Hawaii tourism

Ige plans to veto bill that transfers tax revenue from Hawaii Tourism Authority and counties

Governor David Ige today announced his intention to veto a measure that would make functional changes to the Hawaii Tourism Authority and eliminate the transient lodging tax distribution to the agency as well than to individual counties.

House Bill 862, passed this legislative session through an 11th-hour dump-and-replace effort, sought to eliminate the county’s $103 million annual share of revenue from the tax on the transient accommodation, or hotel tax. Instead of sending the money to the counties, the state would keep it.

The changes outlined in House Bill 862 would also remove transitional lodging tax funding dedicated to HTA since its inception. The bill replaced HTA’s normal $79 million annual TAT distribution with $60 million in funding from this year’s American Rescue Plan Act.

The bill would eliminate HTA’s procurement exemption, a measure that would have required HTA to obtain state approval for all future contracts and purchases.

Ige, who has until July 6 to make final veto decisions, said he fears the “funding and functional changes” in Bill 862 will “seriously damage HTA’s shift to managing destination”.

Ige said HTA’s destination management action plans, which aim to bring the community together to mitigate tourism hotspots, are especially needed given the high number of visitors coming to Hawaii since the development of safe vaccines and efficient. He said the bill would make it impossible for the HTA to find a more sustainable balance in communities across Hawaii.

Ige told lawmakers earlier in the day that the rationale for his veto also stemmed from his concern that funding the HTA with federal funds from the American Rescue Plan Act instead of TAT would make funding less predictable and add potential inefficiencies.

He said a “county TAT of 3% represents a significant increase that could have a major impact on Hawaii’s nascent economic recovery.”

Ige told lawmakers that tying House Bill 862 to House Bill 200 would limit operational funding for the Hawaiʻi Convention Center to $11 million, just 20% of the $54.1 million requested in the biennial executive budget. administration. This move, he said, would seriously impede the HCC from attracting additional events and fulfilling its mission.

After lawmakers passed the bill, Ige met with HTA and offered his support. However, he was unsure whether he would put Bill 862 on his veto list, as the veto would have a convoluted series of consequences since lawmakers left HTA funding out of Bill 200, the bill. State finance law.

During today’s press conference, Ige also announced his intention to veto portions of Bill 200 related to debt service spending and goals that required federal matching funds. .

If Ige vetoes HB 862, that means the federal funding lawmakers allocated to HTA for fiscal year 2022 disappears, with no new special funds to replace it.

Ige said today House Bill 862 is the only funding for HTA.

There’s also a sacrificial lamb in HB862, which came about after lawmakers used gut and replacement to frame HTA and county provisions in the bill, which replaced sections of a draft of aerospace law.

Ige said that if he opposes Bill 862, funding for the International Space Center for PISCES exploration systems would also be eliminated.

According to its website, the state-funded Hawaii Aerospace Center has five employees who “work to position Hawaii as a leader in space exploration while developing sustainable technologies and industries that benefit Hawaii and to space exploration”.

“All of those House Bill 862 appropriations would be vetoed with this measure,” Ige said.

He said HTA and PISCES are among the gaps, “which we would probably propose to fill with the measure we would propose to cover debt service financing and some of the other priority credits needed to run the government.”

Even if Ige vetoes House Bill 862, it is not certain that the veto would hold. If state lawmakers return to session and choose to veto, they may have the votes to override it.

It is still unclear what will happen to PISCES, HTA and county funding, but contingency plans are underway.

Ige said if a veto on House Bill 862 is upheld, the counties would receive their annual TAT distribution of $103 million.

But if Ige vetoes House Bill 862 and that veto does not hold, counties would no longer receive an annual TAT distribution. Instead, the bill would allow each county to raise its hotel tax up to 13.25% from the current 10.25% for up to 10 years. Lawmakers, including House Finance Chair Sylvia Luke (D, Punchbowl-Pauoa-Nuuanu), said the measure was aimed at improving transparency and would prompt counties to crack down on illegal vacation rentals, which could be a source of higher tax. income.

However, the 30% rise has left tourism and government officials wondering if the revenue gains will outweigh the potential negative impact of the rising cost of vacationing in Hawaii, especially now that the state is trying to recover from the fall of the pandemic.

So far, only Maui Mayor Mike Victorino and Honolulu Mayor Rick Blangiardi have said they would exercise their authority to raise TAT taxes if House Bill 862 moves forward.

HTA has bolstered its budget so it is ready for House Bill 862 to become law or a veto or veto waiver.

The agency is trying to squeeze more than $53 million in funds that could help get them through another legislative session. Some $35.5 million of that came from a reallocation of Transitional Lodging Tax funds, which Ige approved on June 1.

HTA had previously not had access to TAT since May 2020, when Ige halted distribution as part of the state’s COVID-19 emergency response. HTA’s TAT ​​reboot is a critical but relatively weak cast given that in FY 2019, HTA received $79 million in TAT funds but helped bring in $631 million in TAT collections in the state.

In May, the HTA Board of Directors pledged to encumber some $12 million in special tourism funds remaining and about $6 million that has been parked for years in a special fund created for the Hawaiian Music and Dance Center.

The decision to bog down so many funds was an administration-backed final race around House Bill 862, which HTA says would have put its future in jeopardy and removed the kind of autonomy that allowed the agency to execute multi-year projects and to relocate. nimbly. It would also make it harder for state lawmakers to interfere with HTA’s destination management priorities and ensure the agency doesn’t have difficulty spending federal funds on foreign marketing and the Hawai’i Convention. Center.

HTA has until June 30, when the agency could lose access to deferred money in its special fund, to create purchase orders to purchase goods and services or sign contracts that commit purchases. This does not necessarily mean that HTA will spend the money, which will be subject to certain criteria established by the HTA board.

HTA’s pending charges are above their budget for fiscal 2020, which HTA reduced to $41 million from the previous $86 million, which included reprofiled funds.