Developer Jeff Stone has canceled a plan to build an aquarium financed by a state tax credit at Ko Olina Resort & Marina, and has agreed to return the controversial $75 million credit.

Stone said the credit's objective — to stimulate economic development at the resort and surrounding West O'ahu community — has been accomplished by market forces.

"You don't really need an attraction (at Ko Olina) anymore," he said. "Our feeling was, 'Give the money back.' "

Stone said he agreed to forgo the credit after being asked by newly installed Senate President Colleen Hanabusa, who sponsored a bill five years ago that led to the tax credit.

Hanabusa, in a speech during the Legislature's opening ceremony yesterday, suggested that the credit be redirected to educate recruits for Hawai'i's hotel industry, and support further development of a media and film industry.

"I would like to see the tax credit redirected and continue to support the West side," said Hanabusa, D-21st (Nanakuli, Makaha). "However, it is up to the Legislature, along with the governor, to make this decision."

Senate Tourism Committee Vice Chairwoman Donna Mercado Kim, D-14th (Halawa, Moanalua, Kamehameha Heights), will lead an effort to redefine and redirect the tax credit, according to Hanabusa.

CREDIT TO BE REDIRECTED

Gov. Linda Lingle, who spoke with Hanabusa on Tuesday night about the Ko Olina tax credit, has her own plan to redirect the credit toward economic development on the Leeward Coast that she will detail in her State of the State address on Monday.

The governor wants any business willing to locate in the region to be able to take advantage of the credit. "So it's not taking it away from anyone, it's simply opening it up to anybody who wants to go out and create jobs in the region," Lingle said yesterday.

"That was the original intent of that tax credit. It wasn't just to favor one company or another, it wasn't just for really one kind of project. It was because we thought by doing that it would create jobs. And that's what this approach I'm suggesting would do."

The aquarium tax credit was established primarily to build a world-class aquarium to bring more visitors, jobs and development to Ko Olina, but also covered marine science and sports training projects at the resort, including the Dolphin Institute and NFL Pro Bowl facilities.

Stone's West Honolulu Attractions LLC to date has spent about $5 million on the aquarium and other qualified projects since the tax credit was authorized by Lingle in 2003.

Stone said he will not claim any credit for what has been spent. The developer also said he will continue funding a $2.5 million grant program to help train people to work in the tourism industry.

The training fund was a condition of Lingle's approval of the credit, and a Stone nonprofit has spent about $1.5 million in scholarship awards to roughly 1,000 people, including many Leeward O'ahu residents.

Stone had until 2009 to spend up to $75 million on the aquarium and other facilities to qualify for the tax credit, which could have been redeemed starting this year at up to $7.5 million a year.

The death of the publicly financed aquarium ends five years of debate over using state tax credit for the troubled project initially projected to open in 2005.

Legislation for the aquarium tax credit was introduced in 2002 by Hanabusa and Sen. Sam Slom, R-8th (Kahala, Hawai'i Kai).

The Legislature passed the bill, but then-Gov. Ben Cayetano vetoed it on grounds that the tax credit would mainly benefit one interest group and could be spent on projects defined too broadly. Cayetano also argued at the time that hotel, condo and time-share developers would build at Ko Olina without the promise of a taxpayer-financed aquarium.

Hanabusa, an attorney, sued Cayetano over the veto and reintroduced the bill in January 2003. The Legislature approved it that year and it was signed by Lingle.

PROGRESS ON PROJECT

Last year, many lawmakers questioning whether the aquarium would be built introduced a bill to repeal the tax credit. The bill was defeated after Ko Olina officials testified that the project was making significant progress. The officials said the project had run into delays caused by permitting difficulties and design changes, but was moving forward.

Yesterday, Stone said the planning for the project was solid and it could have been completed if he were to make use of the tax credit. He also defended the need for the tax credit when it was sought. "In 2001, the state was still in bad shape," he said. "When we got it, we were on our butts. We had bought a bankrupt resort."

Stone with partners purchased the stalled Ko Olina resort in 1999. That year, tax revenue generated by the resort was $3 million, Stone said. Since then, hundreds of homes, condominiums and time-share units have been built. A second hotel is also planned.

The resort now generates $25 million in annual taxes, Stone said, and six construction cranes are working on $500 million worth of condo and time-share projects.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.