Wednesday, February 10, 1999

Hawaii State Seal

House panel rejects
having counties tax
hotel rooms

Legislature Directory
By Mike Yuen


A House panel has rejected the idea of a second hotel room tax that would have been imposed by the counties.

1999 Hawaii State Legislature After hearing objections from Gov. Ben Cayetano's administration, the Hawaii Hotel Association and a Kauai councilman, the House Tourism Committee yesterday spiked a bill that would have allowed counties to set their own tax on hotel rooms and time-share accommodations. The measure would also have lowered the state's hotel room tax of 7.25 percent to 3.75 percent on Jan. 1, 2002. The state's tax of 7.25 percent on the fair market rental value of time-share units would also have been lowered to 3.75 percent.

"During a period when counties are facing tremendous fiscal challenges, the bill may offer a reasonably effective way to broaden the counties' revenue bases without burdening our residents through real property taxes," said Maui County Council Chairman Patrick Kawano.

But, countered Murray Towill, Hawaii Hotel Association president, "By our calculations, the only way for the counties to get more funds via the (hotel room tax) is to increase it beyond the existing level. We would like to point out that Hawaii is already currently ranked No. 1 in the nation on the total taxes collected per hotel room in the resort markets."

Visitors are also hit with a general excise tax of 4.16 percent, Towill noted.

Kauai Councilman Billy Swain, a former House member, added, "What this (bill) does is compete county against county." Kauai, the county with the fewest hotel rooms, would likely have to set a higher hotel room tax just to get the same amount it now receives from the state room tax, Swain said. Under the bill introduced by Rep. Bob Nakasone (D, Kahului), the counties' share of the state room tax would be eliminated.

Sen. Jan Yagi Buen (D, Waihee) introduced an identical measure in the Senate. It has not yet been scheduled for a hearing.

Deputy Tax Director Neal Miyahira said his department would have to reprogram the state's tax computer with not one but five different hotel room taxes and also print new tax forms. The proposal would mean a loss of $5.7 million to the tourism special fund and a $100,000 loss to the convention center special fund, Miyahira added.

The Tax Foundation of Hawaii, the nonprofit research organization, issued a scathing critique of companion bills introduced by Nakasone and Buen.

The counties have used their share of the statewide hotel room tax as a crutch to avoid raising property taxes "to fund a plethora of county programs that perhaps should never have been established at the county level." When they asked in 1978 for control over property taxes so that they could be financially self-sufficient, they got it. But county officials never liked "the discomfort" of being held accountable for raising property taxes, the foundation stated.

Convention center
plan criticized

By Mike Yuen


Gov. Ben Cayetano's administration has proposed a bill that "represents a devious means" of shifting the debt service costs of the Hawaii Convention Center from the cash-strapped general fund to the Hawaii Tourism Authority, claims the Tax Foundation of Hawaii.

Not so, insisted Brad Mossman, deputy director of the Department of Business, Economic Development and Tourism.

1999 Hawaii State Legislature The administration's bill to transfer the responsibilities of the Convention Center Authority to the Hawaii Tourism Authority and pay all convention center operational costs and debt service from the tourism special fund is simply a way provide a comprehensive approach to tourism marketing and development, Mossman said.

The House Tourism Committee approved the administration bill, but it kept open the date of the Convention Center Authority's demise, which was to be June 30. Rep. Galen Fox (R, Waikiki) voted with reservations for the measure; he expressed concerns that the Hawaii Tourism Authority would be burdened with the convention hall's debt service.

The hotel room tax, now at 7.25 percent, may have to be raised since the debt service requirements for the convention center are to peak in the next few years, and would siphon off funds intended for tourism marketing, the Tax Foundation stated.

"In the shell game which created the tourism authority, the counties lost a part of the (hotel room tax), the hotel industry had to swallow an even larger (room tax), but the state general fund was a primary beneficiary because it no longer is being tapped for visitor promotion," the foundation added. "Last year's legislation ended up producing a windfall of more than $25 million for the state general fund. It seems only fair that some of those 'new found' dollars be used to help pay off the convention center debt service rather than taking back vitally needed visitor promotion dollars."

Bill raises isles’
minimum pay, bases it on
yearly U.S. average

By Pat Omandam


An increase in the state minimum wage from $5.25 to $6.50 per hour translates to a no-brainer for Bill Sullivan and his wife, owners of an Aiea hair salon who have hired beauty school graduates at minimum pay since 1972.

They told lawmakers they'll just have to leave town.

1999 Hawaii State Legislature "This act will force me to join my sister-in-law and niece, who have moved to the mainland be-cause of the miserable economic opportunities in Hawaii," Sullivan said in written testimony.

The House Labor Committee yesterday heard a House bill that would raise the state minimum wage on Oct. 1. The minimum wage was last raised from $4.75 per hour to $5.25 per hour on Jan. 1, 1993.

House Bill 625 also establishes a minimum wage based on half of the national average hourly wage for non-managerial employees. The current cost-of-living differential percentage between the state and the rest of the country is then added to the figure.

This could cause the minimum wage to rise or fall each year. Labor officials say the formula would result in an $8.08 an hour wage using today's figures.

The committee is expected to vote on the bipartisan bill sometime next week, says Committee Chairwoman Terry Nui Yoshinaga (D, Moiliili).

Testimony on HB 625 yesterday was split between those who say a hike in the minimum pay is bad for the economy, and those who believe it helps more people stay above the poverty level.

Liberty House representative Joyce Hedani testified the state retailer would have to recoup the pay hike through increased sales per employee or by passing the cost to the public in higher prices. She and other opponents contend any increase in the state wage must be market-driven.

For example, Bette Tatum, state director of the National Federation of Independent Business, recalled when the labor market was so tight in the 1980s that starting wages in Hawaii went as high as $8 per hour at fast-food restaurants.

"That wasn't from government mandates; the market dictates wages," Tatum said in her testimony.

"In these ghastly economic times in Hawaii, businesses are having to downsize, laying people off. Do you want to add another cost to business, thereby costing more jobs?"

The Chamber of Commerce of Hawaii wants lawmakers to study whether a wage hike would reduce the number of entry-level jobs, as well as its impact on welfare reform.

Data show 63 percent of people entering the work force usually earn higher wages within a year; therefore a hike is unnecessary, chamber officials said.

Military students will
remain in public system

By Crystal Kua


Military children would have been educated in schools separate from Hawaii students under a bill defeated in a state House committee yesterday.

1999 Hawaii State Legislature The House Education Committee voted to hold the bill, which would have required the Board of Education to turn over control of public schools on military bases or public schools attended predominately by military children to the U.S. Department of Defense.

Two of the schools affected would have been Radford High School and Wheeler Intermediate.

The author of the bill, Rep. Mark Takai (D, Waimalu, Waiau, Newtown), said transferring the task of educating the children of military personnel to the federal government would save an estimated $160 million for Hawaii taxpayers.

The savings could be used to reduce classroom size, increase instructional time, boost teacher pay, improve curriculum and other educational increases.

"There is a legitimate concern over money spent vs. impact aid," Takai said.

Impact aid is the amount of federal reimbursement -- currently $700 per student -- to the state for educating so-called federally connected children. The per-student cost of education is an estimated $6,000.

Carolyn Aiken, a retired Radford High School teacher, said there are about 32,000 federally connected students in Hawaii with the cost.

Military parents have complained that their children are not getting a quality state education, she said.

Board of Education Chairman Mitsugi Nakashima said the board believes that every child in the state should be afforded a state-paid education, and he doesn't see the Department of Defense readily taking on the educational responsibilities.

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