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The Honolulu Advertiser
Posted on: Sunday, April 25, 2010

Hawaii counties won’t lose hotel-room tax share to state

 •  Council to take up property tax plan

By Derrick DePledge
Advertiser Government Writer

County mayors dodged what could have been a crippling loss to their budgets when state lawmakers late Friday night chose not to take hotel-room tax revenue to help with the state's budget deficit.

All four mayors sat in a third-floor conference room at the state Capitol waiting with the public for several hours while, in closed-door talks, budget negotiators determined they did not need to take any of the roughly $100 million in hotel-room tax revenue that counties share annually.

The money is a major source of county revenue, behind property taxes, and mayors told lawmakers that losing it would likely lead to higher property taxes and cuts to county programs.

State lawmakers suggested on Thursday night that they might not need the money to close a $1.2 billion deficit through June 2011, but official word did not come Friday until after the midnight deadline to have bills ready for final votes next week had expired.

"My colleagues and I worked very hard to make a strong case about how important this was to the counties," Honolulu Mayor Mufi Hannemann said. "We balanced our budgets based on being able to keep the hotel-room tax, and we're just very grateful that many members of the Legislature saw it that way and were able to make us whole."

The transient accommodations tax — commonly known as the hotel-room tax — is imposed on the operators of hotels, condominiums and beach houses rented to tourists and short-term visitors. The tax is passed on to visitors. Counties receive a share of the revenue.

Big Island Mayor Billy Kenoi said that if lawmakers had taken the revenue, it would have essentially shifted the tax burden to county residents.

"They made a tough decision to preserve this very important source of revenue for all of the counties," he said. "And I think all of us, as mayors, as chief executives of each of the counties, recognize how very fortunate we are."

Maui Mayor Charmaine Tavares said losing the revenue would have been unfair. "We feel that, rightfully so, we should get it because we have to deal with the impacts of tourism, that's fire, police, lifeguards on the beach, water, sewer, everything," she said. "So why shouldn't they pay a fair share of that?"

Kaua'i Mayor Bernard Carvalho Jr. said it was important for mayors to show a united front to lawmakers. "I believe that tonight shows that we stood firm on what we believed in," he said.


Gov. Linda Lingle had proposed taking all of the hotel-room tax revenue from the counties. The House budget draft would have capped the counties' share at $94 million, the amount counties received this year, and skimmed any revenue that came in higher for the state. The Senate had wanted to place the cap at $50 million, scooping at least $44 million for the state.

Negotiators considered various proposals in between but finally decided to leave the counties whole.

At times Friday night, the mayors were invited to speak privately with lawmakers. But for most of the evening, the mayors waited with the advocates, lobbyists and state department staff who had gathered in Room 309 to learn the fate of their bills.

The mayors sat together in the front row, just a few feet from House and Senate negotiators whenever they appeared at the conference committee table.

State Rep. Marcus Oshiro, D-39th (Wahiawā), the lead House budget negotiator, said the mayors' presence brought an added pressure to the discussion.

"But I think, also, they bring a true face to the discussion here," he said. "And I think it's quite compelling when you hear from Mayor Kenoi from the Big Island or Tavares from Maui or Carvalho from Kaua'i, they're telling you that they're wrestling with the same issues and they're facing the same challenges."

"So we're very sensitive to that."