Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committees on Economic Development and Transportation, Military Affairs, and Government Operations, to which was referred H.B. No. 685, H.D. 2, entitled:

beg leave to report as follows:

The purpose of this measure is to direct the Governor to work with the City and County of Honolulu to designate additional enterprise zones in areas where commercial real estate have a vacancy rate of fifteen per cent or more. The designations shall last for two years beginning July 1, 2003, and ending on June 30, 2005.

Testimony supporting this measure was received from Enterprise Honolulu, Hawaii Venture Capital Association, and China-Hawaii Chamber of Commerce. The Department of Taxation submitted comments. The Department of Business, Economic Development, and Tourism submitted oral testimony commenting on this measure.

Your Committees find that Hawaii's economy is enduring challenging times. Recent local, national, and international political and social events have created uncertainty in the economy. In addition, there are certain areas in the State that are experiencing particularly severe economic downturns. These areas are readily identifiable and the State should make every effort to stimulate the economy in those areas.

Over the years, enterprise zone tax incentives have proven to be less successful in reviving commerce and the overall economy of depressed areas than originally intended. One major concern is the requirement that struggling businesses must meet the ten per cent growth requirements in order to take advantage of enterprise zone tax incentives. Although the amendments being adopted by your Committees for "tier two" enterprise zones do include allowing retail establishments to become eligible for enterprise zone tax incentives, your Committees believe that further discussion on the hiring requirements of section 209E-9(a)(3) and (4) is needed.

Therefore, your Committees have amended this measure by:

As affirmed by the records of votes of the members of your Committees on Economic Development and Transportation, Military Affairs, and Government Operations that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 685, H.D. 2, as amended herein, and recommend that it pass Second Reading in the form attached hereto as H.B. No. 685, H.D. 2, S.D. 1, and be referred to the Committee on Ways and Means.