First climate fee bills pass initial hearing, with concerns

Gov. Josh Green’s bills to fund Hawaii’s climate change response by increasing the state’s hotel room tax and dedicating all of the interest from the $1.5 billion rainy day fund were unanimously passed out of a House committee Tuesday, but with concerns that they need “a lot of work.”

“There’s a lot of work to be done on this and the subsequent bill,” said state Rep. Nicole Lowen, who chairs the House Energy and Environmental Protection Committee, which passed House Bills 1076 and 1077 Tuesday.

“The governor’s team, if they want to work on it, needs to put some work in,” Lowen said. “We’re going to leave it to them to work on it.”

Specifically, Lowen said, “There’s a lot of concerns about what this might be used for. The bill language is extremely open-ended. Climate mitigation and resilience, as laid out in this bill, could apply to almost any project.”

HB 1076 — and its Senate companion bill, Senate Bill 1396 — would create a Climate Mitigation and Resiliency Special Fund to be paid for by dedicating all of the estimated $66 million interest earned annually on the state’s $1.5 billion rainy day fund to address climate change and better prepare for wildfires.

HB 1077 — and its Senate companion bill, SB 1395 — would create a Climate Mitigation and Resiliency Special Fund and Economic Development and Revitalization Special Fund by increasing the state’s transient accommodations tax.

Will Kane, a senior adviser to Green, said in a statement: “We are open to working with the legislature to more clearly find those parameters and come to an understanding that’s going to serve the needs of our residents and future generations.

“The Governor’s administration is seeking to establish a fund to address mitigation and resiliency projects across the state that are currently funded, as well as those that need to be funded in the future,” Kane said. “And what that entails will definitely evolve over time as we face new and different challenges.”

Green has previously told the Honolulu Star-Advertiser that the state needs at least $200 million annually to respond to climate change, especially following the deadly Aug. 8, 2023, Maui wildfires, which killed 102 people and all but wiped out Lahaina.

Hawaii’s visitor industry and business organizations have opposed previous, unsuccessful efforts to increase the TAT alone.

So Green this year wants to use a combination of rainy day fund interest and an increase on the TAT to ease the burden on visitors.

But the tourism industry continues to push back on any increase in the TAT.

The bills that moved out of the House Energy and Environmental Protection Committee on Tuesday are just the first to be heard in the Legislature this year among several others to pay for the state to adapt to climate change.

Others are also aimed at tourists, such as HB 1139 and its companion bill, SB 1458, which would create an “environmental stewardship fee program” that would charge only visitors for an “environmental stewardship license” that would be valid for one year.

Neither bill specifies how much the license would cost.

The license would allow nonresidents to access state beaches, parks, forests, trails, recreational natural areas and coastlines.

The revenue would be used to “protect, restore, and manage natural and cultural resources through grants to nonprofit organizations,” according to both bills.

A new Environmental Stewardship Commission would make recommendations to the state Board of Land and Natural Resources on how to spend the new revenue.

Support for dedicating all of the interest from the rainy day fund and increasing the hotel room tax came from state agencies, including the state departments of Land and Natural Resources, Economic Development and Tourism, Defense, the Energy Office and Green’s Climate Advisory Team.

Others in support include organizations such as Coalition Earth, Climate Protectors Hawai‘i, the Pacific Whale Foundation and Care for ‘Aina Now Coalition.

The Climate Advisory Team said in written testimony that the hotel room tax would go up to a total of 12% while “minimizing any direct financial hit to residents and the most vulnerable populations of our state. … Hawai‘i’s tourism industry depends on our state’s land and natural resources. Investing now to protect our natural environment and local communities from the devastating impacts of climate-related disasters will help ensure Hawai‘i remains a desirable travel destination for visitors.”

But opposition remains from individuals, Hawaii’s tourism industry, the Maui Chamber of Commerce and the Grassroot Institute of Hawaii, which argued in its written testimony, “Support for a TAT increase is often based on the faulty notion that the effect of the tax hike will fall exclusively on tourists. However, the TAT also directly affects Hawaii residents who need to stay in local transient accommodations when traveling interisland or simply seeking to enjoy a ‘staycation.’ … (A) large body of research demonstrates that increasing taxes on tourists can also affect both the competitiveness of Hawaii’s tourism industry and the health of local businesses that depend upon tourism dollars — which means the tax affects most, if not all, Hawaii residents, albeit in many cases indirectly. … A study of the Maldives, a country that earns as much as 70% of its revenue from tourism taxes, found that a 10% increase in tourism taxes — an amount significantly lower than the increase contemplated in this bill — reduces demand by 5.4%. To put it plainly, increasing tourism taxes decreases the number of visitors.”

Mufi Hannemann, president and CEO of the Hawai‘i Lodging &Tourism Association, called the proposed higher hotel room tax a “nearly 20% increase.”

“Hawai‘i already has the highest tourism tax rates in the nation, a fact consistently reported in national tourism publications,” Hannemann wrote in opposition. “Further increasing the TAT risks making our state less competitive as a visitor destination, potentially driving business away at a time when we need to rebuild.”

Instead, he urged the Legislature to better ensure that short-term rentals collect TATs because “there remains a significant disparity between the TAT collected from transient vacation rentals and the actual number of rented room nights. A more rigorous and targeted approach to enforcement would not only boost TAT revenues but also level the playing field by ensuring that all accommodation providers contribute their fair share.”

Instead of increasing the TAT, Hannemann repeated his call for more popular state attractions to charge tourists to visit them, which already include Diamond Head State Monument among others.

While he served on the Honolulu City Council before being elected Honolulu mayor, Hannemann successfully drafted a plan to charge visitors to access the city’s Hanauma Bay, which has helped preserve it as a marine sanctuary.

“There are millions of dollars that could be recouped through such strategies, helping to address the funding goals without placing additional burdens on our lodging industry,” Hanne­mann wrote.

Barbara Richards of the ministry group G International Inc. wrote simply, “let (sic) God deal with the weather. and let Humans live out their lives. stop messing with Mother Nature.”