LIHU’E — By a 4-3 vote, the county council on Friday rejected a measure that would have raised the tax rate on vacation rental accommodation and used funding for affordable housing.
Council member Luke Evslin proposed the measure, which would have generated $4.5 million in new revenue by raising the vacation rental tax rate from $1 to $10.85 per $1,000 of income taxable, which would bring it even with the rate of resorts and hotels.
The vast majority of the money created, approximately $4.4 million, would have gone to the Housing Revolving Fund for Special Projects, while the $22,563 would go to the Public Access, Open Spaces and conservation of natural resources, and $100,000 would fund an electronic vehicle charger. program.
Board Member Kipukai Kuali’i and Board Vice Chairman Mason Chock joined Evslin in supporting the proposal, while Board Chairman Arryl Kaneshiro, along with Board Members Bernard Carvalho, Billy DeCosta and Felicia Cowden opposed.
“I’m proposing this increase and this allocation for three reasons,” Evslin said. “First, we are over capacity for tourists, which is straining our infrastructure and our patience. Second, vacation rentals take away resident-occupied housing and increase the cost of housing island-wide. And number three, most important, we need more money for affordable housing and infrastructure.
According to the Kaua’i Tourism Strategic Plan, one in eight homes on Kaua’i is a vacation rental, compared to 1 in 24 homes statewide. In some regions, 1 out of 2.5 dwellings is a seasonal rental. Of these rentals, 53% belong to non-residents.
Property tax data shows a net increase of 133 vacation rentals in 2022, most of which were converted from residential or family use, continuing the trend of the past two years.
Under the proposal, vacation rental rates would still be lower than the national average for resident-occupied homes, meaning a person could own a lucrative Kaua’i vacation rental and pay less property tax. than she would on a resident. -house occupied on the mainland.
“If you take a house off the market, you should be helping build an affordable house,” Evslin said.
Among the affordable housing projects underway that could be funded by the levy is a planned $8 million property acquisition for an affordable housing project in Kilauea, according to the director of the county housing agency, Adam Roversi. The price of the project exceeds the current housing budget by $3 million.
Council member Kuali’i and Vice President Chock both clung to the measure and expressed strong support.
“We always talk about affordable housing,” Kuali’i said. “The administration is now doing a great job with housing, but far from sufficient. And why? We don’t have enough funding. »
Opposition
Although the board was more supportive of Evslin’s proposal than three years earlier — when he proposed a similar measure that was defeated 6-1 — the majority of the board remained cautious about the policy.
“It’s money that’s not necessarily needed at the time,” Kaneshiro said. “I’m very hesitant to opt for a tax increase. Usually I keep this in our pocket – being the conservative person that I am. When the county really needs the money, we can raise the tax rates.
Instead, he advocated lobbying for grant funds from state and federal governments or seeking loans for future affordable housing projects as they arise and using increased taxes as a last resort.
Evslin responded that it would be better to raise a tax when times are good, pointing out that vacation rentals are currently booming, with a 40% increase in rates since before the pandemic.
Cowden opposed it largely because of the lack of public involvement in the proposal. “We have to be consistent, fair and predictable,” Cowden said. “We can’t just blind people with change.”
The procedure surrounding the budget process requires that board members do not reveal proposals to their colleagues or to the public before they are introduced.
Some council members are also concerned that the revenue will not be earmarked for affordable housing, meaning funds from the tax could be transferred to the general fund next year. Such an assignment would require an amendment to the county charter, which requires a public vote on the matter.
Opponents were also concerned about the negative effect it could have on the 46% of the local population who have vacation rentals and the county’s ability to spend the revenue over the coming year.
Roversi said the CHA would not be able to use all of the funds from the next fiscal year’s levy.
“We lined up projects for next year based on the funding we expected,” Roversi said. “That said, the development fund is a revolving fund. Funds that we do not use this year carry over to the following year. In a few years, when we expect to have projects of 12 to 15 million dollars, it might be better to start building this fund gradually over time.
Council also voted on Friday to approve the mayor’s supplementary budget, which included an increase in funding for capital improvement projects from $48.9 million to $50.9 million.
The mayor proposed that new proceeds from the Kukui’ula Community Facilities District bond issue be used for transportation infrastructure projects in Po’ipu and Koloa, and for the construction of new land inclusive play.
•••
Guthrie Scrimgeour, journalist, can be reached at 647-0329 or [email protected]
