NELHA tenants A Lingle administration plan to cut funding to the Big Island's Natural Energy Laboratory of Hawaii Authority will mean its small-business tenants will have to pay more in rent and infrastructure costs.
face rent increase
An administration plan would
cut funding to the Big Island
lab by $875,000 over two yearsBy Lyn Danninger
ldanninger@starbulletin.comThere are 32 tenants at the NELHA ocean science and technology park at Keahole Point next to Kona's airport. Of those tenants, about 20 are considered commercial tenants. The rest are in NELHA's pre-commercial incubator space or are involved in research projects and education.
NELHA administrator Jeff Smith said the proposed cut would eliminate the $875,000 appropriation over two years. The first year, 2004, the funding would be cut in half, then dropped altogether in 2005. While NELHA collects rent from its tenants, the government money is used to cover salaries, operations and other administrative costs associated with running the park, Smith said.
The intent has always been for NELHA eventually to be self-sufficient, Smith said.
Tenants say the best method for that is to trim overhead costs by focusing NELHA on what it does best: Pumping seawater.
The existing plan calls for NELHA to be self-sufficient by 2009. but the Lingle administration's legislation will accelerate the process.
NELHA is administratively attached to the Department of Business, Economic Development and Tourism. Director Ted Liu, who also sits on NELHA's board, said it was time for the organization to become independent.
"The model has to shift over time," he said. "It's not necessarily just the financial environment that drove this. This is something NELHA should have been doing and it coincided with the need for fiscal discipline."
Sen. Russell Kokubun, chairman of the Senate Ways and Means Committee, said NELHA may get a reprieve, with some funding continuing until mid-2005.
"What we are hoping to do is to prolong the ability to use their general funds. But at least half would be gone by mid-2005. That will give tenants time to re-do their business plans," he said.
Kokubun (D, Hilo-Naalehu) said the amended legislation will go to the full Senate for a vote Tuesday and then likely into conference committee.
Smith said he is working on a plan to reduce NELHA's administrative costs and better use existing resources.
He said tenants could expect increases in several areas.
"One thing we are look at is the cost of pumping deep seawater. It costs 14 cents per 1,000 gallons to pump. Right now tenants pay about 7 cents per thousand gallons. One of my recommendations is to cover that cost and give a 20 percent increase until it meets the cost over five years," he said.
Another targeted area would be land rent.
"We charge $100 per acre per month on our unimproved land. That has not been increased in many years ... so I've recommended we charge $200 per acre," he said.
Likewise, for improved land, which is graded lava rock, the rent is $400 a month. That would be increased to $500 a month, he said. Smith said the rent increase would affect 16 firms not under leases, plus new companies coming in.
There also would be increases for tenants in NELHA's incubator space. Normally, incubator tenants stay for three years, Smith said. If their businesses become successful, they can request to move into commercial space. The six incubator tenants pay 10 cents a square foot. The proposed increase would bring rent to 25 cents a square foot, he said.
NELHA began in 1974 when the Legislature created the Natural Energy Laboratory on 322 acres at Keahole Point. It was mandated to provide a support facility for research on ocean thermal energy conversion and related technologies.
By 1984, it became clear that seawater being pumped for research had commercial possibilities so the Legislature allowed the property to take on commercial tenants. Today, with the conversion process long gone, NELHA is landlord to about 32 mostly marine science research and education-related companies on 870 acres.
Tenants say they already pay more in rent than others in similar situations. For example, tenant farmers who occupy five-acre parcels in the agriculture park administered by the state Department of Agriculture across Queen Kaahumanu Highway from the NELHA site pay substantially less, said Gerald Heslinga, president of Indo Pacific Farms, an aquaculture company that has been at NELHA for eight years. Farmers there also are allowed to build houses on their land, he said.
Unlike NELHA, the neighboring agriculture park is full, Heslinga said.
"We need a point by point comparison as to why tenants go there," he said. "Aquaculture is a subset of agriculture. My feeling is that (the proposed rent increase) is a step in the wrong direction for NELHA. At present we are 20 to 25 percent occupied. I believe the state has to closely re-examine the reason for that."
NELHA administrator Smith cited an occupancy rate of about 38 percent.
Heslinga said NELHA should have been self sufficient by now. The answer is to slim down its many missions and function as a utility, he said.
"They should focus on pumping seawater. This is the critical service that distinguishes them from other facilities. They should focus on one job, which is pumping water, and move away from expensive little adventures."
Still, Heslinga said he is pleased with the water NELHA provides. "I'm happy with the way they pump water. They are reliable and they take it seriously," he said. "I give them high marks because it really is a 24-7 commitment."
State of Hawaii