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New Oʻahu hotel room tax becomes law with millions earmarked for Honolulu rail project

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Zoe Dym
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HPR
Mayor Rick Blangiardi signed Bill 40 and 39 into law on December 14.

Tourists will now pay an additional 3% tax on Oʻahu transient accommodations such as hotels and short-term rentals. Between one-third to one-half of revenues will go to the rail transit project.

Honolulu Mayor Rick Blangiardi signed Bill 40 into law on Tuesday after the bill passed in a 6-3 final vote at the city council earlier this month.

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.

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


Maui and Kauaʻi counties have already enacted and begun collecting their respective visitor taxes. Hawaiʻi County also passed its TAT bill this month and will begin levying the tax on Jan. 1, 2022.

The Honolulu bill allocates 1% of the TAT, or one-third, to the Honolulu rail for the first two years, and then 1.5% thereafter — half of the revenue. 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."

So for the first two years, 58.33% of the revenue will go to the general fund, 33.33% to the rail, and 8.34% to the natural resources fund. After that, the rail's share will increase to 50% and the general fund portion will decrease.

The TAT is estimated to bring in $75 to $85 million annually for Oʻahu. In the past, no matter how much money the state collected, Honolulu’s share of the TAT was capped at $45 million.

"I cannot stress enough how humbled HART and myself are that administration, City Council, and even our board supported this bill. It will provide much-needed income that we can use to build a functional system to Honolulu where there’s jobs and connectivity with the bus system," said Lori Kahikina, the interim executive director for the Honolulu Authority for Rapid Transportation.

"As Councilmember (Brandon) Elephante mentioned, there was testifiers on both sides, councilmembers on both sides, and I hear you. I hear what has been said and we’re taking those seriously, even those that were against giving us the TAT but we’re gonna use the funds prudently in the best way we can," Kahikina said at the bill signing ceremony.

The TAT is expected to provide $350 million to the rail.

The new estimated cost for the rail to reach Ala Moana is $11.4 billion, Kahikina said previously. HART officials said after a preliminary independent audit, the fiscal shortfall for rail is estimated at just under $2 billion.

Starting in 2022, Kahikina will shed the “interim” title to become Honolulu rail’s next permanent executive director.

Blangiardi also signed a bill that will make portions of land "actually used" for the active production or storage of renewable energy exempt from a percentage of taxes imposed.

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