OUR TURN
Tax credits to attract high-tech investors deserve support

By Jay Fidell, Laurie Akau, Gordon Bruce and Don Mangiarelli

We couldn't help noticing that The Advertiser has published several articles recently critical of Act 221 as a subject of "controversy," culminating in a Dec. 8 editorial.

Actress Kate Bosworth surfs in a scene from the Universal Studios film "Blue Crush," in this undated promotional photo. Advertiser library photo

Although earlier articles claimed otherwise, one of the things that Linda Lingle and Mazie Hirono could agree on in their technology debate of Oct. 24 was that Act 221 was a good thing and should not be modified — that it should be left alone to "run its course."

Lingle assured the business community that day that she would not seek to modify Act 221, and now that she is governor, we trust she will keep her word and maintain her leadership.

The Dec. 8 editorial suggests that movie deals like "Blue Crush" were not intended to receive the same benefits as tech deals under the Act.

But that is not so. Movies increasingly are using technology, and making them has become a technological process. Movies are important to Hawai'i — the University of Hawai'i has great plans for its new film school. In recent years, filmmakers have become skittish about Hawai'i. What better way to bring them back than with attention-getting tax credits? Understandably, the Legislature really meant to include movie deals in the act, and the act does in fact include them.

We have heard it said that movies were not intended to benefit under the state law because they are customarily "one-shot deals" rather than businesses "committed to moving here" for the period of the act. That's silly. Films and performing arts were specifically included under the act. We also have heard it said that allowing investors from outside Hawai'i to sell tax credits to investors who are here is somehow an "abuse."

But how could there be "abuse" when:

• "Blue Crush" complied with the act's requirements and received benefits under the act?
• The state tax office specifically ruled that it was entitled to those benefits?

The editorial expressed concern that the plot of the movie was "cheesy," but cheesy plots nevertheless qualify under the act. The editorial also suggested that the tax office should "screen" businesses to see if they are "committed to moving here," but that is not a requirement under the act.

So what if investors outside Hawai'i can get benefits? That means they are in fact investing in Hawai'i ventures, and the act is working as intended. So what if "Blue Crush" investors qualified for tax credits of $16 million? The fact is they spent that and more, and what they spent went to people in Hawai'i who worked on the movie — and thus into the Hawai'i economy. And all of that resulted in a movie being seen around the world promoting and publicizing Hawai'i as an attractive destination resort, cheesy plot and all. So what's not to like? We'd love to see the same kind of investments from local investors and institutions.

Why bang the drum for "controversy" here? In approving Act 221, the Legislature created an environment for deal-making and investment, in both tech and filmmaking — one critical to the development of new industries. Right now, there is a ground swell of activity in — and in anticipation of — deals under Act 221. Already, the act has engendered nourishing new investment in Hawai'i's alternative industries. This is not "abuse" — it is the market at work. Together, we should preserve that environment, not squabble about it or express distrust over it or — worse — attempt to restrict it before it has run its course.

Hawai'i is going into its 13th year of recession amid continuing emigration of our best and brightest. The critical need for Hawai'i is to bring in new investment to develop new businesses and create new jobs to keep residents here. To catch up, we need to cross-pollinate and diversify our local economy immediately. The priorities are clear: We need to select strategic industries, including technology and the movies, and then aggressively encourage them in every way possible. There is no time to waste.

We therefore question The Advertiser's editorial, and we believe many others in the community feel the same way. Assume for a moment that Act 221 is what people say it is — progressive legislation that helps Hawai'i by offering an unambiguous welcome to investors.

The indisputable reality is that investors, for both technology and movie deals, want predictability and reliability. They must be made to feel that Hawai'i is not anti-business, and that Act 221 will not be henpecked into oblivion before its five-year sunset; if unconvinced, they will invest elsewhere.

Act 221 went a long way to show the world that Hawai'i means business. To find or feign imagined "controversy" undermines the enlightened legislative message of Act 221, and will be seen as a lack of will and a collective reluctance to commit to a diversified open-for-business economy. We should, rather, join to seize the day and change that image.

We should be proud of this state law, use it and applaud the Legislature for it. Unfounded suggestions of "abuse" and "controversy," however, corrode the act, intimidate our prospects and entrepreneurs, and further deteriorate our business image, all with long-term destructive effect.

Jay Fidell, Laurie Akau, Gordon Bruce and Don Mangiarelli are advisers to ThinkTechHawaii, a nonprofit group dedicated to keeping island people up to date on developments in Hawai'i's technology sector.