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i Jit It O°`co U 11 Y OF HAWAVI STATE OF HAWAII • i tP;.maw:',• +rE 60;F � I BILL NO. 81 (DRAFT 2) ORDINANCE NO. AN ORDINANCE AMENDING CHAPTER 2, OF THE HAWAII COUNTY CODE 1983 (2016 EDITION,AS AMENDED), BY ADDING A NEW ARTICLE TO IMPLEMENT A COUNTY TRANSIENT ACCOMMODATIONS TAX. BE IT ORDAINED BY THE COUNCIL OF THE COUNTY OF HAWAII: SECTION 1. Purpose. The transient accommodations tax was established by the Hawaii State Legislature through Act 340, Session Laws of Hawaii 1986, and took effect in 1987 to provide revenue to the counties to offset the impacts of visitor activities on county infrastructure and services. Over time, the statutory allocation of transient accommodations tax distributed to the counties was reduced to a proportional fraction of the total collections. In fiscal year 2019, pre-pandemic, the total transient accommodations tax received by Hawaii County from the State was approximately $19,000,000. In fiscal year 2020, Hawaii County received approximately $16,000,000 in transient accommodations tax, which was reduced to zero the following fiscal year due to the ongoing COVID crisis. The Hawaii State Legislature,through Act 1 of the First Special Session of 2021, permanently removed the distribution of State transient accommodations tax to the counties; however, Act 1 also established authority for the counties, through their respective directors of finance, to levy a county transient accommodations tax in addition to the transient accommodations tax collected by the State. In 2019,pre-pandemic, Hawaii County received an average of 150,000 visitors per month. The burden of support for infrastructure and services provided for these visitors persists, though the proportional allocation of the State-collected transient accommodations tax will not. To maintain a similar level of service without significant budget shortfalls, the County's tax policy should reflect recouping the impacts of visitor activities. While a balanced budget could be achieved by increasing local property taxes, this would be inequitable. A county transient accommodations tax more justly provides for visitor-related expenditures. This ordinance implements the transient accommodations tax for the County of Hawaii, authorized by Act 1, Special Session Laws of Hawaii 2021. SECTION 2. Chapter 2, of the Hawaii County Code 1983 (2016 Edition, as amended), is amended by adding a new article to be appropriately designated and to read as follows: "Article—. Transient Accommodations Tax. Section 2- Tax established. Pursuant to Part III of Act 1, Special Session Laws of Hawaii 2021, a three percent transient accommodations tax is established on all gross rental, gross rental proceeds, and fair market rental value considered taxable under the definitions of section 237D-1, Hawaii Revised Statutes. This tax shall be levied beginning on January 1, 2022.