Friday, December 10, 1999

State of Hawaii

State revenue
panel optimistic
about coming
year’s economy

'Virtually all the important
economic indicators are positive,'
says the head of the Hawaii
Council on Revenues

By Pat Omandam


All signs point to a more robust economy next year in Hawaii, according to the head of the state Council on Revenues.

But another expert is more cautious.

"I think that it's a little too soon to break open the champagne," said Lowell Kalapa of the Tax Foundation of Hawaii. "Things are still a little bit tenuous out there."

Council Chairman Michael A. Sklarz said all key economic indicators used to prepare quarterly revenue estimates for state government are improving.

Among them are the number of visitor arrivals, the strong Japanese yen, the rising number of construction permits and the continued recovery of the real estate market.

"So what we're seeing is, virtually all the important economic indicators are positive for the first time I can remember," Sklarz said. "I think that in itself is probably significant."

Sandra Moreno of the Hawaii Visitors and Convention Bureau told the council that the agency has neared its goal for convention bookings next year.

The goal was for 24 bookings in 2000, and so far there are 23, with six more listed as tentative. The bureau wants 40 conventions a year. Each one averages 6,000 to 7,000 people and lasts five days, she said.

The council held an information workshop yesterday to discuss its next revenue forecast. In September the seven-member panel voted to forecast growth in state revenue this fiscal year at a 1.1 percent decline instead of the previous 1.6 percent decline.

That 0.5 percent difference translates into another $15 million to $16 million the state can plan to spend this year.

Sklarz said that he doesn't know exactly how much the next forecast of revenue will increase from the September figure but that there seems to be a consensus that the council will raise it. The governor and state Legislature must consider the council's revenue estimates in preparing the state budget.

Kalapa said he understands why the council is optimistic. But he believes it may not be considering changes within the state tax system that take place next year.

Kalapa said omissions in personal income tax reduction legislation passed in 1998 will lead to the state withholding more in taxes from residents than necessary this year. As a result, there will be larger refunds in spring 2000 but lower tax collections for the state.

Also, Kalapa said he believes the increase in visitor arrivals is "unusually skewed" because of the huge American Dental Association convention held in October.

The arrival of nearly 32,000 people for the ADA convention displaced a number of eastbound visitors to Hawaii, who then delayed their travel plans for a few weeks until they could get into Waikiki, he said. Those delays bunched up visitor arrival numbers so they "looked really good," he said.

Finally, Kalapa believes the state will see a lower visitor count in the winter travel season, which starts Dec. 15. More people are avoiding travel for fear of potential Y2K problems and because of possible millennium price-gouging of hotel rooms and packages.

Overall, Kalapa agreed the economy doesn't seem as bad as it was three to five years ago.

"On the other hand, I think most of us are still kind of playing the 'wait and see,' " he said.

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