Once again, Oahu B&B and TVR owners need support from Maui to prevent passage of SB750 by the State Senate this coming week. This grass roots group on Oahu has succeeded in stopping HB1603, which would have given Counties funding and a mandate to increase enforcement against TVRs. Now they need our help with this Senate Bill.

SB750 requires the State to provide addresses of residences which pay TAT to the Counties. MVRA supports compliance with the law, including payment of taxes, but this bill is not truly about tax compliance. The true purpose of this bill is to assist Counties in identifying TVRs who are already in compliance with TAT payments, and punish them for operating a short-term rental. Operators who do not pay taxes would escape detection.

At this point we are recommending that the bill be given further study by the State Auditor, to determine unforeseen impacts. This study would take one year. Reasons for opposing passage of SB750 are summarized at the bottom of this message. In your brief letter, please pick one (or at most two) of these reasons, re-state the reason in your own words, and FAX your testimony to the offices below by Sunday afternoon.

I am going to address the letter "Dear Senator:" so that I only have to type it once. I will just FAX it to each number. Begin the letter with a statement such as "Please defer action on SB750 for further study by the Auditor."

Mahalo,
David

• Governor Linda Lingle- FAX-586-0006
• Senator Rosalyn H. Baker- Chair- FAX-586-6071
• Senator Shan S. Tsursui- Vice Chair- FAX-586-7348
• Senator Chun Oakland-FAX-586-6131
• Senator J. Kalani English-FAX-587-7230
• Senator Carol Fukunaga-FAX-586-6899
• Senator Gary L. Hooser-FAX- 586-6031
• Senator Donna Mercado Kim-FAX-587-7205
• Senator Ron Menor-FAX-586-6829
• Senator Jill N. Tokuda-Fax-587-7220
• Senator Paul Whalen-FAX-586-9391

DEFER action for 1 year on SB750

This bill will result in the closure of vacation rentals and bed and breakfasts because it will help the county locate and close undocumented vacation rentals (VRs) and bed and breakfasts (B&B). Information and analysis is needed to fully understand the impact this bill may have on State tax revenues, the overall impact to the economic activity of the State and the loss to the State of this tourism alternative.

A. Direct the State Auditor to provide this information and analysis to:

1.) Determine the cost this bill may have on State in lost TAT and GET revenue 2.) Identify the loss in both direct and indirect economic activity to the State as a result of closing down VRs and B&B 3). Outline the impact to the mission of both the Department of Taxation and the Hawaii Tourism Authority and identify the associated costs to add this new mission. 4.) Assess whether the State and County are working at cross purposes with the county’s current punitive strategy toward undocumented VRs and B&Bs and the State’s desire to maintain tax revenues, economic activity and the diversification of Hawaii’s tourism offerings.

B. This bill is seriously flawed

1,) The written purpose of the bill differs from the clear intent of this bill. The intent is to assist the county with their punitive strategy in dealing with undocumented VRs and B&Bs though the county does not provide the means for these small businesses to obtain a permit. 2.) Your Department of Taxation and the Hawaii Tourism Authority in written testimony questions the need for this legislation. 3.) Your Tax Department in testimony does not believe there is substantial non-compliance with tax obligations by VRs and B&Bs. 4.) It tasks the Department of Taxation and the Hawaii Tourism Authority with identifying undocumented VRs and B&Bs for administrative and enforcement actions dictated by county zoning and licensing requirements and not State requirements; 5.) It ties the State to what we believe is a counter productive county strategy of punitive action toward undocumented VRs and B&Bs.

C. The current county strategy is punitive. Citizens who operate an undocumented VR or B&B are treated like drug criminals subject to forfeiture of their property even though the county does not provide any means for VR and B&Bs to get a permit to operate. This moratorium on licensing is nearly 20 years old. The county’s punitive strategy seems intent on turning the clock back to 1989.

D. The alternative strategy available to the county is to encourage community dialogue on how to properly license and regulate VRs and B&Bs. Sensible community based tourism can coexist with maintaining the character of our neighborhoods. This bill will not encourage community dialogue.

E. Your vote to defer not only gives you the time to get the information you need to make an informed decision but it provides some breathing space for sensible solutions to develop at the county level.