HomeMy WebLinkAboutCOM 0841.004 2020-2022 D
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June 1, J022
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Mai|eDavid,Chair
Aaron Chung,Vice Chair �—
Hawaii County Council
Hawaii County Building
l5AupuniStreet, Hilo, HI 96720 r—
Comments onRes.441-22Real Property Tax Rates July l2U2%—June 3lIU23
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Dear Chair David,Vice-Chair Chung, and Members ofthe Hawaii County Council,
We would like to thank Councilmember Inaba for introducing Resolution 441-22,to provide an opportunity for
additional discussion on real property tax rates for the period of July 1, 2022—June 30, 2023.
While we appreciate the Council's understanding that businesses across the island are still reeling as they try to
recover from the pandemic,we believe that providing real property tax adjustments to only some classes
(commercial, industrial,ag),while excluding others(hotels and resorts, apartments), is unfair and unjustifiable.
When I asked Councilmember Inaba his reasoning for excluding the hotel and resort class, he said that the discussion
at the last council hearing led him to try to provide relief for small businesses. But small businesses are not their own
tax class. Both small and large businesses operate in all tax classes and providing relief to one group over another is a
very slippery slope. Where does the line even get drawn for a business to be considered a small business versus a
large business?Is it based on revenues?The number of employees?Name recognition and a corporate brand?And
aren't there large businesses in the industrial and commercial tax classes(for example,Costco)who would also
benefit from this proposal,while others would beexcluded?
All businesses, including hotels and resorts, are seeing significant increases in the day-to-day costs of operations.
Many are struggling to continue to operate.We all need relief including our island's hotels and resorts.
For our members the cost of doing business has gone up 40% in the last year with:salary increases; increases in the
cost of family medical benefits;food costs for both our guests and our employee meals;energy and gasoline costs;
construction materials costs and delays;supply chain disruptions;the new Hawaii County TAT implemented in
January 2022;and now,significant increases in real property tax values in 2022-23.
Hotels and resorts saw the largest gain in property tax valuations for the upcoming fiscal year. Across the Kohala
Coast,we had seven properties that saw the value of their buildings increase by 50%or more. One hotel saw the
value of its buildings increase by 124%! Please recognize,these gains in values are only realized if a property is sold
to a willing buyer.The Finance Department and Real Property Tax office have shared that this transfer of assets
happens less frequently with businesses than it does with residences,and it is therefore more difficult to determine
actual property values. In the case of the hotel/resort class, comps from other islands were used to establish tax
values,osthere are such alimited number oftransactions each year.
If the Council wanted to try to target the visitor industry with this type of legislation,that is also a problem,as there
are currently accommodations located in nearly every tax class.The way this resolution is written,someone running
an illegal STVR on ag land would benefit from a reduction in rate, as would a homeowner renting out a bedroom in
her house, as would a bed and breakfast located in a downtown improvement district. But those specifically defined
as hotels and resorts should not. It doesn't make sense.
i
Our hotel and resort members had significant losses in 2020 when the visitor industry was completely shut down.We
invested in medical benefits and food programs for our furloughed employees, spending more than$30 million,with
zero income. Last year was also a challenge,with the surge of the delta variant, as Governor Ige told visitors not to
travel to Hawaii during what is typically our busy summer season.And while we are hopeful that 2022 will continue
to be a year of rebuilding and stabilization,we are justifiably wary,as COVID cases climb locally,which impacts our
employees,and our ability to maintain normal business operations.And we are still awaiting the return of
international visitors,as countries adjust their COVID-19 protocols to address ever-changing conditions. UHERO has
estimated that it will be 2024 before the visitor industry fully recovers.
Please recognize the impacts your decisions have on our industry. Nearly 800 entities filed appeals of their property
tax rates this year, almost twice the number of previous years,and nearly all of those appeals were filed by
businesses both large and small, in every tax class.
We all need your assistance, and we need it now.
KCRA members employ 5,000 people,supporting 20,000 Hawaii Island residents at their hotels,timeshares,
restaurants, retail outlets,golf courses and spas.Additionally, in 2022, KCRA members will pay an estimated$60
million in state and county TAT, and$40 million in state and county GET. Further, KCRA members,and the residents
within our resorts, paid$73 million in property taxes to Hawaii County last year, nearly one fifth of total property tax
collections.
Sincerely,
auL P Z"
Stephanie Donoho
Administrative Director, Kohala Coast Resort Association
PO Box 6991,Ka uela,HI96743 (808)747-5762* ko alae astresortassn ail.co
www.kohalacoastresorts.co