[ OUR OPINION ]
PROPOSED tax credits that would benefit a single resort development at Ko Olina are so narrowly targeted that they amount to a government subsidy rather than the broader economic incentive tax credits are supposed to be. Absent solid indications that the resort will revitalize Hawaii's economy, as the developer contends, and without clear requirements that the project include the educational and marine research facilities the developer has offered as enticements, state legislators should reject the proposal. Tax credits look more
like a subsidy
THE ISSUE:
A resort developer wants $100 million in state tax credits for a project he says will boost Hawaii's economy.
At the same time, lawmakers and the state administration should establish explicit standards and guidelines for providing tax credits to avoid misuse and to set definite ceilings to control the amount of revenue loss.
Governments commonly offer tax credits to stimulate fresh economic development and credits are usually made available to a broad segment of a desirable business. Tourism, however, is a well-established industry here and lawmakers would do better to aim valuable credits at businesses that diversify the state's economic base.
Ko Olina developer Jeff Stone has added education-related elements, such as a marine-mammal research facility, a travel industry campus, a golf academy and a "world-class" aquarium to his resort plans. However, the bill before the Legislature -- which would grant the project $100 million in tax credits over five years -- does not require they be built and no educational institutions have yet signed on.
Stone contends that the aquarium ultimately will save the state's economy. He pointed to aquariums in other states that have lured millions of people, but he also must take into account that Hawaii already has other marine attractions -- not to mention the ocean -- that are likely to diffuse its appeal. The developer says that Hawaii will benefit when 50 percent of the aquarium is turned over to the state, which he estimates will be in about 25 years, after all debts are covered. That's a long time to wait for a facility that will have aged and that would transfer operational costs to the state.
The developer's promise of thousands of jobs and $60 million in annual tax revenue may prove irresistible to legislators who have come up with few other plans to stimulate the state's lagging economy. But lawmakers should be careful to extend further credits without first setting up a definite structure for their offerings. At present, there are no overriding policies or principles that govern tax credits. Rather they are given to whoever comes up with an engaging idea and asks for them. That's not a good way to run a tight ship.
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