Gov. Josh Green has signed what’s being called the “Green Fee” into law. It raises the state’s transient accommodations tax by 0.75 percentage points, bringing it to 11%.
It also puts the tax on cruise ships, which have not been paying any hotel tax. The tax increase will go into effect in 2026.
The increased revenue will go toward climate resilience. Green explained that it’s a major step forward for the state to adapt to climate change.
“It's important so people see that where we have shoreline erosion near hotels, we're able to protect these incredible assets; where we have people being displaced, we're able to help them,” Green said Tuesday at a bill signing ceremony.
"Where we see sea level rise coming up, we can adapt and we can actually have these resources from the hard monies and also likely bonds from these dollars to help us go forward with large projects as the Legislature sees fit, as the people across our state express need.”
The TAT increase is expected to bring in an additional $80 million to 100 million a year for climate resilience.
However, it’s far below the over $200 million a year that Green’s Climate Advisory Team estimated the state would need.
Green explained that although the funds are less than what was originally asked for, the funds can be used to take out bonds for larger projects.
“For every about $4.5 million that we take from this fund. We can bond about $100 million,” he said. “That's how you get big things done.”
Hawaiʻi Hotel Alliance spokesperson Kekoa McClellan added that while any increase to the TAT will impact hotels, ultimately, because it is going to preserve natural resources that attract tourists, it’s a good thing.
"This direct investment in sustainable tourism, in sand replenishment and renourishment in mitigating the impacts of climate change that are affecting our visitor industry is going to guarantee that we can have a thriving visitor economy,” McClellan said.
“The work just begins on Jan. 1, where we'll need to partner with our Legislature and with the community and with the governor and the administration in identifying projects that make sense for all Hawaiʻi.”
In addition to the state transient accommodations tax, counties levy their own 3% TAT. Accommodations are also charged the state's 4% general excise tax, plus a county surcharge.
In total, after the “Green Fee” goes into effect next year, visitors will face a tax on their hotel or vacation rental of over 18%.
When it comes to allocating the new funds to these climate resilience projects, the Legislature will have to approve the budget request that the governor submits.
Green explained that stakeholders, departments and the public can submit plans on how they would spend the funds and what should be prioritized.
“It will not be just simply handing out large checks. It will be people submitting to us what the benefit is to the state of Hawaiʻi because this is coming to the state of Hawaiʻi through all of tourism,” he said.
"I would not be surprised if we have some public meetings to get input. We will certainly have a portal so people can say these projects matter most in their community.”
Green added that the state Attorney General's Office will also be submitting requests to use some of the Green Fee to fund some of the recommendations from UL's Fire Safety Research Institute Reports on the 2023 Maui Fires.
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