Report Title:

Tourism Special Fund; Safety and Security; HTA; Hotels

Description:

Redistributes the transient accommodations tax to facilitate the Hawaii tourism authority with existing and expanded programs. Imposes TAT surcharge on hotel conversions. (SD2)

HOUSE OF REPRESENTATIVES

H.B. NO.

997

TWENTY-THIRD LEGISLATURE, 2005

H.D. 1

STATE OF HAWAII

S.D. 2


 

A BILL FOR AN ACT

 

RELATING TO TRANSIENT ACCOMMODATIONS TAX.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The tourism industry plays a large role in the health of Hawaii's economy. Consequently, the State's growth is strongly correlated to the rate of economic expansion in U.S. and international tourist markets. The legislature finds that an increase in funding is necessary to preserve and strengthen the tourism industry.

The legislature further finds that investment in tourism is critical to ensure that Hawaii maintains a successful and sustainable tourism industry. The Hawaii tourism authority recently completed the Hawaii tourism strategic plan: 2005-2015, with assistance from industry, government, and the community. The plan broadened the roles and responsibilities of the Hawaii tourism authority by identifying the Hawaii tourism authority as the lead or support in all nine strategic initiatives and the overall management of the tourism special fund. One of the critical programs implements a safety and security budget. These moneys would be used to pay for existing programs such as the visitor assistance program and the implementation of the aloha aina patrol. It is imperative that the Hawaii tourism authority be given additional resources to effectively and efficiently implement its programs. This would mean an increased focus in areas such as safety and security, workforce development, and communications.

The Hawaii tourism authority provides funding for various visitor assistance programs. Moneys for these programs are derived in part from the transient accommodations tax. With a dedicated source of funding created under this Act, for safety and security programs, the Hawaii tourism authority will have the latitude to fund existing programs or establish new ones in each county such as the aloha aina patrol under the jurisdiction of the county. The Hawaii tourism authority has received numerous awards for its support of visitor safety programs and hopes to increase its efforts.

The legislature further finds that increasing the percentage the Hawaii tourism authority receives from the transient accommodations tax is necessary to ensure funding for other areas as well. State parks and trail systems are in critical need of upgrade and maintenance. An increase in the percentage that the Hawaii tourism authority receives from the transient accommodations tax will ensure a dedicated source of revenue for state parks and the statewide trails and access program to benefit residents and visitors alike, and an increase in revenues for the general fund will assist in supporting programs such as education, health, and infrastructure.

Act 156, Session Laws of Hawaii 1998, created the Hawaii tourism authority to establish, among other things, a mechanism for funding tourism. Act 156 specified that 37.9 per cent of the transient accommodations tax is to be earmarked to create a tourism special fund to fund tourism activities by the Hawaii tourism authority.

Act 250, Session Laws of Hawaii 2002 (Act 250), reduced the percentage of transient accommodations tax revenues from 37.9 per cent to 32.6 per cent. Act 250 also established the transient accommodations tax trust fund (trust fund) to serve as a holding account for transient accommodations tax revenues to supplement shortfalls in the tourism special fund, if the tourism special fund does not receive $63,292,000 in a fiscal year. All investment earnings from moneys in the trust fund are credited to the general fund. These moneys could instead have been used to accumulate reserves in the trust fund.

Currently, 17.3 per cent of transient accommodations tax revenues of up to $31,000,000 are deposited into the convention center enterprise special fund to pay for the center's debt service and for facility maintenance. With the current limit, the amount available for maintenance is only $1,000,000 for a $300,000,000 facility. This does not allow for adequate maintenance of the center, nor a build-up of maintenance reserves in the future. Revising the monetary limit of $31,000,000 will provide for maintenance and reserve.

The legislature further finds that there is a concern in regard to the growing number of hotels converting into timeshare or condominium use. This new trend is negatively affecting transient accommodations tax revenues that are vital to the counties and the State for infrastructure, repair, and maintenance funds. In addition to the loss of transient accommodations tax revenues, the loss of hotel room inventory could negatively affect the tourism industry as a whole.

The purpose of this Act is to:

(1) Allow moneys in the convention center enterprise special fund to be placed in interest-bearing accounts and otherwise invested; provided that statutory securities and investment guidelines are adhered to;

(2) Allow moneys in the tourism special fund to be placed in interest-bearing accounts and otherwise invested; provided that statutory securities and investment guidelines are adhered to;

(3) Change the distribution of revenues from the transient accommodations tax and repeal the transient accommodations tax trust fund;

(4) Earmark a percentage of the Hawaii tourism authority revenues for the safety and security program of the Hawaii tourism authority; and

(5) Impose a transient accommodations tax surcharge upon hotels converting to time sharing plans or to condominiums.

SECTION 2. Chapter 237D, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§237D-   Conversion of hotels to condominium or time sharing plans; imposition of surcharge tax. A hotel that converts to a time sharing plan under chapter 514E or a condominium under chapter 514A shall be subject to a transient accommodations tax surcharge in an amount equal to the average of fifty per cent of the previous two years of transient accommodations tax revenues collected by the hotel. The transient accommodations tax surcharge shall be assessed and levied against the entity owning the hotel prior to the conversion."

SECTION 3. Section 184-3.4, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) There is established within the state treasury a fund to be known as the state parks special fund, into which shall be deposited:

(1) All proceeds collected by the state parks programs involving park user fees, any leases or concession agreements, the sale of any article purchased from the department to benefit the state parks programs, or any gifts or contributions; provided that proceeds derived from the operation of Iolani Palace shall be used to supplement its educational and interpretive programs; and

(2) Transient accommodations tax revenues pursuant to section [237D-6.5(b)(2);] 237D-6.5(b)(4); provided that these moneys shall be expended in response to a master plan developed in coordination with the Hawaii tourism authority."

SECTION 4. Section 198D-2, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) The trail and access program shall use funding for the management, maintenance, and development of trails and trail accesses under the jurisdiction of the department from the following sources:

(1) A portion of the highway fuel taxes collected under chapter 243;

(2) Federal government grants;

(3) Private contributions;

(4) Fees, established pursuant to administrative rules and charged by the department for the commercial and other use of trails and trail accesses under the jurisdiction of the department; and

(5) Transient accommodations tax revenues pursuant to section [237D-6.5(b)(2).] 237D-6.5(b)(4)."

SECTION 5. Section 201B-8, Hawaii Revised Statutes, is amended to read as follows:

"[[]§201B-8[]] Convention center enterprise special fund. (a) There is established [in the state treasury] the convention center enterprise special fund, into which shall be deposited:

(1) A portion of the revenues from the transient accommodations tax, as provided by section 237D-6.5;

(2) All revenues or moneys derived from the operations of the convention center to include all revenues from the food and beverage service, all revenues from the parking facilities or from any concession, and all revenues from the sale of souvenirs, logo items, or any other items offered for purchase at the convention center;

(3) Private contributions, interest, compensation, gross or net revenues, proceeds, or other moneys derived from any source or for any purpose arising from the use of the convention center facility; and

(4) Appropriations by the legislature, including any transfers from the tourism special fund established under section 201B-11 for marketing the facility pursuant to section [[]201B-7(a)(7)[]].

(b) Moneys in the convention center enterprise special fund shall be used by the authority for the payment of any and all debt service relating to the convention center, any expense arising from any and all use, operation, maintenance, alteration, improvement, or any unforeseen or unplanned repairs of the convention center, including without limitation the food and beverage service and parking service provided at the convention center facility, the sale of souvenirs, logo items, or other items, for any future major repair, maintenance, and improvement of the convention center facility as a commercial enterprise or as a world class facility for conventions, entertainment, or public events, and for marketing the facility pursuant to section [[]201B-7(a)(7)[]].

(c) Moneys in the convention center enterprise special fund may be:

(1) Placed in interest-bearing accounts; provided the depository in which the money is deposited furnish security as provided in section 38-3; or

(2) Otherwise invested by the authority until such time as the moneys may be needed; provided that the authority shall limit its investments to those listed in section 36-21.

All interest accruing from the investment of these moneys shall be credited to the convention center enterprise special fund."

SECTION 6. Section 201B-11, Hawaii Revised Statutes, is amended to read as follows:

"§201B-11 Tourism special fund. (a) There is established [in the state treasury] the tourism special fund, into which shall be deposited:

(1) A portion of the revenues from any transient accommodations tax, as provided by section 237D-6.5;

(2) Appropriations by the legislature to the tourism special fund;

(3) Gifts, grants, and other funds accepted by the authority; and

(4) All interest and revenues or receipts derived by the authority from any project or project agreements.

(b) Moneys in the tourism special fund may be [placed in interest-bearing accounts or otherwise invested by the authority until such time as the moneys may be needed.]:

(1) Placed in interest-bearing accounts; provided the depository in which the money is deposited furnish security as provided in section 38-3; or

(2) Otherwise invested by the authority until such time as the moneys may be needed; provided that the authority shall limit its investments to those listed in section 36-21.

All interest accruing from the investment of these moneys shall be credited to the tourism special fund.

(c) Moneys in the tourism special fund shall be used by the authority for the purposes of this chapter; provided that:

(1) Not more than five per cent of this amount shall be used for administrative expenses, including $15,000 for a protocol fund to be expended at the discretion of the executive director; [and]

(2) At least $1,000,000 shall be made available to support efforts to manage, improve, and protect Hawaii's natural environment and areas frequented by visitors[.]; and

(3) Notwithstanding any other law to the contrary, the authority is authorized to set up a special account in the tourism special fund for depositing non-tax revenues received from either public or private contracts. Part II of chapter 37 and other laws to the contrary notwithstanding, this special account may be used by the authority for the purposes of the public or private contracts or any other purpose of this chapter. All disbursements shall be drawn on the special account upon checks prepared and signed as approved by the executive director and some other person authorized by the board of directors of the Hawaii tourism authority."

SECTION 7. Section 237D-6.5, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) Revenues collected under this chapter shall be distributed as follows:

(1) 17.3 per cent of the revenues collected under this chapter shall be deposited into the convention center enterprise special fund established under section 201B-8; provided that beginning [January 1, 2002,] January 1, 2006, if the amount of the revenue collected under this paragraph exceeds [$31,000,000] $           in any calendar year, revenues collected in excess of [$31,000,000] $           shall be deposited into the general fund;

(2) [32.6] 35.4 per cent of the revenues collected under this chapter shall be deposited into the tourism special fund established under section 201B-11 for tourism promotion and visitor industry research; [provided that beginning on July 1, 2002:

(A) If the amount of revenues deposited into the tourism special fund exceeds $62,292,000 in any fiscal year, of the first $1,000,000 in revenues deposited in excess of $62,292,000:

(i) Ninety per cent shall be deposited into the state parks special fund established in section 184-3.4; and

(ii) Ten per cent shall be deposited into the special land and development fund established in section 171-19 for the Hawaii statewide trail and access program;

provided that the total amount deposited into the state parks special fund and to the special land and development fund for the Hawaii statewide trail and access program shall not exceed $1,000,000 in any fiscal year;]

provided that of the 35.4 per cent, 0.5 per cent shall be transferred to a sub-account in the tourism special fund to provide funding for a safety and security budget in accordance with the Hawaii tourism strategic plan: 2005-2015, to be expended for:

(A) An aloha aina patrol established in each county under the jurisdiction of that county for operational expenses, including staffing from the police service employees and cadet program, to provide security and assistance to tourists and to serve as ambassadors of aloha in areas of popular beaches and parks that have high tourism traffic, as determined in conjunction with the Hawaii tourism authority, that are in need of additional security to augment normal police services; and

(B) A visitor assistance program established in each county;

(3) 44.8 per cent of the revenues collected under this chapter shall be transferred as follows: Kauai county shall receive 14.5 per cent, Hawaii county shall receive 18.6 per cent, city and county of Honolulu shall receive 44.1 per cent, and Maui county shall receive 22.8 per cent; [and]

(4) [5.3 per cent of the revenues collected under this chapter shall be deposited into the transient accommodations tax trust fund established under section 237D-5.5.] One per cent of the revenues collected under this chapter shall be distributed as follows:

(A) Ninety per cent shall be deposited into the state parks special fund established in section 184-3.4;

(B) Ten per cent shall be deposited into the special land and development fund established in section 171-19 for the Hawaii statewide trail and access program;

to be spent by the department of land and natural resources as designated by a plan approved by the Hawaii tourism authority; and

(5) 1.5 per cent of the revenues collected under this chapter shall be deposited into the general fund.

All transient accommodations taxes shall be paid into the state treasury each month within ten days after collection, and shall be kept by the state director of finance in special accounts for distribution as provided in this subsection."

SECTION 8. Section 237D-5.5, Hawaii Revised Statutes, is repealed.

["[§237D-5.5] Transient accommodations tax trust fund. (a) There is established in the state treasury the transient accommodations tax trust fund to be administered by the director of finance, into which shall be deposited the revenues prescribed by section 237D-6.5(b).

(b) All investment earnings from moneys in the trust fund shall be credited to the general fund.

(c) The purpose of the trust fund is to serve as a holding account for transient accommodations tax revenues to supplement shortfalls in the tourism special fund, if the tourism special fund does not receive $63,292,000 in transient accommodations tax revenues as provided in this section.

(d) If the amount of transient accommodations tax revenues distributed to the tourism special fund pursuant to section 237D-6.5(b)(2) is projected by the director of finance to be less than $63,292,000 in the aggregate in a fiscal year, the director of finance, at such times and in such amounts that the director shall reasonably determine, shall deposit moneys from the trust fund to the tourism special fund to provide the tourism special fund with a minimum of $63,292,000 in transient accommodations tax revenues in the aggregate for a fiscal year; provided that any deposit from the trust fund to the tourism special fund shall be limited to the moneys available in the trust fund.

(e) If the tourism special fund receives less than $63,292,000 in transient accommodations tax revenues in the aggregate for a fiscal year, even after receiving moneys from the trust fund, the shortfall shall be noncumulative and shall not represent a claim against future distributions from the trust fund.

(f) No deposit from the trust fund to the tourism special fund shall be made that would cause the tourism special fund to receive more than $63,292,000 in transient accommodations tax revenues in the aggregate for a fiscal year.

(g) Any moneys remaining in the trust fund at the end of each fiscal year shall be credited to the general fund; provided that, upon receipt by the tourism special fund of at least $63,292,000 in transient accommodations tax revenues in the aggregate during the course of a fiscal year, the moneys in the trust fund shall thereafter be credited to the general fund."]

SECTION 9. Upon the repeal of the transient accommodations tax trust fund by section 8 of this Act, all unencumbered and unexpended moneys remaining in the fund shall be transferred to the general fund.

SECTION 10. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 11. This Act shall take effect on July 1, 2099.