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City council approves new 3% hotel tax, up to half will go to Honolulu rail project

A Honolulu rail train car in 2016.
Honolulu Authority for Rapid Transportation
A Honolulu rail train car in 2016.

The Honolulu City Council approved Wednesday a new 3% tax on transient accommodations, allocating between one-third to one-half of revenues to the city’s rail transit project.

The bill still needs to be signed by Mayor Rick Blangiardi. His administration has voiced support for the measure. If approved, it will go into effect immediately.

Earlier this year, the Hawaiʻi State Legislature voted to strip the counties of revenues from the state’s transient accommodations tax, or TAT. The legislature did, however, allow the counties to levy their own TAT of up to 3% — on top of the state’s existing 10.25% hotel room tax.

Maui and Kauaʻi counties have already enacted and begun collecting their respective visitor taxes. Honolulu’s efforts were bogged down by discussions over whether some of the money should be directed towards the beleaguered rail project.

But on Wednesday, Bill 40 passed its third and final reading in a 6-3 vote. Councilmembers Carol Fukunaga, Heidi Tsuneyoshi and Augie Tulba voted against it.

The bill will allocate 1% of the TAT to the Honolulu rail for the first two years, and then 1.5% thereafter — that's half of the TAT fund.

The rest will go into the city’s general fund, with a portion to be used "to mitigate the impacts of visitors on public facilities and natural resources, including the restoration, operations, and maintenance of beaches and parks."

Councilmember Tsuneyoshi was disappointed that the money would not be fully devoted to the general fund.

"We are looking to very possibly move into that budget season at a deficit at a time where we could be looking right now, this could be a most amazing day for us to go back to our constituencies and say: we passed the TAT, we have an additional 3% to work on our city parks as we've always wanted to do, we can fund our ocean safety officers, we can fund our HPD. This could be such a transformative day for our city," Tsuneyoshi said.

No matter how much money the state collected, Honolulu’s share of the TAT was previously capped at $45 million.

Councilmember Andria Tupola said she welcomed the change.

“I think this division of us, separating ourselves from the state is super important because of the impacts of tourism, because of the need for us to not have to go and beg for the money, sometimes get it, sometimes not get it," Tupola said.

Two additional amendments were introduced on the floor.

Councilmember Calvin Say’s amendment clarified the electronic tax filing requirements, requested by the administration’s office. The amendment was unanimously approved.

A second amendment from Councilmember Tsuneyoshi would have removed the Honolulu rail allocation. It was not adopted.

The new estimated cost for the rail to reach Ala Moana is $11.4 billion, said Honolulu Authority for Rapid Transportation Interim Executive Director and CEO Lori Kahikina.

HART officials say after a preliminary independent audit, the fiscal shortfall for rail is estimated at just under $2 billion.

Jason Ubay is the managing editor at Hawaiʻi Public Radio. Send your story ideas to him at jubay@hawaiipublicradio.org.
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