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The Honolulu Advertiser
Posted on: Friday, May 30, 2003

Lingle signs Ko Olina tax break

By Gordon Y.K. Pang
Advertiser Capitol Bureau

A bill signed yesterday by Gov. Linda Lingle gives developers of the Ko Olina Resort and Marina up to $75 million in tax credits to help stimulate the economy along the Wai'anae Coast.

Gov. Linda Lingle signed into law a bill awarding tax credits for Ko Olina developers.

Associated Press

The credits will apply to an entity that spends "qualified costs" that will go toward development of "a world-class aquarium and marine science and mammal research facility at the Ko Olina Resort and Marina."

That entity is expected to be made up of the various landowners and developers who make up the burgeoning Ko Olina Resort under the leadership of Jeff Stone, Ko Olina's master developer. It would then be able to apply those credits to income, hotel-room tax or other taxes tied to individual projects.

The plan is believed to be the largest ever dedicated to helping a single project. The subject of two years of debate, it moved out of the Legislature last year only to be vetoed by former Gov. Ben Cayetano who, like other critics, opposed the credits as too generous a break for one project.

This year, with Lingle's backing, Senate Bill 377 passed the Senate 20-3 and the House 36-15.

Lingle and other supporters yesterday defended the action as vital, not for any particular business interest, but for an entire community.

"If it didn't favor this district, I wouldn't be supporting it," Lingle said during a signing ceremony held at the JW Marriott Ihilani Resort & Spa. "I don't think many others would either. It's not just a tax credit for any project anywhere in the state."

Stone yesterday promised that the tax credits would help create an aquarium that would be the catalyst for development that will infuse the economy with more than $700 million in new construction, as well as create 10,000 temporary construction jobs and 2,100 permanent jobs. That also would translate to about $186 million in tax revenues, he said.

"We have multiple projects that this attraction will create," Stone said. "It's not unlike any other attraction that created a stimulus over the years, like the convention centers, the zoos, and the aquariums, beaches and parks that the state backed."

Projections show that the aquarium would draw 400,000 visitors annually, Stone said.

Ko Olina is expected to formally announce in the next 60 to 90 days an agreement with partners that include the Ritz-Carlton Hotel Co. chain for a second hotel to complement the 400-room Ihilani, which opened in December 1993, he said.

There also is discussion with an unnamed party for a second vacation club or time-share facility to be built near one of Ko Olina's four lagoons, he said.

Marriott in January opened a 103-unit, first phase of its 750-unit Ko Olina Beach Club time-share project.

"Our goal is to create our version of Wailea," Stone said, designed to attract a visitor base more affluent than the average Waikiki visitor. He said he expects all three projects to be completed by 2007.

Lingle and Stone also announced yesterday the establishment of a $2.5 million Ko Olina Training Fund to be used to help Leeward-area residents gain vocational skills. Both institutions and individuals are being encouraged to apply for the money, Lingle said.

Decisions on how the money will be awarded will be up to a five-member board comprised of two people from the governor's office, two from Ko Olina Charities and one from the Harry and Jeanette Weinberg Foundation, which owns the land on which the aquarium would be built and other Ko Olina property.

An initial plan for Ko Olina developers to purchase Makaha Resort and establish it as a training and educational facility for up to six years has been scrapped.

Todd Apo, vice president of the Ko Olina Community Association, said that although Ko Olina developers still are pursuing purchase of the resort, it is no longer being considered for a training facility.

Lingle's proviso that Ko Olina would have to set up a job-training component to win her support is being satisfied through the establishment of the training fund, Apo said. He noted that the proviso is separate from the bill, which did not require purchase of Makaha Resort or using it as a training facility.

Ko Olina developers have identified two consultants to design the aquarium. An operator has not been chosen.

The new law requires that after 17 years of operation, half of the net operating income from the aquarium be given to the state.

Expected to be either a component or complement to the aquarium is the Kewalo Basin Marine Mammal Laboratory, which is affiliated with the University of Hawai'i at Manoa.

Lingle has been among the biggest critics of tax credits, but she insists that the Ko Olina program is different because it states specifically that the credits handed out total no more than $7.5 million a year for 10 years. Others, such as those given for construction or high-tech job creation, she said, are open-ended.

"Our budget cannot continue to adjust to the unknown," she said. "This tax credit is very defined."

Some skeptics have said the tax credits are unnecessary because they would help developers who would be building at Ko Olina regardless of the tax benefit.

But Apo noted that the Hilton hotel chain had reached a tentative agreement to develop in Ko Olina last year that hinged on passage of the tax credits bill and that the corporation dropped out of that agreement shortly after Cayetano vetoed the legislation.

Some lawmakers, meanwhile, opposed the tax credits on the grounds that resorts provide primarily low-paying job opportunities that won't be able to support families.

Sen. Colleen Hanabusa, D-21st (Nanakuli, Makaha), among the major sponsors of the legislation, said she embraced the idea of using a world-class aquarium to draw visitors to the resort destination because she didn't want to see gambling there as suggested by others, including Cayetano.

She described the aquarium as "the only way we're going to keep Ko Olina from being nothing more than a hotel with a couple of condos and a golf course."

She added: "This is about hope, this is about the future. This is about giving the people of this coast an opportunity to do it on their own."