Governor Signs Rail Funding Bill Into Law, Next: Transient Accommodations Tax

Sep 5, 2017

Governor David Ige signed Senate Bill 4 into law today, which is expected to provide the Honolulu Rail Transit Project with $2.4 billion.
Credit Wayne Yoshioka

The legislature’s Honolulu rail funding bill was signed into law today. HPR’s Wayne Yoshioka reports. 

Senate Bill 4 raises the Transient Accommodations Tax one percentage point statewide for 13 years.  It’s expected to generate one billion dollars for Honolulu’s Rail Transit project by 2030.  But, critics say online lodging companies like Airbnb and Expedia are not paying their share of the TAT.  Governor David Ige signed the bill into law and says online companies are a priority.

“We continue to work with Airbnb and other similar vacation rental platforms to ensure that appropriate taxes are paid and collected.  We believe that we can implement through voluntary discussions.  Obviously, if we consensus on legislation then that would be a good thing to have.”

Maui County Council Chair, Mike White, says the state can possibly double current TAT collections of about 230 million dollars annually and exceed the billion dollar target for rail transit.

“If the state would just change the TAT statute to include re-marketers as well as operators, we would generate taxes that are being missed on approximately 18-to-20 percent of total hotel revenues.”

Hotel revenues average more than 4 billion dollars annually.   White says Maui County is in the process of contracting a vendor to identify illegal vacation rental operators.  House Speaker Scott Saiki says it’s in the best interest of all the counties to boost TAT collections.

House Speaker Scott Saiki and Finance Committee chair, Sylvia Luke.
Credit Wayne Yoshioka

“There’s now an incentive for the counties to enforce these transient units.  Not that the counties would receive more revenue, but if there is more TAT revenue being generated, then there’s an argument that the counties should receive a greater share of that.”

House Finance Committee Chair, Sylvia Luke, is willing to consider legislation to modify the TAT.

“We will need to look at the whole package to see if there needs to be a re-shifting of TAT or the entire hotel tax.”

Honolulu Mayor Kirk Caldwell is awaiting a report from a task force on vacation rentals but says owners renting residential units should pay even more.

“Many of these homes that are rented year-round are like little mini-resorts and that perhaps they should paying the hotel and resort real property tax amount of $12.90 versus the $3.50 that they’re paying today.”

The TAT is 3.8 percent of all state tax collections, according to the council on revenues.   Council Chair White says the Hawai’i Association of Counties plans to focus on TAT next session along with the state.

“I would like to hope that they can see their way clear to giving the counties some additional share of the TAT based on the fact that we’re helping them go find money that they’re not taking advantage of now.”

For HPR News, I’m Wayne Yoshioka.