Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Tourism, to which was referred S.B. No. 377 entitled:

begs leave to report as follows:

The purpose of this measure is to provide a non-refundable, carry forward income tax credit up to a total aggregate limit of $75,000,000 for taxpayers who develop an aquarium and marine research facilities at Ko Olina Resort and Marina.

Your Committee received testimony in support of this measure from the Department of Business, Economic Development and Tourism (DBEDT), the Department of Taxation, the Hawaii Tourism Authority, Ko Olina Company, Ko Olina Community Association, the Estate of James Campbell, the Association of Apartment Owners of the Ko Olina Fairways, Armstrong Builders, Ltd., the Laborers' International Union of North America Local 386 AFL-CIO, the Iron Workers Stabilization Fund, Ironworkers Union Local 625, Ocean Sports Productions, LLC, the Hawaii Building and Construction Trades Council, Pacific Resource Partnership, the Hawaii Operating Engineers Industry Stabilization Fund, Brookfield Homes Hawaii, Inc., and three concerned citizens.

The Tax Foundation of Hawaii submitted testimony in opposition to this measure.

Your Committee finds that this measure is identical to SB2907, CD1, which was passed by both houses of the Legislature during the 2002 Regular Session and vetoed by Governor Cayetano on June 24, 2002.

Your Committee continues to support this measure, which will help to revitalize the tourism industry on Oahu and stimulate our economy in general. In fact, the ongoing economic slump we have been experiencing in Hawaii makes this measure even more important this year.

Your Committee finds that, like last year, Ko Olina Resort and Marina remains an ideal location for the creation of a world-class visitor attraction. The 652-acre resort is master planned, zoned, and approved for hotel, timeshare, commercial, and recreational development. The development of educational facilities that utilize Hawaii's unique resources, such as an aquarium and marine science center, would add considerably to the attraction.

Your Committee further finds that this project will stimulate Hawaii's visitor industry, which still has not fully recovered following the terrorist attacks of September 11, 2001. Oahu in particular is widely viewed as a single-resort destination, with nearly all visitors to the island concentrated in Waikiki. Your Committee finds that development of further facilities at Ko Olina will re-brand Oahu as a multi-resort destination.

Moreover, a world-class, outdoor aquarium and marine research facility is precisely the type of visitor attraction that Hawaii lacks, which is particularly unfortunate given our traditional connection to the ocean.

As important as this project is for the visitor industry, your Committee finds that it is equally important to stimulate the local economy on the leeward coast. One testifier in support of this measure referred to it as a "regional tax credit," and your Committee agrees.

Your Committee finds that our island economy, even without taking into account the visitor industry, is centralized in Honolulu and Waikiki. Creating new visitor facilities on the leeward side of the island will give leeward and central Oahu residents employment opportunities closer to their homes and help to reduce traffic congestion into and out of Honolulu.

The developers of this project testified, as they did last year, that an important part of the project would be to provide job training to residents of the West Oahu region. In fact, several testifiers, including DBEDT and the Ko Olina Company, informed your Committee that concurrent with the passage of this measure, a Memorandum of Agreement will be executed that commits the developers to provide appropriate job training to residents of the leeward coast. Your Committee fully expects the parties to comply with this requirement prior to accepting any of the benefits of this measure.

Job training will be vital due to the number of new jobs that this project will create, both in the construction and operational phases. Several testifiers, primarily on behalf of the unions, urged your Committee to insert language requiring compliance with chapter 104, Hawaii Revised Statutes, during the construction phase of the project. Your Committee firmly believes that all workers on publicly-funded projects must be paid prevailing wages, as called for by chapter 104, and the developer has assured your Committee that prevailing wages will be paid. Your Committee accepts the good word of the developer, but leaves open the possibility of revisiting the issue if necessary.

Your Committee remains committed to this project, and hopes that the new Administration agrees that it offers numerous benefits for the State.

As affirmed by the record of votes of the members of your Committee on Tourism that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 377 and recommends that it pass Second Reading and be referred to the Committee on Ways and Means.