Cayetano, state
leaders seek to
head off recession

Tobacco settlement and
hurricane relief funds
may be used

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By Richard Borreca and Gordon Y.K. Pang
rborreca@starbulletin.com
gpang@starbulletin.com

SPARKED by a call from Gov. Ben Cayetano, the major players in Hawaii's economy are struggling to find ways to keep Hawaii's tourist-based economy from falling into what the governor called "a spiral we cannot stop."

Cayetano huddled for three hours yesterday with the state's top bankers and tourism, aviation and political leaders to come up with ways to stop or soften the impact of recession.

"We are facing a statewide problem that impacts everyone in this state, whether you work for the tourist industry, pump gas or work for the state," Cayetano said.

The terrorist attack in New York and Washington, D.C., and the ensuing halt in air transportation dropped Hawaii tourist business by 40 percent, Cayetano said. Though the figures are getting better, the governor said the state must act with private business to aid both those hurt by the fallout and encourage those recovering.

State money will be a major part of the recovery plan.

Cayetano will ask the state Legislature for approval to tap the state's $40 million rainy-day fund, which is money set aside from the federal tobacco lawsuit settlement, and $190 million in the Hawaii Hurricane Relief Fund, which was money set aside to reimburse insurance payments for possible future hurricane damage.

Also, he is eyeing $390 million in the airport fund. That money, Cayetano said, will go to balance the state budget if the tax cuts are approved.

Cayetano is also asking the state's banks to come up with policies to help private businesses with outstanding loans.

"We are asking that they give them some extended time to pay their loans and help them through this crisis," he said.

Cayetano called the recession "Hawaii's greatest economic crisis and our most serious challenge."

The state will also come up with more money to help market Hawaii, Cayetano said, but stressed that the tourist industry is also expected to pay for the marketing.

Walter Dods, chairman and chief executive officer of BancWest and First Hawaiian Bank, said the economic crisis "affects every man, woman and child in Hawaii."

"This will have a ripple throughout Hawaii," Dods said.

To help marketing Hawaii to Japanese tourists, Cayetano said he and former Govs. George Ariyoshi and John Waihee and legislative leaders will travel to Japan to stress that Hawaii is open for business and looking to welcome travelers.

Speaking for the tourist industry, Tony Vericella, Hawaii Visitor and Convention Bureau president and chief executive officer, said there will be a new effort to get tourists here by getting wholesalers and travel agents to sell Hawaii.

"We will look at more creative ways to add value and more incentives to wholesalers and the actual sellers who do business," he said.

"Hawaii has to be No. 1 in their minds, and we will give them the reason to make that happen," he said.

Honolulu Mayor Jeremy Harris also has some proposals to stimulate the economy.

Harris said he wants to stimulate construction on Oahu by "fast-tracking" some $200 million in city projects -- initially slated to be moved out in the next 18 months -- so that they now get under way in the next three to four months.

"We're going to try to push out and give notice to proceed on roughly $204 million of infrastructure construction so that we can get the jobs out as quickly as possible to help the construction industry," he said. "If the visitor industry is going to have a lull period here, anything we can do to help, in any sector, is going to help the overall economy."

Harris said he also wants to discuss with City Council members the possibility of extending the deadline for an ordinance that gives tax breaks for new commercial buildings, and possibly expanding the program to include residential properties.

The program, approved in 1999 and initially slated to sunset next year, gives owners of new commercial buildings a seven-year exemption on property taxes after completion of a project. Building owners making additions or renovations to existing structures also get a "holiday" from taxes on the improved sections.

The exemption applies to hotel, resort, commercial, industrial, agricultural and conservation uses, but Harris said he is studying the possibility of including residential as well.

"That would provide, obviously, a huge shot in the arm for the housing industry and for new homeowners because it would mean a lot more people would qualify for a home," the mayor said.

Proposals Here are the proposals that came from Gov. Ben Cayetano's meeting yesterday to bail out Hawaii's economy: >> Call the Legislature into special session in the middle of October to approve using the rainy-day fund, the hurricane relief fund and the airport fund to balance the budget after the tax cuts. >> Immediately waive landing fees on commercial airlines to encourage airlines to keep flying to Hawaii. >> Draft new legislation to cut taxes, perhaps cutting the state capital gains tax in half. >> Extend unemployment benefits. >> Explore new tax breaks to help investors. >> Speed up state construction projects that are already on the books. >> Establish a committee of banking, hotel and tourism officials to keep the tourism industry on track. >> Lead a confidence-building trip to Japan to promote Hawaii. >> Waive University of Hawaii tuition for laid-off workers and their families.