing.
“We understand the impacts that visitors have on services provided by the county, know that the visitor industry directly supports essential position across critical sectors of our state and local government, and also understand the vital role our industry plays in our state’s overall economy,” Donoho said.
Puna Councilwoman Ashley Kierkiewicz also wanted earmarks on the money, while Hilo Councilwoman Sue Lee Loy said she needs more details on the county’s current financial condition before supporting the bill.
Puna Councilman Matt Kanealii-Kleinfelder, the sole no vote on postponing the bill until Nov. 2, pushed Corporation Counsel Elizabeth Strance on whether the bill could be written to exempt residents who choose to vacation on the island.
South Kona/Ka‘u Councilwoman Maile David said the pause in tourism demonstrated the importance of protecting resources from tourist impacts. The county needs money to do that, she said.
“I’ve never seen a more healthy environment for shoreline and beaches as I’ve seen during COVID,” David said. “If we’re really thinking about addressing those impacts and how tourism impacts our environment and our culture, this is a way of putting our money where our mouth is.”