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The Honolulu Advertiser
Posted on: Thursday, February 18, 2010

Real property taxes may rise

By Gordon Y.K. Pang
Advertiser Staff Writer

Leaders from the state's four counties yesterday warned that real property taxes likely would have to be increased if the state makes a grab for transient accommodations tax revenues and maybe even if it doesn't.

Honolulu officials said the city would lose about $44.5 million annually if the TAT funds, or hotel room taxes, are taken away by the state, as proposed in House Bill 2598. Maui County's annual share of TAT revenue is $22.7 million, for Hawai'i County, $18.5 million, and for Kaua'i County, $14.4 million.

Despite county objections, Rep. Marcus Oshiro, D-39th (Wahiawā), chairman of the House Finance Committee, said he will likely recommend his committee advance HB 2598, which suspends distribution of TAT revenues to the counties for the next three years.

The state hopes to reap an estimated $100 million annually in TAT funds to help balance a state budget deficit estimated at $1.2 billion through June 2011.

"A hundred million dollars (lost to the counties) means that we'll have to find a hundred million dollars elsewhere," Oshiro said. "Until we start looking at other options further cuts in the budget or other revenue proposals we need to keep this measure alive."

A decision on the bill and a number of tax and revenue proposals designed to provide an injection of cash into the state general fund is expected by the Finance Committee next week.

State Deputy Budget Director Barbara Annis testified during a committee hearing yesterday that keeping TAT proceeds represents "a good portion of our financial plan." Without the money, "the state will have no other choice but to cut programs or eliminate programs," she said.

County officials called the TAT funds critical to their operations. Hawai'i County Mayor Billy Kenoi said it's only fair that counties get a share of TAT revenues since visitors use a host of county facilities and services.

"And yet not one time are the counties compensated for those delivery of services to the critical hospitality industry," Kenoi said.

Honolulu Managing Director Kirk Caldwell said the city likely will increase tax rates on second homes or investment properties even if the city receives its cut of the TAT funds. He said that at this point, owner-occupants are not being considered for property tax increases.

Kenoi and Gary Heu, administrative assistant to Kaua'i Mayor Bernard Carvalho Jr., said they would have to raise property taxes to a level necessary to offset the TAT losses.

Maui County Mayor Charmaine Tavares said her government "most likely" would increase property taxes in the coming year regardless of whether its TAT dollars are taken away.