Panel offers mixed
bag for tourism

Task force ideas include
higher taxes and more money
for promotion

By Rob Perez
Star-Bulletin

The tourism industry could finally be getting what it has been seeking for years: a dedicated source of funding to promote Hawaii.

But if the Economic Revitalization Task Force has its way, the industry also could be saddled with something it doesn't want: higher taxes for tourists.

That mixed bag was part of the recommendations the state Economic Revitalization Task Force made yesterday as part of its far-reaching plan to reverse Hawaii's economic slump.

The panel is proposing that the state boost the transient accommodations tax, essentially a hotel-room tax, from 6 percent to 7 percent and devote 3 percentage points to tourism marketing annually.

At current tourism levels, that would translate to roughly $60 million, significantly more than what is allocated now.

A state board of public and private sector members would be established to oversee the marketing program.

The proposal would put an end to the practice of using state general funds -- roughly $25 million this year -- for the Hawaii Visitors and Convention Bureau, though the HVCB would be able to bid for the marketing contract.

The proposal would provide more consistency to the state's marketing and eliminate what many say is an unpredictable and inefficient process: going to the Legislature each year to seek funding.

"That's a very positive carrot that's being held out," said Murray Towill, president of the Hawaii Hotel Association.

Not so positive for the industry, which generates about one-third of Hawaii's jobs, is the higher tax burden tourists will face.

Not only would the hotel tax be raised, but the task force is recommending increasing the general excise tax, which tourists pay a big chunk of, from 4 percent to 5.35 percent.

The message that Hawaii wants tourists to pay more will spread through the trade press and other avenues, industry officials say.

"We're going to get beaten up for it," said David Carey, president of Outrigger Hotels and Resorts. "There's real public relations dangers."

But Carey and others said Hawaii may be able to offset that message with the $60 million promotion program, increasing visitor traffic to the islands.

Tony Vericella, HVCB president, said he isn't worried about the prospect of losing state funding. If the task force idea is adopted, he said he expects the agency to win the marketing contract.

Vericella said he was pleased with the task force package despite the proposed tax increases. "Overall, it's very positive," he said.

Major proposals TAXES Reduce top personal income tax rate from 10% to 7% in first year, to 6% after three years. Reduce other rates proportionately. Bottom line: $400 million tax reduction after three years. Provide nonrefundable tax credit for those with adjusted gross incomes below $20,000 and limit current $27 food tax credit to low-income people. Reduce pyramiding (taxes on taxes) of General Excise Tax. Bottom line: $158 million reduction annually. Corporate income tax rates cut in half. Bottom line: $40 million reduction annually. GET raised from 4 percent to 5.35 percent. Bottom line: Additional $260 million annually. TOURISM Raise Transient Accommodations Tax from 6% to 7%. Bottom line: Additional $20 million annually (based on current levels of tourism). Dedicate 3 percentage points of TAT for tourism marketing. Bottom line: $60 million annually. Broaden TAT base to include time-share condos. Establish executive board of private, public sector members to oversee marketing, with no more than 10 percent of budget used for administration. $25 million in general funds no longer goes to Hawaii Convention and Visitors Bureau, though HCVB will be able to bid on marketing contract. Form state/county group to address revitalization of Waikiki. Establish 10-year goal of securing major league sports franchise. REGULATORY CLIMATE Set time limit on process for permits, licenses and other approvals; approval automatically granted if time limit lapses with no action. Eliminate state Land Use Commission, with responsibilities transferred to other state agencies or counties. Board of Land and Natural Resources responsible for conservation district boundaries. Prohibit worker's compensation claims related to stress from appropriate disciplinary actions. UNIVERSITY OF HAWAII Restructure into a quasi-public corporation with independent accountability and power to own and manage lands, funds and resources. Explore acquiring East-West Center. Establish an advisory board of distinguished individuals from around the world, with the aim to expand university horizons, especially in Asia-Pacific region. GOVERNMENT EFFICIENCY Create government accounting and budgeting system based on generally accepted accounting principles, allowing for more accountability of spending. Provide clear measure of actual costs of providing government services. Reduce duplication between state and counties. Set up system in which government can use the public or private sector to deliver a service depending on who can deliver it most efficiently, effectively and economically. EDUCATION Replace elected statewide Board of Education with governor-appointed boards for each county. Maintain responsibility for overall funding, basic academic standards and guidelines with state, but give schools responsibility for respective budgets. Have a statewide, governor-appointed superintendent, who would, with the boards' concurrence, appoint county superintendents. Establish goal of second-language competency for all high school graduates by year 2004. Establish computer literacy for all 8th graders by year 2000, with private sector committing $10 million for computer network in schools statewide. Adjust curriculum to instill strong focus on Pacific Rim in all schools. Within existing labor-management structure, provide pay incentives pegged to performance measures for principals/vice principals. Establish programs to encourage parent participation. Maintain school-to-work program (preparing students for careers) with private funding after federal funding ends in 1999.

Mortimer: Ideas give
UH more autonomy

By Pat Omandam
Star-Bulletin

University of Hawaii President Kenneth P. Mortimer says recommendations by the Economic Revitalization Task Force give the university a chance to achieve its potential.

Mortimer has publicly called for more university autonomy, which could result from the recommendation that the UH become a quasi-public corporation.

The task force hopes to help drive the local economy by seeking to position the UH as the preeminent institution in the world in key areas.

Mortimer said that as a member of the task force he was pleased with the group's support and consensus that the UH be given more autonomy. One cornerstone is the recommendation that UH consider acquiring the East-West Center. In recent years, UH and center officials have studied ways to strengthen the center as federal funding has diminished.

The university, Mortimer said, has been discussing more cooperative efforts with retiring center President Kenji Sumida. Mortimer believes the task force believed there was a need to speed up those talks.

Another plan is for UH to establish an international "Board of Visitors" that would advise the university as it broadens its influence in the Asia-Pacific Rim.

"We believe an advisory committee of international citizens in substantial positions of influence in their countries would be a very effective advisory group as we seek to develop a strategic focus," Mortimer said.

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BOE head takes issue with
task force proposals

By Debra Barayuga
Star-Bulletin

Establishing four county school boards could create more problems for the state rather than revitalize the economy or streamline government, according to the chairwoman of the Board of Education.

The task force recommended setting up separate school boards. But that would require each to have a superintendent, personnel, staff support and facilities, said Chairwoman Karen Knudsen, also a member of the education working group that submitted ideas to the task force.

"When you have four boards competing for pork money and facilities money, there will be competition," Knudsen said. "I'm not sure it's in the best interests of the state."

The suggestions proposed by the task force differed considerably from what the workingml6 Karen

Knudsen group had come up with, she said.

Knudsen suggested that if there is to be a focus on curriculum, it should be far more detailed than zeroing in on second language competency. "I'm all for language, but I would increase that to more than the need for a second language."

One of the radical proposals that came up in working group discussions that merits discussion was having principals removed from the Hawaii Government Employees Association, she said.

Hawaii is the only state with principals in a union. "They are management and in most states, management are not union members," Knudsen said.

The Hawaii Parent Teacher Student Association has been pushing for parental involvement at all levels, one issue the task force proposes schools should focus on.

Parents are encouraged to participate not just as volunteers, but to serve on committees and school/community-based management councils and provide input to principals, said Susan St. Aubin, president of the Hawaii Parent Teacher Student Association.

St. Aubin supports the task force's low tolerance approach to discipline in public schools. "If the environment is not conducive to learning, they're not going to learn," she said.

Kids need to know they're safe at school and teachers shouldn't have to spend class time disciplining, she said.

Task force urges
biggest tax cut ever

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Read the full text of the task force
recommendations in our Specials section.