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The Honolulu Advertiser
Posted on: Monday, May 24, 2010

Hawaii economic agency slow to spend stimulus



By Sean Hao
Advertiser Staff Writer

Hawai'i received $1.3 billion of federal stimulus money as of March 30 and has spent $584 million. The cash was credited with saving or creating 2,566 jobs in the first quarter.

Congress approved the stimulus money in February 2009 and intended it to be used on "shovel-ready" projects to help jump-start the nation's stalled economy. Excluding entitlement programs such as food stamps and jobless benefits, Hawai'i agencies, on average, have spent 21 percent of the funds allotted. However, some agencies have lagged in their efforts to get the money out.

One of those is the agency charged with watching over the economy, the Department of Business, Economic Development and Tourism, or DBEDT.

So far, DBEDT has received $37.3 million in stimulus money, but spent only $446,964, or 2 percent. The money created 12 jobs.

DBEDT officials say they have been slow to spend the money in part because they want to use it to advance a specific goal cutting the state's dependence on crude oil. That has meant the agency is moving more slowly to make sure the money is used wisely.

"We are in the process of transforming our energy system, so we needed to take this funding and not waste it quickly by just getting it out there," said Ted Peck, DBEDT's energy administrator.

The money in question is aimed at projects that increase energy efficiency and reduce reliance on imported energy. That includes photovoltaic rooftop power systems, efficiency retrofits for buildings, and solar water heaters. In Hawai'i that money also is aimed at projects meant to "transform" the state's energy sector by spurring the development of an underwater power cable, and investments in electric vehicles and chargers.

Much of that transformation has yet to occur.

STRICT DEADLINES

Peck acknowledged that some projects are behind schedule but blamed changing federal guidelines, sluggish state procurement processes and the complex nature of Hawai'i's plan- ned energy projects for the delays.

"We're not last to get our money out but we're certainly not first," he said. "A number of states did a very simple set of programs they put all their chips in one type of project or one type of program."

States face strict deadlines for spending stimulus money, or risk losing it.

Last year, the state Department of Agriculture forfeited $119,826 in federal stimulus aquaculture grants that it was unable to use before a federal deadline.

Overall, Hawai'i is expected to get $1.29 billion in stimulus money. That includes money for capital improvement projects, tax breaks, unemployment insurance and food stamps.

Despite the large infusion of federal money that started last summer, there were 14,740 fewer jobs statewide during the first quarter versus the first three months of 2009, according to the University of Hawai'i Economic Research Organization.

Most of the money awarded to DBEDT comes from two main grants, including $25.9 million for energy programs and $9.6 million for energy efficiency programs.

The energy programs include:

• About $5 million for consultants and studies of proposed undersea cables to transfer wind-generated electricity from Lāna'i and Moloka'i to O'ahu.

• About $4 million for electric vehicle and charger system rebates and grants.

Energy efficiency programs include:

• About $3 million for solar water heaters for Hawaiian homesteads residences.

• About $3 million for a state rooftop photovoltaic power system.

Contracts for the two energy-efficency projects have been awarded, according to DBEDT. Additionally, there are 10 energy program deals in place involving $16.7 million, according to DBEDT.

Eight of the deals awarded were to other local government agencies including the University of Hawai'i. There is also a recently awarded $2.99 million contract with AECOM Technical Services Inc. to conduct environmental studies for the undersea cable.

ELECTRIC CARS DUE

While contracts have been awarded, the money hasn't been spent yet.

In addition, DBEDT has more than a dozen other contracts that need to be awarded by the end of September and spent by May 2012. The agency also needs to award $3 million in grants for electric vehicle charger systems before Sept. 30. DBEDT plans to solicit applications for those grants in mid-June.

Those grants, along with approximately 200 electric vehicle purchase rebates worth $4,500 each, and $500 charger rebates also must be spent by the end of April 2022. The rebates, which can be combined with a $7,500 federal tax incentive, are aimed at stimulating demand for electric vehicles.

Just when electrical vehicles will arrive in volume in Hawai'i remains unclear. However, one major manufacturer Nissan Motor Co. has said Hawai'i will be one of the initial markets next year to receive the highly anticipated Leaf, a mass-produced electric car. The company expects to produce about 50,000 Leafs during the first year.

Projects such as the undersea power cable are a good use of stimulus money, said Jennifer Sabas, U.S. Sen. Daniel K. Inouye's chief of staff in Honolulu.

"If we are going to succeed in the Hawai'i clean energy (initiative), that is a key requirement to have a renewable resource on O'ahu," she said. "These (stimulus) dollars provided the perfect opportunity for the cash-strapped state to do this. So we will try to push them to try to keep it moving forward."

However, Sabas also expressed concern that DBEDT isn't deploying money quickly enough to create jobs that are needed now.

"It just doesn't seem like (DBEDT) has moved forward with as much speed as I think we would like them to, especially even on the efficiency" projects, Sabas said.

RULES 'TUGGING'

DBEDT should be able to spend all stimulus money in a timely fashion, Peck said. The agency is prepared to pump unused money into easier-to-accomplish energy efficiency projects, if needed, to ensure that stimulus money is not forfeited back to the federal government.

"I'm not going to let that happen," Peck said. "We're committed to not spending this money ill-advisedly, so we're going to make sure we maximize the benefit and get it out in a timely fashion."

Most state agencies face challenges spending stimulus money on time and efficiently, said Mark Anderson, the state's stimulus funding coordinator. That's because it isn't easy to spend money both quickly and efficiently.

The stimulus program "has the job creation aspect to it and they want us to spend the money quickly," Anderson said. "At the same time, there's this unprecedented transparency effort under way, and they want us to take all actions to avoid waste, fraud and abuse.

"These requirements are sometimes tugging at each other."

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