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Jan 31

Support for H.B. 1671 - Hotel room tax revenues for counties

Posted on January 31, 2014 at 12:00 AM by Troy Hashimoto


 

On Monday, February 3, 2014, the House Committee on Tourism will hear House Bill 1671.  Introduced by Maui Representatives Souki, Carroll, Ing, McKelvey, Woodson and Yamashita, it proposes to remove the current cap on the transient accommodations tax (TAT) revenues (also known as the hotel room tax) that is distributed to all four counties.

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Councilmember White favors this measure. Under the cap, Maui County only receives $21.2 million in hotel room tax revenues. If the cap is removed, Maui County in 2013, could have received nearly $37 million from the State, a $16 million difference. This difference could have helped to ease the tax burden on Maui County residents.

Councilmember White submitted the following testimony to the House Committee on Tourism to support House Bill 1671 and encourages the Maui County residents to also submit testimony on this measure. View PDF version.

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TO: The Honorable Tom Brower, Chair
House Committee on Tourism

FROM: Mike White, Chair
Budget and Finance Committee

SUBJECT: HEARING OF FEBRUARY 3, 2014; TESTIMONY IN SUPPORT OF H.B. 1671, RELATING TO TRANSIENT ACCOMMODATIONS TAX

Thank you for the opportunity to testify in support of this important measure. The Maui County Council has not had the opportunity to take a formal position on this matter and therefore, I am providing this testimony in my capacity as an individual member of the Council. I support the elimination of a cap on the county’s share of the transient accommodations tax (“TAT”) for the following reasons:
  1. The TAT was increased from 7.25 to 9.25 percent between 2009 and 2010, and in 2011, the counties share of the TAT was capped at $93 million, which was meant to be temporary. This change allowed the State to realize a significant increase in revenues and balance the State’s budget at a time when general excise tax collections were in decline. Beginning in 2011, counties experienced a significant drop in property values that continued through 2013. Since the economic recovery, State revenues have increased 32% from $4.9 billion in 2009 to $6.5 billion in 2013. Unfortunately, County property values have not recovered at the same pace. In fact, neighbor islands saw significantly larger declines than Oahu. Revenues for Maui County were only bolstered by significant tax increases to balance our budget. Therefore, as State revenues continue to grow and a surplus recognized, the State must assist counties and provide relief by removing the cap.
  2. Since being given a share of the TAT, the funds have become vital to each county in offsetting the greater impact of the visitor industry on county services such as parks, beaches, water, roads, sewage systems and other tourism-related infrastructure. As the visitor counts begin to recover, the counties are left with greater upkeep of infrastructure.
  3. Reductions in the allocation of TAT revenues has unfairly burdened residents through increases in real property taxes and other fees to maintain core services that could have been offset by the full allocation of TAT generated by hotels and visitor accommodations in each county.
  4. A portion of TAT revenues are also used for marketing costs to compete against destinations outspending Hawai‘i. Even with these additional marketing funds, many counties, including Maui County, have elected to supplementary fund marketing costs to bolster economic activity. Maui County annually contributes over $3 million to the Maui Visitors Bureau and without an increase in the TAT, we would be unable to compete with other destinations that have become increasingly competitive.
  5. The neighbor islands have had a greater impact during the economic recession with larger declines in visitor counts and real property tax values. Therefore, to offset revenues, neighbor island residents have been taxed significantly more than residents on Oahu.

For the foregoing reasons, I support this measure. Thank you for your consideration.

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