Against a backdrop of the COVID-19 pandemic, Maui Mayor Michael Victorino released his $870-million county budget proposal last week. It includes a number of measures that Victorino said were responses to the impacts of COVID-19, such as $10 million allocated for countywide costs to “help eliminate COVID-19” and $3.8 million to replenish the Emergency Fund.
Also part of Victorino’s budget are an increase in funding for the Maui County Visitor Association to $3.5 million (a $500,000 increase) and a decrease of the Hotel and Resort Tax to $9.37 per $1,000 of assessed value (a decrease of about 15 percent).
“Real property tax rates make working families and local businesses our top priorities, providing lower tax rates than this current fiscal year for owner-occupied, commercial, industrial and hotel categories,” Victorino wrote in a letter to the County Council. He added, “Given the impacts of the COVID-19 outbreak, it is more vital than ever that we provide funds to Maui County Visitor’s Association to ensure our main economic engine, tourism, is providing livelihoods for our residents and tax revenue to help fund essential services.”
The fiscal year 2021 budget, after deliberation by the council and public input in coming weeks, will go into effect in July, a time when projections show that the world will be reeling from the economic impacts of COVID-19, if not still actively fighting the spread of the pandemic. While the economic toll of the virus is not yet known, by all indications it will be tremendous: Predictions for the end of social distancing (and the accompanying business shutdowns and slowdowns) remain murky and range from May to the end of the year. And last week, which ended March 28, the number of unemployment claims filed in Hawai‘i totalled 101,024, according to state Department of Labor and Industrial Relations spokesperson William Kunstman.
This disruption and uncertainty has provoked a number of opinions on how best to address economic impacts and the long road to recovery. Some, like the President, have urged a return to normalcy as soon as possible and support financial packages for large corporations. On the other hand, a group of academics and progressives who penned an open letter to members of Congress supporting a “Green Stimulus to Rebuild Our Economy” have suggested that recovery efforts should also improve the status quo by addressing climate change and inequality.
On Maui, too, there are disagreements as to whether stimulating the visitor industry, as the mayor is proposing, is the best path for the island’s recovery. Just months ago, headlines in outlets like CNN and the New York Times took up the issue of overtourism in Hawai‘i after the Hawai‘i Tourism Authority reported a record 10.4-million visitors to the state and 3-million visitors to Maui in 2019. And, while shrouded in uncertainty, the University of Hawai‘i Economic Research Organization predicted on March 30 that Maui visitor arrivals would bounce back to 2.98 million in 2021 and resume hitting record-setting numbers by 2022. Plus, as the COVID-19 crisis has laid bare the island’s food insecurity and dependence on tourism, questions have been raised about continuing to have such a vulnerable, singular economy.
“The pandemic has clearly signaled an urgent obligation to shift our assets and our energy, investing in more sustainable industries, in order to become a more self-reliant and stable market,” said council budget committee chair Keani Rawlins-Fernandez, who last year proposed a hotel tax rate as high as $14.91.
Still, she said the new rate would have to be carefully considered in light of COVID’s impacts. “Because I recognize that many of our family and friends have, or had, jobs in the tourism industry, I plan to weigh a more balanced perspective moving forward,” she said. “Regarding the proposed hotel rate reduction, I will evaluate whether we should revert back to our previously normalized way of living, prior to the pandemic, or if we shall take heed of this new found cognizance, shifting toward more responsible enterprises that prioritize our residents’ long-term quality of life, and the health of our environment.”
Councilmember Tamara Paltin, of the hotel-heavy West Maui district, similarly expressed caution and concern for those with jobs in the tourism industry.
“For me at this time, it is much too early to speculate anything,” she said when asked to comment about the hotel tax rate reduction. “The situation with the current global pandemic and its affect on the local and global economy is just beginning to be felt and is changing day to day. Here on the West Side nearly everyone I know outside of our county workers have been laid off, including within my household. We will all need to be tightening our budgets in the near future.”
Councilmember Kelly King of South Maui, who chairs the Climate Action and Resilience Committee, however, questioned the notion that a tax break on hotels and resorts would translate to actual benefits for Maui’s workers.
“I think it was a preliminary reaction,” she commented on the proposal Monday, highlighting the fact that the federal $2-trillion stimulus package only recently passed and that the mayor had likely been working on the budget for months, before the COVID outbreak reached its current severity. “Most of our hotels are part of large multinational corporations, and they’re already getting huge benefits [from] the package… I really hope they don’t try to say that this is going to affect people’s jobs, because people’s jobs are affected by COVID-19, not by the taxes.”
King recalled the fear of job losses expressed in public testimony during the last budget session when hotel tax rates were raised, then said, “I have not seen a single person that lost their job because the hotel tax rate went up; we have the lowest tax rate in the state.”
Instead, she hopes to see more support for agriculture in the next year, in the form of lower taxes and funding for programs that help with things like community gardens and food processing.
“We don’t have the ability to feed ourselves,” she said. “I think what we need is to diversify the economy.”
“The nonprofits also need to be shored up right now, probably more than ever,” she added. “If we have extra money, let’s not give it back to the hotels. Let’s give it back to ourselves.”
Maui College professor emeritus of economics Dick Mayer agreed with King’s assessment of the relationship between jobs and the county hotel tax rate.
“The hotels are not gonna hire people because they have a lower tax rate,” he said Tuesday. “I think the hotel rates should stay where it was or even be raised higher, because I think hotels have been making unbelievable large amounts of money because they’ve been charging $300 to $600 a night and more for their rooms.”
Mayer also agreed that the pandemic exposed the island’s over-dependence on the tourism industry.
“One lesson we learned from this is that we should not become even further dependent [on the tourism industry],” he said, “which means we should put a moratorium on all future hotel construction.”
To help remedy unemployment and reduce economic dependence on tourism in the long term, Mayer suggested expanding the local agricultural industry and funding a job retraining program. An increase in funding for affordable homes could also increase the construction workforce, he added.
Citing “too many unknowns,” Mayer disputed UHERO’s tourism recovery forecast as “very speculative and a best case scenario.”
To him, the focus needs to be on the unemployed and building a more resilient future.
“We have 30,000 workers in the [tourism] industry, who are tied to this industry, and they will have try to get their lives back together,” he said. “We need to make sure that we can handle future situations where there may be a crisis which we don’t know.”
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