Rail bill moves for­ward

Inouye, Ka­hele vote no; mea­sure likely goes to full state Se­nate to­day

Hawaii Tribune Herald - - FRONT PAGE - By NANCY COOK LAUER

A $2.4 bil­lion bailout of the Honolulu rail project, partly sub­si­dized by an in­crease in the statewide ho­tel tax, ad­vanced by a 6-5 vote Mon­day in the Se­nate Ways & Means Com­mit­tee.

Big Is­land Sens. Lor­raine Inouye and Kai Ka­hele were among the no votes.

The bill likely goes to the full Se­nate to­day. The House sched­uled a com­mit­tee meet­ing Wed­nes­day.

Se­nate Bill 4 levies a statewide 1 per­cent in­crease on the tran­sient ac­com­mo­da­tions tax ded­i­cated to Honolulu rail while set­ting the share of the TAT to be di­vided by the coun­ties at $103 mil­lion per­ma­nently. It also gives coun­ties the op­tion of rais­ing their gen­eral ex­cise tax by one-half per­cent to be used for roads.

Com­mit­tee mem­bers vot­ing yes said neigh­bor is­lands ben­e­fit from tax rev­enues gen­er­ated by the much more pop­u­lous Oahu, and im­pos­ing a statewide tax on ho­tels is within their author­ity.

“Do not Oahu tax­pay­ers fund many of the neigh­bor is­land projects?” asked Sen. Michelle Ki­dani.

Oth­ers wor­ried about the prece­dent of levy­ing a statewide tax for a county project.

“Now we’re pit­ting neigh­bor is­lands

against Oahu,” said Sen. Breene Ha­ri­moto. “To say we’re go­ing to use statewide TAT money to help fund a lo­cal project … I’m just very con­cerned. … I have a large con­cern with that pol­icy, set­ting that prece­dent.”

The bill also ex­tends Honolulu’s cur­rent half-per­cent gen­eral ex­cise tax for three years and re­duces how much the state takes as ad­min­is­tra­tive fees. It also re­quires an au­dit and more over­sight for the rail project. The mea­sures come as the cost of the rail project bal­looned from $5.26 bil­lion in late 2014 to $8.2 bil­lion.

Honolulu Mayor Kirk Cald­well ac­knowl­edged there has been a history of “over-promis­ing and un­der-de­liv­er­ing” on the project. But he ques­tioned whether the TAT in­crease is the way to go.

“We have le­gal con­cerns about the statewide TAT in­crease and the de­posit of that in­crease into the Mass Tran­sit Spe­cial Fund,” Cald­well said in tes­ti­mony. “The GET sur­charge has been tried and true for 10 years, which is why it seems the best way to go.”

Leg­isla­tive lead­ers, how­ever, want to use the TAT in­crease be­cause it will “front load,” or al­low the city to pay more in ad­vance, sav­ing in­ter­est charges.

Tes­ti­fiers, gen­er­ally re­peat­ing tes­ti­mony they made dur­ing a HouseSe­nate in­for­ma­tional ses­sion ear­lier this month, mostly op­posed the bill.

Ho­tels and ho­tel as­so­ci­a­tions lamented the pro­posed 1 per­cent TAT in­crease, say­ing it could dis­cour­age tourists. The 8 per­cent an­nual growth rate of TAT dur­ing the next 13 years fac­tored into the bill is too op­ti­mistic, they added.

“Govern­ment en­ti­ties at both the state and county lev­els can­not con­tinue to levy ad­di­tional taxes on the vis­i­tor in­dus­try, our pri­mary eco­nomic driver, as those costs will be passed on to the vis­i­tors, who can choose to va­ca­tion else­where,” said Stephanie Donoho, ad­min­is­tra­tive di­rec­tor for the Ko­hala Coast Re­sort As­so­ci­a­tion.

A 1 per­cent in­crease for a $300 ho­tel room would add $3 to the bill.

“Is that go­ing to break the back of the in­dus­try?” asked Sen. Brick­wood Ga­lu­te­ria, whose Waikiki district gen­er­ates a lot of the tax.

“You put too many drops in the bucket and it over­flows,” re­sponded Ed Case, se­nior vice pres­i­dent of Outrig­ger En­ter­prises Group.

Wes­ley Machida, di­rec­tor of the state De­part­ment of Bud­get and Fi­nance, which sup­ports the bill, said his cal­cu­la­tions showed the 8 per­cent growth fig­ure is rea­son­able. Case, a mem­ber of the state Coun­cil on Rev­enues, said the cal­cu­la­tions don’t take into ac­count AirBnB and sim­i­lar ho­tel al­ter­na­tives, which now ac­count for 37 per­cent of vis­i­tor lodg­ing.

The pro­posed cap on the TAT for coun­ties also spurred opposition. The Leg­is­la­ture capped it dur­ing the Great Re­ces­sion, re­sult­ing in Hawaii County get­ting about $20 mil­lion less than prior years. The $103 mil­lion cap pro­posed in the bill is a $2 mil­lion in­crease from the $17.3 mil­lion the county got last year.

“This cap is un­nec­es­sary to achieve all other as­pects of the bill to fi­nance Honolulu’s rail,” said Hawaii County Mayor Harry Kim. “We al­ready had to in­crease our prop­erty tax to make ends meet.”

This should not be a neigh­bor is­land vs. Oahu is­sue, said Chu Lan Shu­bert-Kwock, pres­i­dent of the Chi­na­town Busi­ness & Com­mu­nity As­so­ci­a­tion, who fa­vors the bill as writ­ten.

“This rail is for ev­ery­one. We should not be di­vi­sive,” Shu­bert-Kwock said. “This is for Hawaii. This is our cap­i­tal. This should be our show­place.”

KA­HELE

INOUYE

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