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The Honolulu Advertiser
Posted on: Tuesday, February 5, 2002

Ko Olina developer seeking tax credits

By Andrew Gomes and John Duchemin
Advertiser Staff Writers

Ko Olina developer Jeff Stone is proposing a $100 million project for the resort area that would include a world-class aquarium as well as travel industry and sports facilities for the University of Hawai'i, contingent on the passage of special tax-credit legislation.

Stone wants to build a training hotel, golf academy, marine science center and sports practice facilities for UH, plus an aquarium and a new home for the Dolphin Institute, if legislators grant a 100 percent tax credit for the investments.

A tax bill introduced in the state Senate yesterday would do just that, giving Stone or other investors tax credits for any investment in education-related "amenities and attractions" at the largely undeveloped 650-acre Ko Olina Resort & Marina.

"We are enthusiastic about (the legislation because it) will help Hawai'i's economy recover," Stone said. "Ko Olina Resort & Marina in the West O'ahu community is the best place for this to happen, as it has sufficient land area approved for resort development and a new $50 million marina."

The proposed projects, Stone said, would create thousands of jobs and potentially millions of dollars in state revenue. They also would help Stone increase demand for as many as four more hotels and time-share projects at the resort.

Without the tax credits, Stone said, none of the construction could take place in a time frame suitable to help Hawai'i's economy recover.

Late last year, Stone shelved a $500 million plan for a hotel, 3,000 homes, a golf course and commercial center next to the resort because investment and development partnerships fell apart in the tourism slowdown following the Sept. 11 attacks.

Political observers say such special-interest legislation is not unusual for legislators to introduce, but often comes under fire and is rarely passed.

The Senate bill, introduced by Sens. Colleen Hanabusa, D-21st (Barbers Point, Makaha), and Sam Slom, R-8th (Wai'alae Iki, Hawai'i Kai), met with guarded response from Gov. Ben Cayetano and University of Hawai'i officials.

A spokeswoman for Cayetano said the governor would not comment on specifics of the bill, but she noted it was similar to one the governor vetoed in 1999 that would have given 20 percent tax credits for some hotel renovations.

"At this time it's too premature to comment, because we don't know what the final bill will look like," said spokeswoman Kim Murakawa.

University officials said yesterday they still had to analyze where the proposed Ko Olina developments would fit into UH plans.

"At this point we don't have a position, because this would have to be viewed in the context of our overall strategy," said Paul Costello, spokesman for UH president Evan Dobelle.

Still, Republican leader Slom, who has loudly opposed such bills in the past, said he co-sponsored this one because economic choices are limited in Hawai'i's posti Sept. 11 environment.

"The main difference between the last several years and now is that you don't have people in line with projects," he said. "Here's something very specific ... it's an opportunity to create jobs and diversify the economy a little."

Hanabusa said she introduced the bill because it would mean more jobs, particularly for Leeward Coast residents, and an improved visitor destination.

"If this is an industry we have to revitalize, why don't we give them the tax credits?" she said. "To use the tax credits they have to build — they have to make the investment."

To qualify for the credits, investments at Ko Olina would need to be made between June 30 this year and Jan. 1, 2008. Credits would be received in 20 percent increments over five years.

Tax credits could not be earned by typical resort developments, such as hotels or vacation homes.

Specifically, Stone is proposing to spend about $60 million to develop a world-class aquarium, about $40 million to establish a training hotel for UH and $10 million for sports facilities. Other projects include a golf academy and relocating the Kewalo Basin Marine Mammal Laboratory, also known as the Dolphin Institute.

Cayetano envisioned the aquarium as part of an ocean science center at Kaka'ako, but the Legislature last year rejected a $30 million request for the facility.

A training hotel has been considered by university officials over the years. Chuck Gee, dean emeritus of the UH Travel Industry Management School, said the proposal for a privately developed training hotel and golf academy was promising but would need more discussion.

UH athletic officials could not be reached yesterday. But Stone said they had indicated they would like multi-sport practice facilities that visiting teams could use while in town.

Dolphin Institute President Louis Herman said the move would allow expansion of research programs and special educational opportunities. A planned relocation to a site in Kihei was blocked last year.

Ko Olina Resort was envisioned by developer Herbert Horita in the late 1980s as a $3 billion self-contained resort/residential community, but the grandiose project stalled in the early '90s.

Ko Olina Co., headed by Stone, acquired much of the mostly undeveloped resort in 1998. Since then the company, alone or with other partners, has bought the J.W. Marriott Ihilani Resort & Spa hotel and golf course and attracted other developers who are building homes and vacation units on the property.