Rob Perez

Raising Cane

By Rob Perez

Sunday, October 14, 2001

‘Quick fix’ on isle economy
could turn out to be long wait

WHEN LEGISLATORS gather later this month to consider ways to energize Hawaii's sputtering economy, don't expect any quick fixes.

Even if lawmakers approve most of the $1 billion in emergency construction funds that Gov. Ben Cayetano is seeking, the bulk of that money will take months -- and in some cases years -- to work its way into the economy.

That, of course, will do little for the thousands of Hawaii residents who lost jobs or had their hours reduced since the Sept. 11 terrorist attacks. Few of the affected workers, in fact, are in the construction industry, the main benefactor of such a spending plan.

Despite the sense of urgency and raised expectations that have been created going into the special session, the state actually can do little to provide an immediate boost to the economy, according to economists and fiscal analysts.

Seiji Naya, head of the state Department of Business, Economic Development and Tourism, says spending money on capital improvement projects is the quickest way for the state to create jobs, some of which can go to those laid off by tourism-related businesses.

But a large state bureaucracy, which must follow set procedures to ensure tax dollars are spent properly, can only move so fast when it comes to processing paperwork and getting contractors to the job sites, especially for major projects.

THE SIMPLER JOBS can start first -- and in relatively quick fashion, according to state officials.

Of the $1 billion that Cayetano is seeking, roughly $130 million is earmarked for basic school repairs, such as renovating restrooms, repainting classrooms and replacing light fixtures, cabinets and windows.

Wayne Kimura, the state's comptroller, says the basic repairs can start within a month of funding approval.

But the more complicated work, such as doing structural renovations, and the new projects Cayetano is proposing, such as building a University of Hawaii West Oahu campus, would take months or even a few years before construction starts.

"That's not going to help the economy now," said Lowell Kalapa, head of the Tax Foundation of Hawaii.

The planning and design phases that occur before the hammers and nails are needed typically don't inject large sums of money into the economy, according to UH economics professor Carl Bonham.

To get the bigger economic boost, the projects need to get to the construction phase as quickly as possible.

"The question," Bonham said, "is how fast can state government move?"

Historically, it has not moved very fast.

That's why Cayetano is making administrative changes and proposing some legislative ones to speed the procurement process. Some legislators, though, are wary of paring checks and balances in the system.

On the administrative front, the state is developing boilerplate contracts that can be used for certain basic projects, a move that will quicken legal reviews.

It also is working with the city to streamline the building permit process so applications only go before city and state reviewers once, instead of multiple times as is often the case now. The single review process is expected to take one to two months, while the current process can stretch up to eight or nine months.

On the legislative front, Cayetano is seeking authority to raise the ceiling under which he can award contracts without seeking formal bids.

For school construction projects, Cayetano wants the ceiling raised to $250,000 from $100,000; for purchasing of goods and services, he's proposing the maximum be set at $50,000, up from $25,000.

If legislators grant the governor's request, the state would maintain lists of contractors interested in doing certain types of work. When that work is needed and is under the nonbid ceiling, a computer would randomly select five contractors from the appropriate list, and each would submit informal bids. The state would then award a contract based on the five proposals.

SUCH A PROCESS can save roughly two to three months, according to Kimura.

Cayetano also wants legislators to waive the administrative protest process available to unsuccessful contract bidders -- a proposal that should raise some eyebrows.

When a contract is awarded now, a losing bidder can file a protest with the administration, which halts the project until the challenge is resolved. But the challenge can result in delays of up to three months, Kimura said. Roughly 80 percent of protests eventually are determined to be unfounded, he said.

If the protest process is waived, an unsuccessful bidder still would have the right to take the state to court, but work on the project wouldn't automatically stop if that happened.

Such a system, though, would make challenges more costly -- and could discourage even some that have merit.

Kimura said the changes Cayetano is proposing won't compromise the integrity of the overall process but will help get projects off the ground more quickly.

Even if the legislators don't approve all of Cayetano's requests, the administration is doing what it can to expedite roughly $550 million in bond-financed construction projects that already have been authorized. Some were approved as far back as 1998.

Kimura said about $180 million worth of projects are ready to go or are in the design phase.

The projects Cayetano is proposing for the special session also would be funded with borrowed money, something that concerns legislators wary of adding too much to the state's existing debt.

Because many of the projects won't help the economy immediately, some wonder why legislators need to meet in a special session at all. The regular session starts in January, when the same issues could be considered.

If the politicians don't meet now, though, "you look like you're doing nothing" about the economic crisis, Kalapa said.

And in a time of crisis, that's an image that wouldn't sit well with constituents.

Star-Bulletin columnist Rob Perez writes on issues
and events affecting Hawaii. Fax 529-4750, or write to
Honolulu Star-Bulletin, 500 Ala Moana Blvd., No. 7-210,
Honolulu 96813. He can also be reached
by e-mail at:

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