Hawaii Tourism Industry Opposes Proposed Property Tax Increase, Says It's Paying For Rail

Jun 4, 2019

President and CEO of the Hawaii Lodging and Tourism Association Mufi Hannemann speaks about the city's proposed real property tax increase.
Credit Casey Harlow / HPR

Members of the Hawai‘i Lodging and Tourism Association, opposing Mayor Kirk Caldwell’s proposal to raise real property taxes for hotels and resorts, say they're being made to bear the burden of the $9 billion rail system.

At a press conference Tuesday on the grounds of the Royal Hawaiian Hotel, the association called on the City Council to reject the tax proposal when it comes up for a scheduled vote at its meeting Wednesday.

The mayor’s budget plan for the coming fiscal year that begins on July 1 seeks a tax increase for hotel and resort property from $12.90 to $13.90 for every $1,000 of assessed value. Tax rates for residential homeowners, meanwhile, would remain the same, although assessments could still go up, resulting in higher tax bills.

The association argued that the increase in taxes could force hotels and resorts to hike room rates and offset their costs.

Mufi Hannemann, association president and former Honolulu mayor, also raised concerns that his members may be unable to raise rates high enough given competition from places like Mexico and parts of Europe that offer cheaper accommodations.

“There’s a certain tipping point where we can’t raise the rates, and all of a sudden, we’re going to price ourselves out of the market,” Hannemann said. 

Industry representatives said the property tax increase would come at a time when Hawaii hotels are experiencing a downturn.

Glenn Vergara, association chair, said the industry has seen a decline in occupancy rates over the past few months. Combined with the costs of the proposed tax increase, the dip could hurt hotel employees, he said.

“If we can’t raise our rates, we have to cut costs somewhere. And usually, the costs would really relate to hours and bodies, because they are the biggest expense item,” he said.

Hannemann said the cost of the rail system, which has grown more expensive, would be borne by the hotels and resorts.

"We're paying for rail. That's another thing that we heard -- that they need the money for rail," he said. "No other sector is paying for rail right now. We are. So, once again as I said, we're doing our part and then some."

Hannemann asserted hotels and resorts as a property category generate the most tax revenues for the city and county.

Mayor Kirk Caldwell
Credit Casey Harlow

In his own press conference, Mayor Kirk Caldwell said that's not true. He said Oahu residents pay about 55 percent of the property taxes collected by the city.

As for the cost of rail, the mayor said: "None of the hotels in Waikiki or any hotel on this island is actually paying money for rail."

He said the tourism accommodations tax is one collected by the state of Hawaii, "just like they collect income taxes. and part of that is going to rail. It's not industry money. It's a tax paid by hotels, just like an excise tax, and it's used for all kinds of things."

Council members Ann Kobayashi and Carol Fukunaga appeared at the association's press conference in support of its opposition to the real property tax increase proposal. 

“Let’s not keep raising fees,” said Kobayashi. “Let’s look at how we can raise our own funds. The city has ways. Let’s look at how we can cut our budget before we start having employees cut from the payroll.”

The council's meeting begins at 10 a.m. in the members chambers at Honolulu Hale.