The transient accommodations tax, known widely as the hotel room tax, is a major source of state money for city and county governments as well as for the marketing of Hawai'i as a tourist destination.

No consensus has emerged on how the revenue should be divided and used, foreshadowing another battle at the Legislature over one of the most lucrative sources of money for state and local programs.

To some, hotel room taxes should be used for drawing more tourists to Hawai'i. To others, the taxes should help cover upkeep and development of attractions and local resources used by tourists, including beaches, parks, trails and roads.

Still others say the revenue should be used for cash-strapped programs that benefit Hawai'i's residents, such as education and healthcare.

At the heart of the discussions are questions of who should directly benefit from the $10 billion tourism engine and how best to maintain the strength of Hawai'i's largest industry.

Some 6.5 million people visit Hawai'i annually, paying a 7.25 percent tax for staying in a hotel room or other "transient accommodation."

Of the taxes collected, about 44.8 percent is transferred to the counties,

32.6 percent to the tourism special fund that is the source of the Hawai'i Tourism Authority's budget to promote the Islands, 17.3 percent to a convention center special fund for operations and 5.3 percent to a transient accommodations tax trust fund, which the authority can use if it doesn't reach its financial ceiling. Caps and certain conditions apply on the amounts that go into the tourism and convention center special funds.

Even five years after the establishment of the tourism authority and an increase in the tax to 7.25 percent, "there's a lot of questions about what the funds should be used for," said Marsha Wienert, Gov. Linda Lingle's tourism liaison.

At Lingle's tourism summit meetings earlier this year, a committee headed by Murray Towill, president of the Hawai'i Hotel & Lodging Association, recommended a restoration of the original 37.9 percent financing level for tourism marketing with no caps on the amount.

The change could increase the tourism authority's financing beyond its $63.3 million cap for tourism promotion, and decrease the amount that would be transferred to the general fund.

After the meetings concluded, Gov. Linda Lingle said she hoped to raise the ceilings on the state money designated for tourism, adding "there will be a big push" to do so in the next legislative session.

Wienert also has said the administration wanted to remove the caps and conditions placed on tourism money that goes to the tourism authority.

Stance changes

Towill's committee was to develop a plan by the end of last month and work with the administration and Legislature to restore the financing with no cap.

But since then, Wienert said the administration doesn't plan next session to seek changes to the formula that could increase tourism marketing money to the authority.

"That is not in the legislative package, to remove the cap or to change the percentage" going to the tourism special fund, Wienert said.

Instead, the administration wants to spend more on tourism-related facilities, such as parks and roads, according to Wienert.

Plans call for spending $20 million on park improvements, for example, Wienert said.

"Some of our parks are in such a horrible state right now," she said. The money for those improvements would come out of the general fund.

"If we increase funds to the tourism special fund that decreases funds to the general fund," Wienert said.

Chris Resich, a board member of the Hawai'i Visitors & Convention Bureau who participated in Lingle's tourism summit, said "this kind of looks like a change in the position."

"They are just limiting our ability to be competitive," Resich said. The tourism authority's budget constraints will reduce the visitors bureau's budget for North America marketing next year by more than $1 million, he said.

Peter Young, who sits on the tourism authority board as chairman of the state Department of Land and Natural Resources, said preserving natural and cultural resources benefits tourists as well as local residents.

The tourism authority designates $1 million annually out of its hotel tax revenue for natural environment programs annually whenever money reached a certain threshold, as required by state law.

Tourism industry leaders argue the authority does not have enough money to pay for all of the state's natural resources programs.

"This is something that they have to work through the administration and to go through the regular budgeting process for each department," Resich said.

Wienert contends that everyone needs to clearly identify what the tourism authority money should be used for and "then after that's done we'll better understand whether that should increase."

That won't happen, Wienert said, until after the tourism authority and industry representatives hammer out improvements to the state's tourism strategic plan by 2005.

Lawmakers differ

"If that's their proposal then we're going to have to have hearings and see how that goes, said state Rep. Jerry Chang, D-2nd (Hilo), the House tourism committee chairman.

Senate tourism committee chairwoman Donna Mercado Kim, D-14th (Halawa, Moanalua, Kamehameha Heights), who would play a key role in decisions on the hotel room tax allocations, was not available for comment.

Chang said the Legislature may consider legislation similar to one proposed last year that would increase allocations to the tourism authority and Neighbor Islands while authorizing the city to impose a 1 percent general excise tax in exchange for forgoing hotel room tax revenue.

Hawaii State Association of Counties representatives, meanwhile, are proposing that counties be allowed to impose a 1 percent general excise tax on retail sales in exchange for giving up all or part of their accommodations tax share. The proposal would also increase to 38 percent or 40 percent the amount going into the tourism special fund for marketing, with some earmarked for county programs.

Tourism executives maintain lawmakers should restore the authority's original 37.9 percent share of the hotel room tax revenues with no cap on the amount. That is what the industry and legislators agreed to in 1998 when they decided to raise the tax to 7.25 percent and create the tourism authority.

But in the 2002 legislative session, the authority's share was reduced to 32.6 percent with a $63 million cap.

"We've always thought it to be greatly unfair and wrong," said Keith Vieira, senior vice president at Starwood Hotels & Resorts. "The fact that you go in and have an agreement with legislators on how something is going to be done and support the effort, and then to have someone come at a later date and change the rules, we think that hurts the credibility."

Rex Johnson, executive director of the Hawai'i Tourism Authority, said the authority will likely propose increasing to 37.9 percent the percentage of hotel room tax revenues for the tourism special fund and lifting the $31 million cap on deposits into the convention center special fund.

Towill added there should be no ceiling on the appropriation to the tourism special fund, either.

"We would like them to have access to all of the money that is in the tourism fund," Towill said.