- Associated Press - Wednesday, March 12, 2014

HONOLULU (AP) - Honolulu’s city council is considering raising taxes on residential vacation rentals.

The measure up for first vote Wednesday would create a new tax category for homes that rent short-term rooms, the Honolulu Star-Advertiser reported (http://bit.ly/1cTN4Qr).

Bed and breakfasts and short-term rental vacation homes presently pay property taxes of $3.50 per $1,000 of assessed value, the same as other residential owners. Hotels and resorts, meanwhile, pay nearly four times that rate - $12.40 per $1,000. The council last year rejected a plan to raise the taxes of short-term rental homes to match those of hotels, as owners objected.

Council Chairman Ernie Martin, the bill’s author, said the measure would put short-term residential rentals on something closer to equal footing with hotels.

“Both endeavors are primarily business activities,” he told the newspaper. Martin added that he intends to introduce companion measures that would make way for more rentals to operate legally in the city while cracking down on illegal rentals.

The city now counts about 48 legal bed and breakfasts in the city and 810 legal transient vacation units. Martin said he believes twice that many rental operations operate illegally in the city.

Vacation-rental owners said raising taxes would cut into already-thin profits.

“We work hard just to be able to break even at the end of the year,” said Tonic Bille, president of the B&B; TVU Association of Oahu.

Angie Larson, the former president of the Hawaii Vacation Renters Association, said a tax hike would drive some owners out of business and discourage owners of illegal rental operations from wanting to become legal.

Owners of legal rentals pay income and general excise taxes already. Larson suggested to the paper that the city could raise rates by increasing the renewal fee for a nonconforming use certificate, which would stay steadier year-to-year than property taxes.

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Information from: Honolulu Star Advertiser, http://www.staradvertiser.com

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Information from: Honolulu Star-Advertiser, http://www.staradvertiser.com