A move to exempt county residents from having to pay an extra 3% hotel tax in order to enjoy a staycation on their own island was shot down Wednesday by a County Council majority before advancing Bill 81 on a unanimous vote.
The state Legislature this year gave the counties the ability to pass their own local-option tax up to 3% on top of the state’s 10.25% for up to 10 years. The option came after the Legislature took away the counties’ share of the transient accommodations tax and gave it to the state, costing Hawaii County about $19 million annually.
“We’re not transients; we already pay for infrastructure on the island,” said Puna Councilman Matt Kanealii-Kleinfelder, introducing an amendment that would exempt island residents from the additional tax. “I think residents should get a break.”
The problem is, the resident discount is not authorized in the state law allowing the county surcharge, said Deputy Corporation Counsel J Yoshimoto.
“The concern that I hear is a real one. I don’t disagree with the policy, the question is whether we have the authority to legally do that,” Yoshimoto said.
Several council members approved the spirit of the amendment, but agreed with Yoshimoto that state law prohibits the county from doing so.
“I don’t disagree with the intent of that, but there is a jurisdictional question,” said Kohala Councilman Tim Richards. “I like the idea of taking care of the community and the whole idea of the TAT was a tourism impact fee. … Conceptually, I like it, but I recognize our abilities are authorized by the state.”
Hamakua Councilwoman Heather Kimball, sponsor of Bill 81 setting the 3% tax to start Jan. 1, said the tax is technically not imposed on those renting hotel rooms, transient vacation rentals and other accommodations of less than six months, but on those providing the rentals. The owners invariably pass that charge on to the consumers, but Puna Councilwoman Ashley Kierkiewicz wondered if the lodging hosts could provide a kamaaina discount to make up for it.
Stephanie Donoho, administrative director of the Kohala Coast Resort Association, said an inventory of all visitor accommodations on the island needs to be one of the first steps. Kohala Coast Resort Association members total 3,940 hotel and timeshare rooms and an estimated 3,500 additional rooms are operated as legal short term vacation rentals within the resort.
It’s not known exactly how many STVRS are operating islandwide, but estimates put it in excess of 10,000 rooms, Donoho said.
“Taxes must be collected equitably from all units,” Donoho said. “With state and county taxes and allowable administrative fees, visitors will pay nearly 18% on their accommodations, one of the highest tax rates in the nation.”
She 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.
Council members didn’t sponsor amendments dealing with Donoho’s concerns, although there are future opportunities to amend the measure on first and second reading at the council level. The council Finance Committee voted 8-0, with Hilo Councilwoman Sue Lee Loy absent, to send a favorable recommendation to the council.
