The increase of $1 per $1,000 of assessed value will raise an estimated $17 million annually for the city, to help pay for a new rail line and added operating and service expenses. Tourism officials have opposed the hike, noting an extended trend towards decreased spending by visitors, despite an increase in traffic volume.
The City Council of Honolulu, Hawaii voted 5-4 in favor of adopting Resolution 19-55, which would raise real property taxes for hotels and resorts, during its meeting on June 5, Pacific Business News reported.
Proposed by Honolulu Mayor Kirk Caldwell, the resolution would increase property taxes for hotels and resorts to $13.90 per every $1,000 of assessed value, up by $1 from the current rate of $12.90 per $1,000.
The increase would raise about $17 million more for the city annually, according to the Honolulu Star-Advertiser.
As Caldwell wrote in an editorial published in the Star-Advertiser, the resolution and other proposed measures were made “based on the fact that the city has rising nondiscretionary obligations to pay, as well as future rail operations and maintenance costs.”
Caldwell clarified to the Star-Advertiser that the increase is intended to help cover the cost of the first segment of a new rail line that is slated to come online in December 2020, and is estimated to cost the city roughly $30 million to cover operations and maintenance for the service during its first six months. The tax hike also intended to cover added expenses for operations and for first responders, parks and other departments that provide city services, Caldwell said.
The Hawaii Lodging & Tourism Authority (HLTA) has been vocal in its opposition to the proposal, Pacific Business News reported. In a press conference preceding the Council meeting and then in testimony at that meeting, HLTA President and CEO Mufi Hannemann and Chairman Glenn Vergara raised concerns that the tax hike would cause a strain in hotel operations. Hotel occupancy and visitor spending have declined, they noted, signs that the industry is heading toward a slowdown.
But in the editorial, Mayor Caldwell wrote that the hotel industry is “thriving” and that his proposal would “pass additional tax burdens to the millions of visitors that enjoy our island,” rather than to residents, Pacific Business News reported.
In his testimony at the City Council meeting, Hannemann asked for a compromise, urging council members to cut spending instead of increasing taxes, Pacific Business News reported.
In a statement provided to Pacific Business News via e-mail after the vote, Hannemann said: “Although the vote was not in our favor today, we are pleased that at least four out of the nine council members believed in our message: Cut and trim the spending of a runaway city budget that has ballooned by over nearly a billion dollars in seven short years. Households and businesses do that, and it should be no different with government.
“There are signs everywhere that the tourism industry is softening in Hawaii, and it is unfortunate that Mayor Caldwell and his supporters on the council opted to raise more taxes instead of looking at the big picture and showing budgetary restraint,” Hannemann added.
Caldwell told reporters that “The city, like any other business, is trying to control costs, but [we] also look for revenue because our operations keep going up,” the Star-Advertiser reported.
“Almost 50 percent of those operations are beyond our control— it’s retirement benefits [and] health benefits, those kinds of things,” Caldwell added.
The Star-Advertiser reported that April 2109 marked the sixth month in a row that more visitors came to Hawaii than the previous year, while creating less economic benefit. Arrivals have been growing since February 2017, the Star-Advertiser reported, but tourism spending has been falling every month since November of that year. Hannemann said hotel occupancy rates have declined, too.