The September 11th attack
Agenda full at Legislature

By John Duchemin and Frank Cho
Advertiser Staff Writers

The governor's request for as much as $1 billion in construction money has center stage at the Legislature in the week ahead, but also on the table are plenty of other measures intended to stimulate Hawai'i businesses stunned by the Sept. 11 attacks.

Among the measures are proposals for tourism marketing dollars, tax deferments and rent breaks for specific businesses, the temporary waiving of fees for airlines and airport businesses, and relief for unemployed workers.

The measures, many supported by Gov. Ben Cayetano, are likely to play second fiddle to construction spending during the one-week special session, which begins tomorrow.

Still, with millions of dollars at stake, these supplementary stimulus measures are likely to receive a good deal of scrutiny. Many already have attracted either objections or applause from lobbyists and politicians.

It is unclear whether the measures will have any concrete economic effect. Some observers object to several proposals up for consideration, saying they are limited to special-interest groups or not relevant to the immediate crisis, and those bills could be rejected or tabled until the regular legislative session begins in January.

Most likely to get quick legislative approval is a request for $10 million in marketing and advertising money for tourism.

The measure has industry backing and, with the tourism industry hard hit, is likely to receive little opposition. The money would help pay for a $20 million international advertising campaign that is already under way.

A $60 million proposal to temporarily extend unemployment benefits, and a companion measure to provide $1.5 million in modified health-care coverage for laid-off workers, are also on the A-list.

Some tax experts and political opponents have criticized several tax-relief bills as ineffective. Others say the measures don't directly address what the state needs most — help for tourism.

"They are shooting a shotgun when I think they really need to hone in on the visitor-related businesses," said Lowell Kalapa, executive director for the Tax Foundation of Hawai'i.

The governor has proposed to have motor and water carriers start paying the state's general excise tax instead of the public service company tax they now pay.

This measure would cost the state's general fund an estimated $3 million this fiscal year, but it would help companies like Atlantis Adventures submarine tours, which has been hit hard by the tourist slowdown. Beyond that, however, the scope is limited, some complain.

"I generally support it, but that will only affect about 400 taxpayers," said Senate Minority Leader Sam Slom, R-8th (Wai'alae Iki, Hawai'i Kai).

The governor also is proposing to let businesses that pay withholding taxes on a monthly basis to pay them quarterly, and quarterly payers to pay biannually — giving cash-strapped businesses some breathing room.

This measure is expected to cost $16 million from the state's general fund, according to the most recent estimates, and about $1.2 million from the Tourism Special Fund and counties this fiscal year.

Kalapa said the measures only defer taxes that businesses will have to pay later.

"This is nothing. These measures don't really put money back in my pocket," Kalapa said. "I guess I really didn't expect that after all this time they would have nothing really novel and flashy."

Cayetano had said he wanted to reduce the state capital gains tax to try to encourage investment in Hawai'i, but has since dropped the proposal. Cayetano said the state cannot afford such a cut right now.

Another proposal that could be controversial is a proposal to change rent calculation for airport concessionaires including flower stands, shops and restaurants.

Concessionaires are required to pay a fixed minimum rent. With many suffering double-digit reductions in sales, concessionaires want to see the rules temporarily changed so they can base rent on a percentage of revenues.

An administration proposal would temporarily allow this change — but only until the regular legislative session begins next year, when the legislature would have to decide to officially grant the change. Concessionaires say that's too uncertain for them; they need to know now whether they'll have to pay a fixed minimum rent.

"If we have to wait to know whether we have to pay a minimum or not, then we have to plan as if we have to pay," said Peter Fithian, president of Greeters of Hawai'i, which runs the lei concession at Honolulu International Airport. "You begin to do different things if you have to be cautious."

As of late last week, the legislative agenda still was being hammered out. Other proposals that could be on the table include:

• Permitting the Board of Land and Natural Resources to defer fees and rents for leases, permits, equipment rentals, contracts, easements and rights-of-way.
• Changing hiring rules for companies in enterprise zones. The zones require companies to hire a minimum number of employees in order to get benefits; the governor wants to tinker with the rules to avoid penalizing companies that reduce their work force.
• Changing the state's Capital Loan Program interest rate to a monthly variable rate, which would temporarily lower interest payments for companies that have borrowed money from the state.
• Establishing a moratorium on business license renewal fees for the rest of fiscal year 2002. This could cost the state $12 million, the Cayetano administration calculates.

The government's top economic official said such measures, combined with the proposed tourism advertising, unemployment benefits and construction spending, make a decent stimulus package.

"I think, when these things are combined together, there's a number of things we're doing that can help affected workers, assist businesses in the short run, and stabilize tourism," said Seiji Naya, director of the Department of Business, Economic Development and Tourism.

But critics say that some of the measures could do little other than aid specific interest groups — namely those who have existing connections to public money through avenues including loan programs, airport leases, public land and harbor permits.

"We don't want to buy into just giving certain businesses deferrals and waivers on taxes and fees — we need to help the whole economy," Slom said. "If you're alleviating the pain one group suffers, it's better to make an extra effort to see how badly other areas are suffering."

The Republican minority has prepared its own legislative agenda for next week. Slom said his party will push for giving private landlords financial incentives to offer rent breaks to tenants, and for a capital gains tax exemption, among other measures.