Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committees on Tourism and Economic Development, to which was referred H.B. No. 2809, H.D. 2, entitled:

beg leave to report as follows:

The purpose of this measure is to establish a qualified hotel project tax credit to stimulate large hotel and commercial construction, renovation, and redevelopment.

Testimony in support of this measure was received from the Land Use Research Foundation of Hawaii, Chamber of Commerce of Hawaii, Hawaii Hotels & Lodging Association, Cendant/Fairfield, Hawaii Resort Developers Conference, Polynesian Cultural Center, Hawaii Reserves, Inc., and Ko Olina Resort & Marina. Comments were received from the Department of Taxation, Waikiki Improvement Association, the Department of Business, Economic Development and Tourism, Hawaii Tourism Authority, and Tax Foundation of Hawaii.

Your Committees find that tourism is the foundation of Hawaii's economy. As the primary engine that infuses millions of dollars worth of U.S. and foreign currency into our economy, the visitor industry serves our State by establishing thousands of local jobs, stimulating real estate and commercial investment, as well as providing a dedicated revenue base for the transient accommodations tax (TAT).

Your Committees further find that these tax credits will provide tax incentives to spur the developing and refurbishing of resort properties. According to testimony, the resort industry needs upgrading in order to continue to compete in a globally competitive tourist market. It is difficult to attract investment dollars in this industry because investors can generally find better returns elsewhere and in other forms.

Your Committees further find that providing tax credits for qualified costs is an appropriate manner to give Hawaii the needed investments to accomplish this, enabling Hawaii to remain as a pre-eminent tourist destination.

Your Committees have amended this measure by deleting references to a tax credit under chapter 237D, Hawaii Revised Statues, relating to the TAT.

As affirmed by the records of votes of the members of your Committees on Tourism and Economic Development that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 2809, H.D. 2, as amended herein, and recommend that it pass Second Reading in the form attached hereto as H.B. No. 2809, H.D. 2, S.D. 1, and be referred to the Committee on Ways and Means.