Sunday, May 12, 2002

Jeff Stone, developer of Ko Olina, showed the view from the lanai of the presidential suite at the JW Marriott Ihilani Resort and Spa on April 29.

Ko Olina resort
lines up support

Developers hope to lobby
the governor against vetoing
$75 million in tax credits

By Russ Lynch

Ko Olina developer Jeff Stone will meet with Gov. Ben Cayetano tomorrow to present a proposal and some signed agreements for the construction of a new hotel and a vacation resort at the 600-acre West Oahu property, the Star-Bulletin has learned.

The new construction includes plans for an Embassy Suites hotel and a new vacation club, similar to a timeshare operation, in a commercial resort called the Marina Village.

Representatives of the Hilton Corp. and IntraWest Resort Corp., a $2 billion-assets company based in Vancouver, B.C., are expected to back Ko Olina officials in an effort to persuade the governor not to veto a 10-year, $75 million tax credit the state Legislature approved to help Stone build a $100 million aquarium, sources said.

Representatives of the Harry & Jeanette Weinberg Foundation will join the group to tell Cayetano that the foundation is committing land it owns at Ko Olina to the aquarium project.

Last week, the governor said he was inclined to veto the tax credit, which would relieve Ko Olina and the operators of the aquarium-village-hotel complex of having to pay general excise or transient accommodations taxes to the state for a decade starting in 2004.

The legislation passed this year set $75 million as the maximum taxes to be forgiven over the 10 years that the development is taking place. Stone's group says that will be more than made up for by some $186 million in new taxes that the project will generate for the state over the same period.

"I have been asked to listen to a briefing by the proponents of the Ko Olina tax credits and I will reserve judgment until I've had that briefing," Cayetano said Tuesday. "If I had to make a decision today, I would veto it, but I have not had that briefing yet so I'll sit down and listen to what they have to say."

Stone has said the aquarium would cost $100 million to build. Sources say the new plans for construction over the next 10 years would include an additional $300 million in hotel construction, $300 million for new timeshare developments, and some $15 million in commercial developments.

That adds up to $715 million and the Ko Olina Co. has estimated the work could generate nearly 11,000 new construction jobs while the work is being done and more than 2,000 permanent jobs once the projects are completed.

Stone recently said that getting a clear commitment from such top-level investors would be the key to getting approval from the governor.

Opponents of the tax credit in the Legislature raised concerns over the fairness of earmarked tax breaks and whether the development might be a precursor to gambling.

State Tax Director Marie Okamura said her department had "very serious concerns" about the proposed legislation.

"Unlike other credits that are targeted at a specific industry, this credit will largely benefit a handful of taxpayers who have already secured a position in this particular development site," Okamura said.

"We do not feel fairness and equity can permit such a generous tax credit for such an exclusive group of taxpayers."

Rep. Jim Rath (R, Kona) said neighbor island resorts were built without these tax credits. Moreover, Rath said, it creates government-subsidized competition within the private industry.

Stone told reporters recently that while he believes the aquarium would make money by itself, a mix of resort operations, shops and other activities with the aquarium would create a much greater economic effect, with each part generating business for the other parts.

Hilton, which operates the Embassy Suites brand, has 500 hotels worldwide with nearly 150,000 rooms. In Hawaii, it owns and operates the Hilton Hawaiian Village Beach Resort and Spa in Waikiki and the Hilton Waikoloa Village on the Big Island.

IntraWest has resorts and golf courses across North America through its timeshare operation, Club IntraWest, and operates five resort villages, including one in France.

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