Ige plans veto of invoice that shifts tax income from Hawaii Tourism Authority, counties

Governor David Ige today announced its intention to veto a measure This would make functional changes to the Hawaii Tourism Authority and eliminate the distribution of the temporary lodging tax to the agency as well as individual counties.

House Bill 862, which passed this legislature in an eleventh hour, attempting to eliminate the county’s annual $ 103 million share of temporary lodging or hotel tax revenue. Instead of sending the money to the counties, the state would keep it.

The changes outlined in House Bill 862 would also take away the dedicated tax funding for temporary housing that HTA has had since its inception. The bill replaced HTA’s normal annual TAT payout of $ 79 million with $ 60 million in funding from this year’s American Rescue Plan Act.

The bill would remove HTA’s procurement exemption, a move that HTA would have required government approval for all future contracts and purchases.

Ige, who has until July 6 to make final veto decisions, said he was concerned that the “funding and functional changes” in House Bill 862 would “seriously affect the HTA’s shift to destination management.”

Ige said HTA’s destination management action plans, which focus on bringing the community together to mitigate tourism hotspots, are particularly needed given the high traffic volumes that have come to Hawaii since safe and effective vaccines were developed. He said the bill would make it impossible for the HTA to achieve a more sustainable balance in the Hawaiian communities.

Ige told lawmakers earlier today 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 that a “TAT of 3% for the county represents a significant increase that could have a major impact on Hawaii’s nascent economic recovery.”

Ige told lawmakers that the tying of House Bill 862 with House Bill 200 would cap operational funding for the Hawaii Convention Center to $ 11 million, which is only 20% of the $ 54.1 million requested by the government during the biennium corresponds to. The move would greatly prevent the HCC from attracting additional events and fulfilling its mission.

After lawmakers passed the law, Ige met with HTA and offered assistance. However, it was not certain that he would put House Bill 862 on his veto list, as the veto would have a number of complicated consequences as the legislature left HTA funding from House Bill 200, the state’s finance law.

During today’s press conference, Ige also announced his intention to veto portions of House Bill 200 relating to debt service spending and goals that require federal funding.

If Ige vetoed HB 862, it means that the federal funds that the legislature has allocated to HTA for the 2022 financial year will disappear without any new special funds replacing them.

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

There is also a sacrificial lamb in HB862 that arose after lawmakers used gut and substitution to spell out the HTA and district provisions in the bill that replaced portions of an aerospace law.

Ige said if he vetoed House Bill 862, funding for the International Space Center for Exploration Systems PISCES would also be removed.

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 space exploration.”

“All of those funds in House Bill 862 would be vetoed along with this move,” Ige said.

He said HTA and FISH are among the loopholes “that we would likely be closing in the measure we would propose to fund debt servicing and some of the other priority funds needed to run the government” .

Even if Ige vetoed House Bill 862, it is uncertain whether the veto would hold. If state lawmakers come back in session and decide to tackle the veto, they may have the votes to overturn it.

It is still unclear what will happen to the funding for FISCH, HTA and the counties, but contingency plans are in progress.

Ige said if a veto of House Bill 862 was upheld, counties would receive their annual TAT payout of $ 103 million.

But if Ige vetoed House Bill 862 and this veto does not apply, the counties would no longer receive an annual TAT payout. Instead, the bill would allow each county to increase its hotel tax from the current 10.25% to up to 13.25% for up to 10 years. Lawmakers, including House Finance Chair Sylvia Luke (D, Punchbowl-Pauoa-Nuuanu), said the measure aims to improve transparency and encourage counties to crack down on illegal vacation rentals that are a source of higher Taxes could be revenue.

However, the 30% increase led tourism and government officials to debate whether the revenue gains would offset the potential negative impact of an increase in the cost of a Hawaiian vacation, especially now as the state tries to get away from the onset of the pandemic to recover.

So far, only Maui Mayor Mike Victorino and Honolulu Mayor Rick Blangiardi have stated that they would exercise their TAT tax increase powers as House Bill 862 moves forward.

The HTA has increased its budget in preparation for House Bill 862 to become law or become a veto or veto-override.

The agency is about to dig in more than $ 53 million in funds that could help move them into another legislature. About $ 35.5 million of that came from a new distribution of temporary housing tax revenue that 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 small distribution as HTA received $ 79 million in TAT funding in fiscal 2019 but helped bring $ 631 million in TAT collections to the state .

In May, the HTA board pledged to charge about $ 12 million in leftover tourism special funds and about $ 6 million that had been parked for years in a special fund created for the Hawaiian Music and Dance Center.

The move to drain so much funds was an administratively-assisted finale for House Bill 862, which HTA said would have jeopardized its future and taken away the kind of autonomy that has allowed the agency to run multi-year projects and move nimble. It would also make it harder for state lawmakers to intervene in HTA’s goal management priorities and ensure the agency doesn’t get into trouble spending federal funding on overseas marketing and the Hawai’i Convention Center.

HTA has until June 30, the date the agency could lose access to transferred money in their special fund, to create orders to purchase goods and services or to sign contracts that commit to purchase. This does not necessarily mean that HTA will spend the money subject to certain benchmarks set by the HTA board of directors.

HTA’s outstanding charges are more than FY2020 budget, which HTA slashed from the previous $ 86 million to $ 41 million that included some funding for the carryover.