State of Hawaii

Lingle likely to
veto tax credit

The governor tells Outrigger
executives that the credit was
not part of her budget

While Gov. Linda Lingle will not confirm it, two hotel chain executives said she told them yesterday that she plans to veto a hotel construction tax credit bill.

Outrigger Enterprises Chairman Richard Kelly and Outrigger Chief Executive Officer David Carey met with Lingle to make a last-minute appeal for the bill they say is vital in financing Outrigger's planned $300 million redevelopment of its Lewers Street properties in Waikiki.

Kelly and Carey emerged from the meeting and said Lingle had told them she would veto the measure, despite their arguments countering her claim that it would put a strain on tight state tax revenues.

Lingle said she will not report her veto intentions on that or any other measures until she first notifies legislative leaders of her decision, although she reiterated her opposition to the bill.

Rep. Brian Schatz (D, Tantalus-Makiki), the House's lead negotiator on tax-credit legislation, said yesterday he could not understand how Lingle could justify her signing a $75 million tax credit for an aquarium at Ko Olina and reject the extension of the hotel construction and renovation tax credit.

"It's just a question of fairness when you single out one project in one area for a tax credit and then ignore a broad-based tax credit for everyone," Schatz said, adding that both would stimulate the economy by creating jobs.

However, Lingle said the two are much different types of credits.

"The Ko Olina credit sets out a specific amount that can be claimed every year over the next 10 years. It doesn't go into effect until 2005, and then it's set at a maximum amount each year," she said.

"It's unlike this (hotel) credit, which was open-ended, and we don't know how much it would have cost the state and it wasn't part of my financial plan that I submitted to the Legislature this year," Lingle said.

The governor said she told lawmakers she had a problem with just extending the hotel construction tax credit passed in 2001, and lawmakers then went beyond that by also applying the credit to commercial construction on a resort area.

Kelly and Carey said a study by the state Department of Business, Economic Development & Tourism showed hotel construction projects generate 11 1/2 cents in tax revenues for each $1 spent.

Meanwhile, the tax credit would cost the state only 8 cents for every $1, meaning the state ends up making money, Carey said.

Kelly and Carey acknowledged that they sought the provision expanding the tax credit because the first phase of Outrigger's Lewers Street project involves development of a commercial area.

Rep. Joe Souki (D, Waihee-Wailuku), a close ally of Outrigger, said he thinks Lingle has missed the mark.

"When you compare Waikiki and Ko Olina, it should be no match," he said. "Waikiki is the major tourist attraction in the state. You would think it would be a priority."

House Speaker Calvin Say (D, St. Louis Heights-Palolo-Wilhelmina Rise) said: "It's her decision.

"I hope it's a wise decision, because the loss of capital coming into the state for these particular projects will be tremendous."

Lingle said she spoke to two contractors involved in major renovation projects in Waikiki at a dinner Thursday night, "and they both told me all the renovation will go on without these credits."

State of Hawaii

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