Ko Olina tax break not good public policy
As a project, the proposed "destination resort" at Ko Olina built around a world-class aquarium, dolphin research facility, athletic fields and other amenities is intriguing and exciting.
But as a matter of public policy, a proposal to give developers of the resort a tax break of $75 million maybe more is a shaky idea. Gov. Ben Cayetano should veto the tax credit bill targeted at Ko Olina so that a more nuanced, supportable plan can be developed.
Jeff Stone, master developer for the proposed multimillion-dollar complex of hotels, time shares and public attractions, paints an engaging picture of what is possible for the Leeward O'ahu site.
As envisioned, it could give O'ahu something it now lacks: an integrated resort community that would rival if not exceed those found on Neighbor Islands. A key to the project is a complex of alluring attractions, including an aquarium and marine science center and a training site for traveling sports teams.
That's where the credits come in. Stone argues that without the attractions to drive visitors to the resort, it might not pencil out. Developers would be willing to "front" the costs of the aquarium complex in exchange for tax credits of $100 million.
In short, the taxpayers would build the amenity, over time.
The strongest argument for the tax credit is that this is money the state wouldn't see anyway, since without the amenities the project wouldn't go and nothing would happen.
That argument is countered somewhat by the fact that no investor buys land with the intention of letting it sit forever idle. Something will eventually happen at Ko Olina, credit or not. Why should the state give up that future income?
But beyond the back and forth of the specifics of this project is a larger policy question. By approving a tax credit (a big one, and against most forms of tax liability) for one particular project, what precedent is being set?
As a general principle, tax credits are designed to ease the burden of tax liability on those who can least afford it (low-income tax credits, for instance) or to broadly stimulate new economic activity. Tax credits for new forms of high-tech industry or for cruise lines are examples.
Even the new construction tax credits for business and private homeowners (which, by way of disclosure, may be available to this paper as it goes ahead with its new Kapolei printing facility) fit that philosophical principle.
But the Ko Olina credit is targeted at a specific project in a specific place. The likelihood of another mega-destination resort with an aquarium complex being built somewhere else is virtually nonexistent.
If this measure is approved, it will set a policy that may become difficult to defend in the years to come as others clamor for their own special help.
If Cayetano vetoes this bill, as he should, the Legislature should come back and work with the developers on a more creative form of support that will kick-start an intriguing and undoubtedly desirable project without setting bad public policy in cement.