Posted on: Tuesday, May 14, 2002
Ko Olina project pitched in return for tax credit
By Andrew Gomes
Advertiser Staff Writer
Gov. Ben Cayetano gave no indication whether he was swayed by the presentation.
Cayetano has said he is inclined to veto the bill passed by the Legislature earlier this month that would provide $75 million in tax credits for private development of an aquarium attraction at Ko Olina.
But resort representatives said yesterday after the meeting that they believe they made a strong case for the tax break.
"I think he was impressed," Jeff Stone, master developer of Ko Olina Resort & Marina, said about the governor, while adding that he "has no idea" if Cayetano will change his mind.
Cayetano spokeswoman Kim Murakawa said the governor didn't not make up his mind yesterday, and would not discuss his impression of the meeting.
"He's going to take as long as he needs to think about it," she said. The governor has until June 24 to make veto decisions.
Yesterday, Stone said he had a signed agreement with Hilton Hotels Corp. to co-develop a 340-room hotel, and an agreement with Canadian firm Intrawest Corp. to co-develop a vacation club condominium with more than 200 rooms, commercial village and expanded marina.
A third company, Florida-based development and planning firm EDSA, has agreed to build the tax-credit-financed aquarium and a marine science center.
All three components would be developed over10 years on land at Ko Olina owned by the Harry & Jeanette Weinberg Foundation, which would also help finance the project, according to Stone.
But the development commitments are contingent on Cayetano allowing the tax incentive, Senate Bill 2907, to become law.
Cayetano has said that he is inclined to veto the bill, citing "great concerns" about giving a public subsidy for a private resort development in the form of a 100 percent tax credit. The governor also has said that tax credits should be for strategic purposes such as developing high-tech, biotech and other new industries in the state rather than to support a well-developed industry.
The state Tax Department has opposed the bill, saying it favors a handful of private developers, and that others could ask for tax breaks to help improve or create competing resort destinations.
Watchdog organization Tax Foundation of Hawaii also criticized the bill, calling it a bailout of the Ko Olina project.
Stone argued that the state has an interest in improving Hawai'i's economic recovery by helping create jobs and new state tax revenue that he said would not be created without the incentive.
He estimated that the "marine village" project would create more than 10,000 construction jobs, 2,000 permanent jobs and $186 million in state tax revenue over 10 years.
Stone also said the project goes toward the state's vision of making neighboring Kapolei the "second city" of O'ahu to ease urban density buildup in Honolulu.
He added that Hilton and Intrawest have looked at Ko Olina for years and have been unwilling to invest in the resort without the world-class attraction.
"There's no way I could get Hilton and Intrawest to come without an attraction," he said. "Waikiki has zoos. Waikiki has the convention center. Waikiki has state parks. We need something like that at Ko Olina."
Joining Stone at the meeting with the governor were Peter Schall, Hilton's Hawai'i region senior vice president; Jim Gibbons, president of Intrawest; Bob Behling, a principal of EDSA; Charles White of the California design firm Olio; officials with the Weinberg foundation and Ko Olina representatives including Roy Tokujo, who is also chairman of the Hawai'i Tourism Authority.
Stone said Gibbons, who declined an interview, presented the governor with examples of Intrawest projects that were partly government financed. For example, he said in Durban, South Africa, the city government is financing roughly half of a $1 billion project to turn an old marine park into a resort village with a SeaWorld Aquarium.
Intrawest's Canadian alpine resort of Whistler Blackcomb also was supported by government-provided infrastructure and bonds, Stone said.
Cayetano has advocated a world-class aquarium as a tourist attraction, and supported making the facility part of an ocean science center in Kaka'ako, but the Legislature last year rejected a $30 million request for the facility.
Stone suggested that if there is a better place to build the aquarium, and the state or other private developers are willing to take the risk building it on public or private land "then they should do it."
Ko Olina is a largely undeveloped 650-acre property. The resort was envisioned by developer Herbert Horita as a $3 billion self-contained resort/residential community in the late 1980s, but the grandiose project stalled in the early 1990s.
In 1998, Ko Olina Co., headed by Stone, stepped in and acquired much of the property. Alone or with partners, Stone's company bought the J.W. Marriott Ihilani Resort & Spa hotel and golf course.
Other companies — including Marriott International, Alexander & Baldwin and Brookfield Homes — have also recently invested in the resort by building homes and vacation units at Ko Olina.
Stone said that if the tax-credit bill is approved, construction on the proposed marina village could start as early as the first quarter of next year. "We're ready to go," he said.
The proposal calls for construction in two phases over 10 years. The first five-year phase would include the aquarium, marine science center, half the commercial village and portions of the Hilton hotel and Intrawest vacation club units.
The marina expansion and remainder of the commercial village and vacation units would be built in the second phase.
After 10 years, the Weinberg Foundation would give back to the state a half interest in the aquarium.
Stone estimated the cost of phase one at $300 million, which would include $75 million in tax credits that would be payable over 10 years to cover 100 percent of the aquarium and marine center.
Phase two improvements are estimated at another $400 million.
Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.
A team of resort developers yesterday presented a plan to the state that would add $700 million in vacation units, a commercial village, a hotel and an expanded marina to Ko Olina in return for $75 million in tax credits to finance an aquarium and marine science center at the West O'ahu property.
