HI. TECH
Act 221 debate should be preparation for criticism of UH med school
By John Duchemin
Advertiser Staff Writer
If anything useful emerges from the yearlong debate over the merits of the Act 221 tax credit, it could be that the Hawai'i high-tech community will be better prepared for criticism.
When Act 221 became part of the commercial and political vernacular of Hawai'i last year, people interested in creating a high-tech economy had something concrete to debate. Instead of having to argue over the same basic idea — that Hawai'i should try to create a venture-capital-driven, entrepreneurial economy featuring cutting-edge research — advocates and skeptics could sink their teeth into real matter.
Should the 100-percent investment credits and 20-percent research credits in Act 221 be usable by movie productions? Should the tax department set tighter rules? Was Act 221 being misused by corporate scam artists, and would this tarnish Hawai'i's reputation as a site for high-tech startups?
Somewhere this conceptual debate switched into an outright conflict pitting those such as the Hawai'i Technology Trade Association, which would defend Act 221 from all comers, against a group including the Lingle administration, that was highly critical of the act's wording and demanded major changes.
Some high-tech advocates have mourned the divisive nature of this scrutiny, which has split the business community into Act 221 reformists and preservationists. But criticism, both legitimate and not, often happens when one strikes out in a bold new direction, and especially when one tries to bring along the rest of Hawai'i.
The mistakes will be public, even if they're just part of the learning curve, and they can multiply until political and commercial momentum turns against the new direction. With Act 221, the backlash started in 2001, when investors in the surf movie "Blue Crush" took advantage of Act 221's liberal language to claim millions of dollars of credits. Now, some would argue that Act 221 is as much of a short-term irritant as it is a long-term benefit to the economy.
High-tech leaders, having experienced this phenomenon with their pet tax credit, should be aware that their next major initiative will be equally vulnerable to criticism.
The new University of Hawai'i medical campus being built in Kaka'ako is the boldest physical expression of the state's high-tech aspirations.
Financed by $150 million in state bonds, the school is supposed to attract medical researchers, private endowment money and laboratory construction, and eventually spawn a legitimate biotechnology industry that could rival places such as San Diego.
Problem is, everyone seems to be waiting until the buildings are built. The university has announced no major private sponsorship, which was supposed to match the state's appropriation. Although nearby property owner Kamehameha Schools wants to build a lab-ready office building, no major pharmaceutical companies have committed to going in. While UH medical school officials hope to dramatically increase research grants and attract top faculty, they acknowledge that building a top-tier medical school will take many more years than the construction process.
In other words, the state has sunk major money in a project that is far from certain. And the payoff, if it comes, is years, perhaps decades, away. Yet the technology community is depending on the new medical school as a major part of its future.
If the payoff doesn't come, or is delayed beyond the patience of Hawai'i residents, expect the chorus of criticism to grow exponentially louder than anything experienced during the Act 221 debates.
Some criticism undoubtedly will be shortsighted nay-saying, but some will be legitimate arguments. The technology community would be wise to prepare some convincing answers to both.
Reach John Duchemin by e-mail at jduchemin@honoluluadvertiser.com or by phone at 525-8062.
