Ko Olina tax break vetoed

By Johnny Brannon
Advertiser Staff Writer

Just hours shy of a midnight deadline, Gov. Ben Cayetano yesterday vetoed a controversial $75 million tax break for an aquarium project at the Ko Olina resort, a 4 percent tax credit for other commercial construction, a major campaign finance reform measure and a rent relief extension for concessionaires at state airports.

Gov. Ben Cayetano said giving tax breaks to one group of developers would be wrong. Advertiser library photo

Proponents of Senate Bill 2907 promoted the plan as an economic jump-start that would provide jobs in Leeward O'ahu and reinvigorate the island's sluggish tourism market with a new attraction, but said all of those projects would now be scuttled.

"It's a shame because it would have really been a tremendous boost to that part of the island," said Ko Olina Resort Association vice president John Toner.

But Cayetano argued that it would be wrong to target tax credits specifically for one area or group of developers. The state already allows a 10 percent tax credit for hotel construction or renovation, the project could be eligible for city tax credits as well, and interest rates are at an all-time low, he pointed out.

"Under these circumstances, it makes little sense to provide what amounts to a 'super' tax credit for what will amount to another resort development," Cayetano wrote in a message that accompanied the veto.

Local 5 of the Hotel Employees and Restaurant Employees union, which is negotiating contracts with Hilton and other hotels, lobbied against the bill and characterized it as a giveaway to companies that did not need it.

Sen. Colleen Hanabusa, who sponsored the bill and lobbied Cayetano to approve it, said she was unhappy with the governor's decision.

"You're not going to come up with this combination again, and that's what makes it such a disappointment," said Hanabusa, D-21st (Barbers Point, Makaha). "The bottom line is, you need to get the people working."

Cayetano said he shot down the campaign finance reform measure, Senate Bill 2431, because legislators had amended it to exempt themselves from its provisions, which would have prohibited direct political contributions by corporations and labor unions.

"To approve this bill would be to give the public the impression that meaningful campaign spending reform has occurred. It has not," the governor said in his veto message.

But one of the bill's strongest supporters, House Majority Whip Brian Schatz, D-24th (Makiki, Tantalus), dismissed that argument as "specious" because legislators don't approve contracts with companies or unions and would therefore be in no position to directly reward political donors. The bill could be amended to include legislators later, he said.

"The governor had a big opportunity to pass the biggest campaign finance reform measure in at least 20 years and he just missed the opportunity," Schatz said.

The governor also rejected Senate Bill 2383, which would have established a 4 percent tax credit for commercial building construction and expanded the existing hotel tax credit to include other facilities. The bill defined projects eligible for the credit too broadly, Cayetano complained, and was not targeted to assist any particular industry or create new ones.

John Morita, government relations director for the Building Industry Association, one group that backed the bill, said the veto was expected but was still a disappointment.

"The idea is not just the economic stimulation for the construction activity, but to revitalize areas that are run-down," he said. "In the tourism industry, many of our attractions are viewed as aged, and we physically need new attractions and major renovation of existing facilities, basically Waikiki."

Cayetano also balked at Senate Bill 2306, which would have extended rent relief the state granted to companies that lease space at state airports and bid for exclusive marketing rights. Emergency legislation approved after Sept. 11 provided $26.5 million in rent relief to airport concessionaires, but it expired April 30.

Cayetano said he opposed an extension of the arrangement "because it mandates the state to take actions designed to virtually guarantee that airport concessions stay in business at the expense of the public."

Peter Fithian, a spokesman for the Airport Concessionaires Committee, said some companies could go out of business without additional help because they had suffered major business losses after Sept. 11.

The governor also vetoed:

• Senate Bill 2816, which would have created a tuition reimbursement program for a person who completes a state-approved teacher education program in Hawai'i and who teaches in the Hawai'i public school system for at least six years.
• An $8 million construction appropriation slipped into the budget for the financially troubled Japanese Cultural Center.
• $6 million in general obligation bonds for the Upcountry Maui watershed project.
• $5 million in general obligation bonds for a grant to the Waikiki Health Center.
• $5 million from the Hawaii Tourism Authority, leaving the state agency with $56 million. Cayetano said even with the reduction, the $56 million is more than double the agency's financing four years ago.
• $2.95 million in general obligation bond funds for a grant for the Hawaii Island Veterans Memorial in Hilo.

Advertiser staff writer Lynda Arakawa contributed to this report.