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Council passes 3% TAT: New hotel tax makes up for state cuts

Visitors to Hawaii Island hotels and vacation rentals will be digging a little deeper come Jan. 1, with the County Council on Thursday unanimously passing a 3% local option lodging tax.

The 9-0 vote on Bill 81 on final reading followed failed attempts to amend the bill to earmark money for specific areas, such as county parks, and efforts to exempt county residents from having to pay the added tax.

“I’ve said it a number of times and I’ll say it again,” said Puna Councilman Matt Kanealii-Kleinfelder. “Locals aren’t visitors. We shouldn’t have to pay the tax.”

Mayor Mitch Roth, who has called the tax hike a “necessary evil,” is likely to sign the measure.

The 3% county tax is on top of the current 10.25% state transient accommodations tax.

The Legislature paved the way for the additional tax in a gut-and-replace bill passed without public input earlier this year. The bill 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% for up to 10 years.

Finance Department officials estimate the proposed tax will bring the county back up to its $19 million annually within three years.

The TAT was originally passed by the state Legislature in 1986 to provide revenue to the counties to offset the impacts of visitor activities on county infrastructure and services. Over time, the counties’ share was diluted by earmarks added for specific projects, leaving the counties an increasingly diminished share. That share stopped entirely this year.

Stephanie Donoho, administrative director for the Kohala Coast Resort Association, asked the county for assurances that taxes are collected equitably from all legal visitor accommodation and that illegal accommodations be shut down. In addition, she said, there should be transparency on how the funds are spent and that a portion of the funds be used to address larger infrastructure needs such as roads, water, wastewater, expanded mass transit and the development of workforce housing.

Kohala Councilman Tm Richards was unsuccessful getting specific language in the bill, but he expressed confidence that county Finance Director Deanna Sako would follow the spirit of the recommendations.
Source: Hawaii Tribune Herald

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