Construction tax credits
face Cayetano’s veto

---

By Pat Omandam
pomandam@starbulletin.com

Gov. Ben Cayetano said he is considering a veto of a bill that provides annual 4 percent tax credits for commercial construction in Hawaii between Jan. 1, 2003, and Jan. 1, 2007.

Cayetano said the measure does not take into account construction projects being built regardless of the tax relief.

Major construction projects that could qualify for the financial help include the proposed new Wal-Mart and Sam's Club at the 10.5-acre superblock property along Keeaumoku Street near Ala Moana Center. Also qualifying would be the new $81 million printing and distribution plant being built by the Honolulu Advertiser on 11.6 acres in Kapolei.

Both projects have completion dates of 2004 and could lose millions of dollars in tax relief if the governor vetoes the bill.

Cayetano is expected to meet with department heads today to decide whether to veto certain bills passed this legislative session or allow them to become law in a month without his consent.

"I have some bills that I am inclined to veto, and I've asked the departments who have differed with me on this to tell me why I should not veto the bills," the governor said yesterday.

Already on the Cayetano hit list is a bill that would abolish nearly all state deputy director posts at year's end. The governor has said it would be unfair to the next administration not to allow it to have deputy positions.

Lawmakers had praised the tax credits as targeted economic development in tourism and construction that could generate immediate revenue.

But Cayetano refused to say what he would do on another bill that gives a 10-year, $75 million tax credit for a Ko Olina Resort development that would include a world-class aquarium and marine research center. State tax officials have opposed the measure.

"(I'm) like the Tower of Pisa. I'm not going to tell you which way (I'm leaning), though," he said.

Cayetano explained yesterday that many tax credits created by the Legislature this spring were not well thought out. He said lawmakers should have stuck to his proposed billion-dollar capital improvement project budget to stimulate the economy.

For example, he said, the state already has a 10 percent tax credit for hotel renovation and construction that could be used for the 600-acre Ko Olina Resort project. A combination of the proposed $75 million tax credit for Ko Olina and other existing tax credits for solar energy, biotechnology and high technology would cost the state tax revenue, he said.

"And that's the problem that the Legislature has not dealt with. They just kept on throwing these tax credits out, almost mindlessly, without seeing what the impact would be," Cayetano said.

Earlier this month, Ko Olina developers and others who favor the tax credits met with the governor in a last-minute pitch to show the project, if aided by the tax credits, would create thousands of jobs and generate tax revenue for the state.

But opponents say tax credits should be used to help an entire industry and not for a single resort project on Oahu that could compete with neighbor island resorts.