Lingle proposes suspending hotel tax payments to counties... - Hawaii News Now - KGMB and KHNL

Lingle's budget plan sparks hotel room tax fight

Governor Linda Lingle Governor Linda Lingle
Kirk Caldwell Kirk Caldwell
Howard Dicus Howard Dicus
Clockwise from top left: Mayors Hannemann, Kenoi, Tavares & Carvalho Clockwise from top left: Mayors Hannemann, Kenoi, Tavares & Carvalho

By Mari-Ela David - bio | email

HONOLULU (HawaiiNewsNow) - It's a billion dollar fix. The governor unveiled a sweeping new plan on Monday to balance the budget, in part, by delaying tax returns.

The state has to make up the $1.2 billion budget gap through July of 2011.

On top of all the budget cuts already discussed, the governor is proposing to delay next year's tax returns by up to 90 days.

And then there's the transient accommodations tax, known as the TAT. She wants to keep the counties' share until the economy rebounds.

"I wouldn't be surprised if the counties object but I think they're prepared for it. In my meetings with them, they recognize that," said Governor Lingle.

It turns out the governor was right.

The counties objected and are vowing to fight for that money.

Withholding the TAT would give the state an extra $100 million next fiscal year. But all county mayors say that's money they need to stay out of the red.

TAT is a hotel room tax. Revenues from it is typically shared with the counties.

The governor's proposal drew immediate criticism from leaders of all four counties.

"It's very unfair because the counties provide so many of the services for our tourism. It's health and safety, you have police, fire, lifeguards and all the infrastructure servicing all these tourist destinations," said Kirk Caldwell, Managing Director for Honolulu County.

They're services the counties use TAT revenue to pay for.

Here's a breakdown of how much money each county stands to lose:

•Honolulu County: $44.5 million

•Maui County: $22.7 million

•Hawaii County: $18.5 million

•Kauai County: $14.4 million

Business Reporter Howard Dicus predicts a domino effect.

"This would allow the counties to raise their property tax rates, and blame her," Dicus said.

But the governor says the counties could've recouped those losses if they had been as disciplined as the state in cutting spending.

"The state implemented some very tough decisions, hundreds of people lost their jobs, and people were furloughed, thousands of people were furloughed, and there was a reduction in our payment to UTF. The counties on the other hand took none of those actions. So they were basically putting out the message of, we don't need to save that much money, only the state does," said the governor.

"To say because you've balanced your budget, we're going to punish you, and take more money away, isn't very fair," said Caldwell.

This past July, lawmakers raised the TAT one point, to 8.25%.

The governor vetoed it, but lawmakers overruled it.

Now, it's back to the capital.

"I think we're going to be fighting very hard up at the Legislature to try to preserve it," said Caldwell.

In statements, county mayors reacted:

"I am disappointed that the governor would reverse from last session her position on taking the counties' share of the hotel room tax. In so doing, she is opening the door to the possibility that local residents will have to pay more in property taxes so that the counties can continue to provide essential services such as police, fire, paramedics and lifeguards for the state's number one industry" said Honolulu Mayor Mufi Hannemann.

"We incur significant costs related to tourism including: parks maintenance; lifeguards; police and fire services; road maintenance; and the list goes on and on. Losing all of the TAT would be devastating to our budget and we are hopeful that there will be continued dialogue with the state on this matter," said Kauai Mayor Bernard Carvalho.

"The proposal by the governor and her Administration to suspend the TAT revenue to the counties comes at a time when we should be working together to pull ourselves through some of the most difficult economic conditions our state has faced," said Maui Mayor Charmaine Tavares.

"The counties rely on the transient accommodations tax to balance their budgets, and for the state to take away that source of funding puts pressure on the counties to raise taxes at the county level...the TAT is our county's second largest source of revenue and removing it will put a tremendous burden on the backs of our residents," said Big Island Mayor Billy Kenoi.

To see the governor's entire budget plan, click on the link on this page.

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