LIHU'E, Kaua'i — Costco's plan to build a store and gas station on Kaua'i has been derailed, at least temporarily, amid a statewide increase in labor costs and shortage of construction materials.

Costco president Jeff Brotman said yesterday that construction bids for the 150,000-square-foot store and gas station on 15 acres at Kukui Grove Village came in at 30 percent more than the firm anticipated — far more than the company feels it can pay.

"It's way over what we can afford. We will never build if it continues at this level," Brotman said.

The huge demand for material to rebuild cities damaged in Hurricanes Katrina and Rita has exacerbated construction supply shortages in Hawai'i. Meanwhile, the cost of hiring some union carpenters has just topped $50 per hour.

Kaua'i Mayor Bryan Baptiste said the county faces a shock almost every time it opens a bid on a construction project.

"All the contracts that we are opening now are 150 to 200 percent of what we expected," Baptiste said.

"It's supply and demand. There is more work than the industry can handle right now."

That's a story being replayed on all Islands.

"It's not only happening on Kaua'i, it's happening throughout our state," said Karen Nakamura, CEO of the Building Industry Association-Hawaii. "The reason is the high cost of doing business. Everything has gone up."

The state Department of Labor and Industrial Relations last month increased the minimum hourly wage for many journeymen carpenters to $32.95. With benefits, the increase comes to $50.25 per hour, Nakamura said.

"The increase in wages comes whether you are union or non-union," she said. "Because in this market, in order to keep your workers, you have to pay prevailing wages."

Hurricanes Katrina and Rita helped drive up shipping and fuel surcharges as well, Nakamura said, and suppliers are imposing quotas on how much material states can receive.

"If you have reached your quota, they're not sending you any more material," Nakamura said. "You have to wait until next month."

Kaua'i's rapidly expanding economy has made it difficult for businesses to find employees and pushed up the cost of living so high that new workers can't afford to move to the island, Leroy Laney, First Hawaiian Bank economic consultant, said last week.

The Kaua'i Costco facility received planning commission permits earlier this year and had hoped to start construction this year.

Costco president Brotman said that some of the construction bids were "crazy numbers." In some cases, it would be far less expensive to fly in crews from the Mainland and house them during construction than to pay the bid prices, he said.

The company has not given up and is reviewing a range of options, he said.

"If we could build a building that met our cost parameters, we could proceed. But it's not looking good," Brotman said.

The Lihu'e Costco would be the sixth in the state, joining three stores on O'ahu and one each on Maui and in Kona. Brotman said the company continues to look at other Hawai'i sites, whose location he would not disclose.

Reach Jan TenBruggencate at jant@honoluluadvertiser.com and Dan Nakaso at dnakaso@honoluluadvertiser.com.