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 S.B. No. 1562 entitled:

beg leave to report as follows:

The purpose of this measure is to provide a tax credit for a taxpayer's operating costs to provide air freight service to a county with a population of less than 100,000 residents.

Testimony supporting this measure was received from the Mayor of Kauai County, a member of the Kauai County Council, Pioneer Hi-Bred International, Inc., Hawaii Air Cargo, Kakalina's, Bobs Tropicals.com, and Kauai Tropicals. The Department of Taxation took no position on this measure but provided comments. Additional comments on this measure were received from the Tax Foundation of Hawaii.

Your Committees find that Hawaii's airline industry faces unprecedented financial challenges stemming from the prospect of conflict in the Middle East or Asia, thereby causing severe repercussions in the local tourism-based economy. This situation does not bode well for Hawaii's overall economy, which depends heavily on air transportation in all facets of the economy and daily life. Air freight service is of particular importance as it is the only means by which Hawaii's local businesses are able to quickly transport their products interisland, nationally, and internationally. The current economic climate has affected the frequency and cost of air freight service in Hawaii and is threatening the sustainability and competitiveness of Hawaii's businesses. Your Committees believe that this measure provides appropriate and effective tax relief for local businesses that depend on air freight services.

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 S.B. No. 1562, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 1562, S.D. 1, and be referred to the Committee on Ways and Means.