Posted on: Wednesday, February 9, 2005

Hotel tax-credit bill advances

By Lynda Arakawa
Advertiser Staff Writer

The debate over state tax credits for hotel construction and renovations is on at the state Capitol again, as two House committees yesterday approved a bill to increase and extend the incentive.

The bill would raise the 4 percent tax credit — which is set to expire at the end of this year — to 8 percent in July and extend it until 2009, when it would revert to 4 percent. The tax credit would expire in July 2012.

Hotel-industry officials, including a representative from Outrigger Hotels, said the tax credits would help stimulate investment in hotels and preserve the number of full-service hotel rooms by providing financial incentives to renovate and build rooms rather than convert them to time-shares or condominiums. They warned that fewer full-service hotels would mean less tax revenue and fewer jobs.

Outrigger recently began its $460 million Waikiki Beach Walk project, which includes the conversion of some hotel rooms into vacation ownership units.

House Tourism and Culture committee chairman Jerry Chang, D-2nd (Hilo), expressed concern about the conversions of hotels to time-shares and condominiums, saying that a shrinking hotel-room inventory could eventually make it difficult to attract conventioneers.

Gov. Linda Lingle's administration opposes the tax credits, citing revenue losses that are not factored in the state's financial plan. State Tax Department officials also noted that because the construction industry is already busy, other businesses and homeowners requiring a contractor's services could face delays and higher costs.

House committees on tourism and culture, and economic development and business concerns, addressed some of the administration's concerns by narrowing the eligibility of the tax credits to hotels rather than including other properties such as time-shares and commercial buildings in resort areas. The bill would also require that any participating hotel repay the tax credit if the property is converted within 10 years.

State Tourism Liaison Marsha Wienert said state tax officials will evaluate the potential revenue loss from the amended bill but added that Lingle's executive budget did not include any tax credits for hotel construction or renovation.

The House Tourism and Culture Committee also approved a bill that would give more money to the Hawai'i Tourism Authority and the Hawai'i Convention Center. The bill would increase the Hawai'i Tourism Authority's share of the transient accommodations tax to 35.4 percent from 32.6 percent and raise the cap on revenue from that tax to the Hawai'i Convention Center from $31 million to $35 million.

The bill would also provide 2.5 percent of transient accommodations tax revenue to state parks, statewide trail and access programs and the state general treasury. The administration said the bill would reduce general-fund revenues by $79.7 million over the next six years.

Both bills are headed for the House Finance Committee.

Reach Lynda Arakawa at 535-2470 or larakawa@honoluluadvertiser.com.