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The Honolulu Advertiser
Posted on: Thursday, November 7, 2002

Lingle faces pressure to deliver for businesses

 •  Highlights of Lingle's ideas
 •  'New Beginning' highlights priorities in tourism, agriculture, technology

By John Duchemin
Advertiser Staff Writer

As the first non-Democrat chosen for Hawai'i's top spot in 40 years, Republican governor-elect Linda Lingle faces huge expectations from the business community to step in quickly and make significant changes in how government deals with business.

Linda Lingle and running mate Duke Aiona shook hands at Merrill Lynch in downtown Honolulu on the day before the election: from left, financial adviser Karen Handy, Hawai'i Pacific University interns Aaron Kim and Roar Berg. The business community has pinned its hopes for more favorable policies under the state's first Republican governor in 40 years.

Deborah Booker • The Honolulu Advertiser

Many small- and big-business owners who have complained of inefficiency, obstructionism and impropriety under Democratic governors see Lingle as their best hope for substantial reform.

Lingle has promised not only to bring a cooperative, business-friendly attitude, but also sweep away many of the regulations that businesses have labeled unnecessary interference.

"I think she will bring new confidence, hope and action that will mobilize new initiatives in government reform, the economy, social programs, environmental stewardship, education and

respect for Native Hawaiian culture," said Mike Fitzgerald, president of the economic development organization Enterprise Honolulu.

But Lingle faces challenges as she prepares to succeed Gov. Ben Cayetano.

The pressure will be on for her to deliver on promises such as tax incentives, increased spending on the University of Hawai'i, streamlining permitting procedures and a repeal of the gas price cap enacted this year by the Legislature.

Some of those goals will be difficult to reach.

Not only must Lingle flesh out her broad economic proposals with details, she must also get them through a strongly Democratic Legislature that has championed many of the recent consumer laws she opposes. And she must sell lawmakers on tax incentives, even as the state faces an economic slowdown that has caused tax revenues to fall hundreds of millions of dollars short.

Lingle has not won over many of Hawai'i's public- and private-sector labor unions, powerful influences on state policies toward businesses. Some businesses also have mixed feelings on Lingle proposals, such as creation of a cabinet-level tourism position.

Nevertheless, business owners yesterday called Lingle's victory refreshing, eventful and positive for the Hawai'i economy.

"The votes were evenly divided, even in the business community, but everyone I've talked to today feels the election was a positive step and we'll certainly see some fundamental changes," said Christine Camp, vice chair of the Chamber of Commerce of Hawai'i and owner of Avalon Development Co.

Internet business owner Pete Martinez agreed.

"We should have nothing but the highest of expectations," said Martinez, founder of Hawai'i Internet Emporium, a Web design and consulting firm. "Obviously she'll have an uphill battle, with the Legislature dominated by the other party, but there's only a minuscule chance of nothing happening. There's a real groundswell of support for her."

The plan

Lingle's campaign speeches and treatise "A New Beginning for Hawai'i" described plans to instill new financial discipline in government by providing tax incentives for key businesses, tackling difficult regulatory questions and investing in public education.

Lingle has promised a financial audit of the entire government to weed out unnecessary programs, hidden special funds and wasteful processes. She claims the savings generated will pay for tax cuts and business incentives including a repeal of the 4.16 percent excise tax on health care, a tax credit on food purchases and tax breaks for hotel construction.

Lingle promises to seek a repeal of the gas price cap, and says she supports a controversial $75 million tax credit proposal vetoed by Cayetano that would back development at Ko Olina resort.

She proposes a $100 million increase in the University of Hawai'i budget over the next three years to stimulate the university's research output and professors' ability to create technology with commercial potential.

Yesterday, economists said it was far too early to judge whether Lingle's proposals eventually would make a cohesive plan leading to sweeping changes.

The plan is broad in its sweep but lacks specifics, said Carl Bonham, an economics professor at the University of Hawai'i-Manoa, making it hard to gauge the long-run impact on state finances and economic growth.

State economist Chris Grandy cautioned yesterday that dramatic changes might be difficult, because the new governor faces the same economic realities that dictated policy during Cayetano's eight years in office.

"I'm a little surprised to hear the business community say they expect major changes, because there's a fair amount of overlap between her proposals and those of the Cayetano administration," said Grandy, a professor in public administration at the University of Hawai'i. "We're so dependent on the outside world that the set of reasonable economic policies available to any governor is pretty constrained."

Business community observers say the pro-business attitude implicit in Lingle's proposals is, for now, more important.

"She seems willing to listen to business, to do her homework and to understand the issues we face," said Bill Spencer, president of the Hawaii Venture Capital Association.

The issues

Among major changes that could come in months ahead are some that could significantly affect the state's oil companies.

Several industry leaders said yesterday they were pleased with Lingle's opposition to a law that prevents building new gas stations near existing stations, and to a law passed this year that would tie wholesale gas prices in Hawai'i to West Coast prices. Lingle has said she will seek to repeal both measures.

"The mood here at Chevron is upbeat among our employees," said Albert Chee, a spokesman for Chevron Hawaii, the state's biggest petroleum refiner. "They realize that voting Ms. Lingle in is a sign that people wanted change and an improved business climate."

Chevron was one of several oil companies sued by the state for alleged antitrust violations. The $2 billion lawsuit was settled earlier this year when Chevron paid $5 million and admitted no wrongdoing.

Still, Chee said a Democratic Legislature could pose problems for Lingle.

"At least from where I stand, Linda Lingle understands the issues, and we think is a good first step. But yes, there is still a Democratic Legislature to deal with," Chee said. "The climate certainly is expected to change, and whether that would be the right climate remains to be seen. But it sends a good message not only here but beyond Hawai'i."

Labor concerns

For the state's long-powerful private-sector labor unions, the election of a Republican governor raises new questions.

Lingle emphasized strong pro-business views during her campaign that could be interpreted as less friendly than previous administrations' to labor concerns. But she also stressed she would work to create a partnership among business, labor and government.

Lingle had scant support during her campaign from the private-sector labor unions that are historically linked with Hawai'i's Democratic party.

Among the state's major unions, she won endorsements only from the University of Hawai'i Professional Assembly, which represents faculty in the statewide university system, and the 2,200-member State of Hawai'i Organization of Police Officers

One local labor analyst said Lingle might now reach out to other unions that did not endorse her, "because if you're going to have an ongoing electoral or governing coalition and you leave labor out, it's going to be very difficult to form any kind of ongoing coalition," said Lawrence Boyd, a labor economist with the Center for Labor Education and Research at the University of Hawai'i-West O'ahu.

Democratic majorities in the state House and Senate will make it hard for Lingle to push through changes to pro-labor laws, Boyd said. But she could make appointments to positions such as the Hawai'i Labor Relations Board that have the power to interpret labor laws already on the books.

In addition, Boyd said, Lingle could continue a recent trend toward privatization of government positions that would threaten public-sector unions.

"She got overwhelming business support, and many came from groups that are openly hostile to labor," Boyd said. "These people have agendas that they've stated, and I think (labor's) fears are that that is the agenda that Linda Lingle will adopt."

Local 996 of the Hawai'i Teamsters and Allied Workers was among the first unions to endorse Mazie Hirono. But local president Mel Kahele said yesterday the union is "not going to judge" Lingle.

"She is our next governor and we're going to make every attempt to try to get along and work with her and her administration," he said.

Kahele said a key concern of union leaders had been whether Lingle would attempt to establish Hawai'i as a "right to work" state, in which workers have the option of not joining unions that operate in their workplace.

Teamsters officials asked Lingle about it during the campaign, he said, and "she flat-out stated no. ... So with her taking that position, I don't believe that she'll be against labor, not only organized labor but the labor force in general."


Several travel industry veterans predicted Lingle would be good for Hawai'i's tourism industry, although some had concerns about the potential effects of her plans for keeping tabs on the industry.

Many noted that Lingle was a key supporter of tourism while mayor of Maui. "She funded the Maui Visitors Bureau more than any other county has done, and she did a lot for the county's infrastructure," said Keith Vieira, senior vice president and director of operations, Hawai'i and French Polynesia, with Starwood Hotels &

Resorts Worldwide and a board member of the Hawai'i Tourism Authority.

During her campaign, Lingle said she would create a cabinet-level position focused on tourism. Several tourism officials approve of the plan, saying it is important to have an industry liaison with the governor including the tourism authority.

Others are more cautious about how such a position would work in practice.

Rex Johnson, the authority's chief executive officer, said he believes the authority already is a cabinet-level position, "although not exactly a cabinet officer." Johnson noted that the heads of the departments of Transportation, Land and Natural Resources, and Business, Economic Development and Tourism already sit on the authority, and that he is "always available to come to cabinet meetings to further the goals of tourism."

Lingle has said the tourism authority will not get any more money until it establishes "sufficient financial controls and measures of performance."

A number of tourism officials said they agreed with her position, although many — including several authority board members — said the authority is in the process of developing such controls and measures.

"We're already deeply involved in changing our organization to make it more responsive to, say, market needs, and more accountable to the state government, and we want to make sure that the governor and her staff are well aware of all those changes," Johnson said.

Chuck Gee, dean emeritus of the School of Travel Industry Management at the University of Hawai'i-Manoa, said a cabinet-level position for Hawai'i tourism might help the industry overcome the love-hate attitude of the public.

"If you do make tourism into a cabinet-level position, then it has to interact with all the other positions (in the cabinet), and that means tourism will probably feel more integrated with other needs of our state — with not only economic development, but also social welfare programs and, as it ties in with education, with the needs of labor and so forth.

"... Tourism has become too mature an industry, and it is too important to our economic well-being, to remain a stand-alone industry."


The healthcare industry also could see significant change under Lingle. Cayetano supported regulation of health insurance premiums, but Lingle has expressed less interest in regulation and more in stimulating competition through incentives. That has some people in the medical community concerned.

"We are obviously very interested in seeing who she appoints as insurance commissioner," said

Arlene Meyers, a Wahiawa pediatrician and attorney and president of the Hawaii Coalition For Health, a physicians and consumers advocacy group.

It is the insurance commissioner who will be required to enforce health insurance regulation and have the power to veto rate increases. Meyers said Lingle's appointments to run the state Department of Labor and Industrial Relations, which oversees workers compensation and approves the entrance of new health plans into the marketplace, also will be closely watched.

Some of the state's health insurers also are closely watching Lingle for her stance on regulation.

"The healthcare industry is one of the most heavily regulated industries, so any relief from some of the regulations would be welcome," said Chris Pablo, a spokesman for Kaiser Permanente, the state's biggest health maintenance organization.

Cliff Cisco, a senior vice president for the Hawaii Medical Service Association, the state's largest health insurance company, said: "We look forward to working with the new administration. ... We continue to work with the insurance division to implement the new law and will wait an see how the new administration will implement it."


Hawai'i developers also could gain under Lingle, who supported the Ko Olina tax-credit bill first introduced in this year's legislative session. The bill, which Lingle has called a dynamic idea to create jobs, build public facilities and stimulate the economy, would pay for construction of an aquarium and marine science center at the West O'ahu resort.

Developer Jeff Stone, who had been involved in efforts to develop Ko Olina under the proposed tax bill, said Lingle's election is a big boost for backers of that bill.

Stone said he had conversations with potential investors, including trustees of The Harry & Jeanette Weinberg Foundation, regional executives from Marriott International, the president of Brookfield Homes' California subsidiary and directors of Massachusetts Mutual Life Insurance.

"Every single one of these people were very excited about the future of our state, and really believe that this is a large enough change to make a difference," Stone said. "I would say this election, from a business standpoint, is the most crucial period Hawai'i has gone through in the last decade. We were all waiting for some good strong leadership to take control, and we are very happy with the results."

Camp, the Hawai'i chairwoman of the Urban Land Institute and past president of the Hawai'i Developers' Council, said the real estate community is generally encouraged by Lingle's victory. But she added that many industry executives are reserving judgement until Lingle makes key department-head appointments.

"It's really at that policy level," Camp said, "that you can start to see that business is not as usual."

Advertiser reporters Frank Cho, Andrew Gomes and Susan Hooper contributed to this story. Reach John Duchemin by e-mail at jduchemin@honoluluadvertiser.com or by phone at 525-8062.