2017-03-28 Letter to Sylvia Luke re SB 1290 SD2 HD1 relating to the Transient Accommodations Tax

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Rep. Sylvia Luke March 28, 2017 Page 2 reason why the counties should feel they have a claim on that second part of the TAT, the extra 2%. As stated above, the Senate has proposed, in SB1290, SD2, to increase the counties' share of the TAT from $103M to $108M. While any increase in the counties' share of TAT is appreciated, we cannot help but express our belief that the counties' portion of TAT should be much higher than $108M. Based on past commitments, and the tough vote that the state legislators took, we understand why the counties cannot expect to receive 45% of the total revenue generated from the TAT. However, we do believe that we should receive 45% of what would be collected if the TAT were still 7 '/ %. And we think the history creates a strong case for why this is a position we all should endorse. We are told that the TAT is expected to generate about $472M this year; if the tax were 7 '/%, only $369.9M would be raised. But 45% of$369M would be $166M, not $108M. The State then could receive 55% of the moneys collected at 7 'W%, plus all of the revenue from the second, enhanced, part of the TAT (the extra 2%). (The State should then pay for the various carve-outs from its total share.) Although, as calculated above, $166M would seem to be the fair share for the counties, we are not blind to the State's needs, and if the Legislature feels that it cannot take such a large financial hit this year, we would propose that the restoration to 45% be phased in over two or three years. The statutory language could provide for fixed sums of, say, $125M in FY18 and $150M in FY19, with 45% to be effective in FY20 and beyond. If the Legislature locked in those numbers now, there would be the added benefit that you would not have to waste so much time dealing with complaining counties, year after year. And we all could plan our future budgets with greater certainty. Since the State and the counties serve the same constituents, it is important that we continue to work as partners in meeting the needs of our communities. As demand for services is ever increasing (and so is the cost of those services), it is equally important that revenue be appropriately shared so that the demands can be met to the best of our combined abilities. Many may not realize how important the TAT is to the County of Hawaii (and to the other counties). It is, in fact, Hawaii County's second largest source of revenue, behind only the property tax. Unless we continue to receive a reasonable share of the TAT, we will be pressed to raise property taxes about $19M (5.1% of our total budget), and that would worsen the pressures on the portion of the population that is currently managing a paycheck-to-paycheck financial existence. It would hurt a major portion of our population, affecting renters and homeowners alike. Property taxes, after all, are not simply absorbed by a landlord; they are passed on, in whole or in part, to a tenant. County of Hawaii is an Equal Opportunity Provider and Employer.