By Ken Ige, Star-Bulletin
A new study says tax revenues will cover the
operating loss of the Hawaii Convention Center

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A study asks about the
Hawai'i Convention Center...

But will it pay?

By Russ Lynch

Star-Bulletin

IN its inaugural year, the Hawaii Convention Center will attract a net tax gain of about $3.4 million for the state, a study projects.

Although the convention center itself, like most of its type, will operate at a loss, the study by an international economic analysis group confirms what the center's backers have always contended -- it will more than pay for itself by new taxes pouring into state coffers from spending by conventioneers.

The WEFA Group Inc. study, which was funded by convention center supporters, found that even in its first year, with a few pre-opening events and the conventions booked for after the official opening in June, the $350 million center will generate a net tax profit to the state of $3.4 million.

That tax gain comes after paying interest of $23 million on the center's development loans and after a net loss of $4.9 million from the operations of the center itself, the study says.

The interest payments are almost covered by a $21.2 million contribution from the hotel room tax, the one-point share of the six percent tax that is earmarked by law for convention center debt service. Center supporters note that that tax is paid by visitors to Hawaii and does not come out of local taxpayers' pockets.

The WEFA study, part of a broader work done for the World Travel & Tourism Council to be published next month, shows the state's gain will come from the tax income generated in the hotels, restaurants and other businesses used by conventioneers and their families.

The 1998 schedule of 17 meetings either already held or booked for the rest of the year will generate $182.7 million in visitor spending, adding $119.9 million to the gross state product and financing 1,809 jobs, the study says.

The added business generated by the center will produce $5.7 million in taxes this year from transactions such as restaurant and retail spending.

The share of personal income taxes at state and federal levels paid by Hawaii residents from the part of their earnings that come from conventioneers' spending will come to $14.5 million and the conventioneers will generate $1.8 million in state and federal income taxes.

Take out the federal share and the amount of Hawaii tax generated still comes to $10.2 million.

The "net net" for Hawaii is $3.4 million this year alone, said Richard Kelley, chairman of Outrigger Hotels & Resorts and a leader of the several dozen local business people who joined the Hawaii Convention Park Council in paying for the study.

Looking ahead to 2003, the tax income to the state is estimated at $11.2 million for the year, the study says.

"It's a helluva deal," Kelley said. "It is vitally important that we look at the total state impact of the convention center," he said. "The box itself will appear to lose money, but once you count all of the tax revenues that will be generated at every level of business it becomes a profit-maker and a job-creator right from the first year."

Economists caution that much of the calculation depends on just how the figures for local spending by convention attendees are calculated and there are no current reliable figures on that. The latest number is a 1995 estimate by the Hawaii Visitors & Convention Bureau.

Kelley acknowledged that but said the WEFA calculations were done on a conservative basis, so the results may underestimate spending.