Hawaii’s New Visitor Tax Sends Its First Millions To Just One Beach

Hawaii’s hotel taxes now hover around 19% once you add the state transient accommodations tax, the county surcharge, and the general excise tax. And that is layered on top of the room rate. The latest increase, branded as the Hawaii Green Fee, pushed that total higher again beginning January 1. It was not presented as just another tax increase.

Visitors were told the Green Fee would protect beaches, restore shorelines, and help Hawaii respond to erosion and climate pressure. The message was clear enough: if you come here, you will help preserve what you came to see in Hawaii.

Six weeks later, the first round of spending tied to that tax increase is out, and nearly one-third of the initial $42.2 million allocation is headed to Waikiki and Ala Moana. The projects are being labeled under the Green Fee umbrella, but the funding for this first round is coming from general state borrowing rather than directly from the new tax collections.

The largest single project is $7 million for groin stabilization and sand nourishment along the Halekulani Hotel front, and the second-largest is $6.8 million for beach nourishment at Ala Moana. Together, that’s $14 million directed toward two Honolulu shorelines that already receive regular maintenance and are the highest political priority.

Nobody disputes Waikiki’s importance to Hawaii. It is the economic driver of Hawaii tourism, and its beach exists today only because the state keeps replenishing it. Sand is pumped or barged in, and structures are reinforced. That cycle has been ongoing for many years.

What stands out in this first Green Fee list is not that Waikiki was included, but that places under visible erosion pressure right now are not part of the funding, even as visitors are already paying the higher tax and the state is financing these projects through general borrowing.

Earlier this week, we reported in Hawaii Visitors Losing Beaches To Save Beachfront Condos that Kahana has been battling shoreline loss for two decades, and that a North Shore homeowner testified he has lost roughly forty feet of beach dune in ten years. Emergency sandbags in West Maui are falling apart, permits have expired, and the shoreline continues to narrow while the ocean keeps advancing. Those communities also showed up at the Capitol asking for help, yet they don’t appear anywhere in this first funding list.

The mechanics behind the money.

The way this is being funded makes the story even murkier. Visitors are now paying the higher tax. The assumption most people would reasonably make is that those extra dollars are sitting in a dedicated pot and flowing straight into beach projects. That is not how this first round is being handled. The $42 million being announced for this fiscal year is being financed through general obligation bonds, which are backed by the state’s general fund, not by a separate Green Fee account.

The Green Fee discussion in the above video begins approximately 1:23:00.

When the question was asked, are these actually Green Fee dollars paying for these projects, the answer was no. The projects are being financed the same way other large state projects are financed, through borrowing backed by the state’s general fund. The “Green Fee” label attached to them right now is more about branding than anything.

What that means in practical terms is this: Visitors are already paying the higher tax at checkout. The beach projects being announced this year are being paid through general state borrowing. Over time, that borrowing is repaid with interest. The same dollar doesn’t move from your hotel bill to a stretch of sand.

State officials argue the total amount being spent aligns with what the Green Fee is projected to bring in. While that may be true, it’s harder to explain why the first visible projects require borrowing from the general fund while the visitor tax increase is already flowing in.

From a visitor standpoint, the promise was to pay more so that the beaches get protected. The first allocation reinforces Waikiki, and the funding structure has shifted to general state borrowing rather than a direct link between the fee and the repair.

The revenue picture is shifting like beach sand.

The projected annual revenue of roughly $87 million also assumed cruise ships would be subject to the tax for the first time. But at the last moment, the Ninth Circuit issued an injunction blocking that cruise ship portion while a legal challenge proceeds.

The hotel and vacation rental tax increase still applies, but the cruise ship revenue stream is currently frozen. That means the Green Fee pot is already smaller before the first project even breaks ground, and if collections come in below projections, Hawaii will need to reconcile how much can be spent.

Visitors see a lodging tax burden approaching 19% and were told the increase would protect beaches under threat. The first significant Green Fee allocation reinforces Waikiki and Ala Moana, while the beaches experiencing active shoreline collapse are absent from the list.

Waikiki will continue to be maintained because that has always been true. The question is how quickly and how aggressively the Green Fee will reach beaches outside Honolulu, where erosion is immediate. Yesterday, we covered the fight over whether to allow shoreline hardening back onto Hawaii’s sandy beaches. Today, the focus turned to who pays for the alternative and where that money actually goes.

If the Green Fee is supposed to protect the beaches that visitors come to see, should the first projects be in Waikiki, which already receives constant support and maintenance, or in places like Kahana and the North Shore, where erosion is actively threatening the visitor experience with no help in sight?

We welcome your comments.

Lead Photo: Magic Island at Ala Moana Beach Park, Oahu.