STAND. COM. REP. NO. 3201

Honolulu, Hawaii

RE: H.B. No. 2659

H.D. 1

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Twenty-Ninth State Legislature

Regular Session of 2018

State of Hawaii

Sir:

Your Committees on Economic Development, Tourism, and Technology and Labor, to which was referred H.B. No. 2659, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO ECONOMIC DEVELOPMENT,"

beg leave to report as follows:

The purpose and intent of this measure is to:

(1) Establish a five-year Kapolei jobs initiative pilot program and establishes requirements to qualify for the tax credit; and

(2) Establish a Kapolei jobs initiative income tax credit program as an incentive of the Kapolei jobs initiative pilot program.

Your Committees received testimony in support of this measure from the Chamber of Commerce Hawaii; Kapolei Chamber of Commerce; Pacific Resource Partnership; Palehua Townhouse Association; Hawai‘i Construction Alliance; National Kidney Foundation of Hawaii; James Campbell Company, LLC; Kapolei Commons, LLC; Klapperich International Training Associates, LLC; Hunt Development Group, LLC; Associa; Urgent Care Hawaii; O‘ahu County Committee on Legislative Priorities of the Democratic Party of Hawai‘i; Coral Crater, LLC; Ho‘omanapono Political Action Committee; and ten individuals. Your Committees received comments on this measure from the Department of Taxation; Department of Business, Economic Development, and Tourism; and Tax Foundation of Hawaii.

Your Committees find that job growth in the Kapolei region on Oahu affects employers and employees alike, as households continue to outgrow the number of employment opportunities in the region. Your Committees further find that the state enterprise zone program is restrictive and participation in the program has been relatively low. Establishing an incentive such as the Kapolei jobs initiative program would attract needed professional, high‑paying jobs to the Kapolei area.

Your Committees note that in order for the Kapolei jobs initiative program to produce meaningful impacts, businesses should provide more competitive salaries to at least half of their employees in order to qualify for incentives and participate in the program. According to a report by the Hawaii Housing Finance and Development Corporation, the average area median income of a single person in the City and County of Honolulu is $73,300. Your Committees suggest that $73,000 may be an appropriate amount for your Committee on Ways and Means to further consider.

Your Committees have amended this measure by:

(1) Deleting language that would have allowed qualified businesses to carry over any unused tax credits to subsequent taxable years;

(2) Inserting a blank amount of gross annual salaries that a business must pay to at least half of its employees in order to be considered a qualified business; and

(3) Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

As affirmed by the records of votes of the members of your Committees on Economic Development, Tourism, and Technology and Labor that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 2659, H.D. 1, as amended herein, and recommend that it pass Second Reading in the form attached hereto as H.B. No. 2659, H.D. 1, S.D. 1, and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committees on Economic Development, Tourism, and Technology and Labor,

________________________________ JILL N. TOKUDA, Chair

________________________________ GLENN WAKAI, Chair