New ‘Green Fee’ tax in Hawaiʻi raises questions about how it will be spent, and even if parts of it are constitutional

A new first-of-its-kind climate-impact fee for Hawai‘i visitors is set to begin in January, with the expectation of generating about $100 million annually, but there are some concerns about how it will be spent and even if parts of it are constitutional.

Act 96 states that the “Green Fee” will be used to build resiliency against the impacts of climate change by providing a stable source of funding for environmental stewardship, hazard mitigation and sustainable tourism.

But the state, and a newly formed advisory board, must first come up with a process about how to distribute the funds.

In the meantime, cruise ship operators are claiming the new state tax related to cruise ships is unconstitutional.

Under Act 96, the Hawai’i transient accommodations tax will increase by 0.75% to 11% for hotels and vacation rentals. And for the first time, TAT will be applied to cruise ship stays at Hawaiʻi ports.

“This Green Fee is a generational commitment to protect Hawaiʻi’s future,” Hawai’i Gov. Josh Green said in a news release. “Under the leadership of Jeff Mikulina and this advisory council, every dollar collected will work smarter and harder — to safeguard our natural and cultural treasures, build climate resilience and share responsibility with visitors for the stewardship of our islands.”

The Green Fee Advisory Council was formed last month to guide how the funds will be allocated by developing a criteria for projects and evaluating funding proposals. The 10-member council will recommend a prioritized list to the governor.

The Green Administration will work with the State Legislature to confirm which projects will be funded next session as revenue becomes available. All final appropriations and project selections are done by the legislature.

The new advisory council will host an introductory webinar at 10:30 a.m. on Sept. 24. It will include a discussion about the purpose and approach of the newly formed council, as well as a preview of the process ahead in the coming months.

Interested community members are encouraged to register in advance here for the webinar.

The only member of the council from Hawai‘i Island is Janice Ikeda, founding CEO of the nonprofit Vibrant Hawaiʻi.

A statement from the Office of the Governor indicated members of the advisory council were selected following consideration of the key goals of the bill.

“Organizations relevant to these goals were reviewed and individuals were approached about their willingness to serve in this volunteer, advisory capacity,” Green’s office stated.

On Tuesday, Ikeda said it’s still really early in the process. She has not met with anyone on the advisory council yet.

Ikeda said she will seek clarity about how the funds will be distributed and if any money has already been earmarked for any current projects.

Hawai‘i County Mayor Kimo Alameda said Tuesday he thinks the Hawai‘i Green Fee Advisory Council could bring transparency, inclusiveness and expertise to managing conservation funds — but added that it could risk slowing decisions, diluting authority or becoming politicized if not carefully structured.

Alameda would like any of Hawai’i County’s wastewater projects to be prioritized for funding allocated to the Big Island.

While there is only one person on the council to represent Hawai‘i Island, Alameda said the county’s relationship with the governor is strong and “I am confident that funds will be distributed fairly.”

But Act 96 is under fire by several cruise ship operators and tour businesses who have filed a lawsuit in federal court to block the state’s new law to tax cruise ships at the same rate as hotels.

The lawsuit, filed by Cruise Lines International Association, Inc., states the new law, the only one of its kind in the nation, is unconstitutional because it levies an 11% surcharge on the gross fares paid by a cruise ship’s passengers, prorated by the portion of its voyage spent docked in Hawai‘i ports.

Cruise Lines International Association is a nonprofit based in Washington, D.C. that advocates for the interests of the cruise community and works to protect its members’ legal rights. According to the lawuit, many of those members sail and dock in Hawai‘i, including AIDA Cruises, Azamara Cruises, Carnival Cruise Line, Celebrity Cruises, Cunard Cruise Line, Disney Cruise Line, Hapag-Lloyd Cruises, Holland America Line, MSC Cruises, Norwegian Cruise Line, Oceania Cruises, P&O Cruises, Princess Cruises, Royal Caribbean International, Seabourn Cruises and Silversea Cruises.

Other plaintiffs listed are Honolulu Ship Supply Co., Kaua‘i Kilohana Partners and Aloha Anuenue Tours.

The new tax also authorizes Hawai‘i counties to collect an additional 3% surcharge on a prorated portion of the gross cruise fares of cruise ships that dock in each of the respective counties.

“This Court should act swiftly to declare Act 96’s new cruise-ship-related provisions unconstitutional and enjoin their enforcement,” the lawsuit states. “In recent years, the cruise industry has drawn nearly 300,000 annual visitors to Hawai‘i, supporting thousands of jobs throughout the state and making a total economic contribution of more than $600 million a year.”

The lawsuit states that if Act 96’s fees are permitted to take effect on Jan. 1, “they will increase the cost of Hawai‘i-bound cruises substantially and cause many potential visitors to vacation elsewhere.”

The Hawai‘i County Council, during its Committee on Governmental Operations and External Affairs on Sept. 2, took up Resolution 288-25 that authorizes the mayor to enter into an intergovernmental agreement with the state, as well as Kaua‘i, Maui and Honolulu counties, that outlines how the transient accommodations tax will be allocated in cases where a cruise ship docks in two or more counties during a single day.

“The purpose of this agreement is to facilitate the orderly and uniform administration of the TAT on cruise ships across the state,” the resolution states.

Alameda said he thinks the tax is fair for cruise passengers because they use Hawai‘i’s natural and cultural resources just like other visitors — sometimes with more concentrated impact.

“The challenge is to implement it in a way that’s legally defensible, clearly communicated, and seen as equitable because most of the time they’re in international waters,” Alameda said.

Deputy Corporation Council Kira Wong explained to the County Council during the Sept. 2 meeting that the plaintiffs are alleging the tax is unconstitutional, adding: “At the same time, they’re also asking for a court order to stop the counties from implementing it altogether.”

Wong said the county litigation team is still reviewing the lawsuit.

“I do think whatever disposition, it could have an effect on the MOU, and so I think the best advice going forward is to postpone, maybe to the call of the chair, because it also could affect the language in the MOU,” Wong explained.

The motion made by Dennis “Fresh” Onishi to postpone the resolution failed. The County Council gave the measure a favorable recommendation, with Onishi voting against it and Council Member Matt Kaneal‘i-Kleinfelder absent.

They will discuss it at the next regular County Council meeting on Sept. 15.

Despite the impending lawsuits, Alameda didn’t think it was premature to discuss the county’s memorandum of understanding, “as long as it’s framed as preparatory and conditional.”

Understanding there is an impending lawsuit regarding the new tax, Council Member Ashley Kierkiewicz said she was curious about the county’s role in shaping how all the Green Fee funds will be used. She said she wants to ensure Hawai‘i Island’s voice is heard on the newly created council.

“I’m definitely going to advocate for that because the whole premise is for the transient accommodations tax to go towards destination management, but also quality of life,” Kierkiewicz said.

Quality of life, Kierkiewicz went on to say, is also impacted because of over-tourism. “We just want to make sure that whatever the problems we are facing as a county because of tourism, they’re solved for in some way with this funding.”

Council Member Heather Kimball said she was interviewed by a consultant from the governor’s office asking about things in her district that might be eligible for this funding.

“We need to continue to make our voice heard loudly because there’s definitely need on this island for that sort of destination management support,” Kimball said.

At this time, is not clear how much money collected from the new tax each county will get at this time.

The members of the first Green Fee Advisory Council:

Green Fee Advisory Council Members:

• Jeff Mikulina (Chair): Executive Director of Climate Hawai‘i; strategist in social impact and sustainable development, spearheading statewide climate initiatives.
• Eric Co: CEO of the Harold K.L. Castle Foundation, with 25+ years in ocean management, community development and climate resilience across Hawaiʻi and the Pacific.
• Lea Hong: Hawaiʻi State Director of The Trust for Public Land since 2006, championing restoration of lands to Native Hawaiian stewardship and sustainable community spaces.
• Dennis Hwang: Faculty, University of Hawaiʻi Sea Grant College Program, NOAA, lead author for the ‘Homeowner’s Handbook to Prepare for Natural Hazards” and member of the Hawaiʻi Emergency Management Agency’s Hawaiʻi Earthquake and Tsunami Advisory Committee. 
• Janice Ikeda : Founding CEO of Vibrant Hawaiʻi, advancing resilience networks and community-led development across Hawaiʻi Island
• Michelle Kaʻuhane: Chief Operating Officer and Executive Vice President at Hawaiʻi Community Foundation; experience in non-profit management, community-based economic development, and public policy advocacy. 
• Dr. Jack Kittinger: Conservation scientist and Research Professor at Arizona State University; leads Conservation International’s Center for Regenerative Economies.
• Keoni Kuoha: Long-time Hōkūleʻa crew member and Maui community leader, with deep experience in governance, indigenous resource stewardship and nonprofit leadership.
• Carmela Resuma: Destination Stewardship Director at Kilohana by the Hawaiian Council, integrating culture, tourism and ʻāina stewardship in community programs.
• Jeff Wagoner: President and CEO of Outrigger Hospitality Group; leads a global portfolio of beach resorts, hotels, vacation condominiums and retail operations and has a more than three decade career in hospitality.