How to Revitalize Hawaii’s Economy
Dozens of ideas to get the Islands back on track
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From left: Belsby, Okimoto, Dancil, Petranik (back to camera),
Participants in this discussion:
Kirk Belsby, VP of the endowment for Kamehameha Schools
Kyle Chock, executive director of Pacific Resource Partnership
Keiki-Pua Dancil, president and CEO of the Hawaii Science and Technology Council
State Sen. Carol Fukunaga, Democrat, representing McCully to Punchbowl
Ernest Nishizaki, executive VP of Kyo-ya, owners of Hawaii Starwood Hotels
Dean Okimoto, owner of Nalo Farms and former president, Hawaii Farm Bureau Federation
Patrick Sullivan, founder and chairman, Oceanit
Moderator: Steve Petranik editor, Hawaii Business
Hawaii Business gathered seven local leaders – from businesses, nonprofits and government – to talk about how Hawaii can revitalize its economy. This is an abridged version of that discussion. (Click here to read the full transcript.)
Petranik: The topic is revitalizing Hawaii’s economy. Carol, I’m starting with you because you’re the only politician at the table. What should government do?
Fukunaga says film production in Hawaii has a consolidated,
Fukunaga: What government should be doing that it’s not doing enough of right now is accelerating capital improvements on things that we need, like school repairs, infrastructure development and all the rest. Also, we should be measuring how long it takes to get things done and put in specific incentives: If departments are able to perform better than the standard we set, then next year their CIP (capital improvement projects) standing should go up. If they do poorly, their CIP standing should go down.
Chock: There’s almost a billion dollars in deferred maintenance and repairs between the University of Hawaii’s 10-campus system and the entire state Department of Education. If we took care of our schools, that would get a lot of our guys working again. It’s the classic countercyclical spending in a recession: When the private sector’s not putting money into the economy, government needs to take the lead.
One good example, the Legislature this past session funded the University of Hawaii’s West Oahu campus – $48 million – and they’re going to be able to break ground in August on construction of a new four-year university in Kapolei.
Belsby: The fiscal crisis forced us to rethink our view that government was responsible for everything. We’re getting back to the basic purpose of government: providing infrastructure for the private sector to succeed. Instead of being responsible for bringing Silicon Valley to Honolulu, the idea is back to providing an educated labor force, highways, other forms of transportation, utility infrastructure in Hawaii.
To build that infrastructure, we should use some tools used in other parts of the country, such as Mello-Roos bonds in California. They’re basically private-sector bonds that have the full faith and backing of the state as a credit enhancement.
Nishizaki: In construction, the Honolulu airport should have been renovated much sooner. It’s the first and last impression that visitors have of Oahu, and that project should have taken first priority. Honolulu Airport is nice, but it’s certainly not up to par with other airports around the world.
Sullivan: In the short term, construction is a terrific investment. In the long term, education has been put under the rug. That’s a huge mistake. But in the medium term, the dialogue in tech is more sophisticated than it’s ever been. Act 221 created the environment for angel investing in tech companies, so we’ve got sophisticated angel investors, but to bring a product to market requires more capital. The state government can have a leadership role in encouraging more capital to bring these tech companies and their innovative technology to the marketplace.
There’s a lot to learn from what other states have done successfully around the country. Several years ago, Congress supported venture funds by putting some of its retirement money into them. Those venture funds then attracted additional capital. If you look at those funds today, 80 percent of businesses that were created are within about a 30-minute drive of where those funds physically reside. National Venture Capital Association numbers show that, for every $25,000 invested from these funds, you create one tech-sector job. Average salary for a tech-sector job is $70,000 to $75,000. Every dollar that was invested created $9 dollars circulating in the economy. It’s well within the flexibility of what the state can do to stimulate that.
Petranik: What’s the role of universities?
Dancil: They’re usually the No. 1 source of innovation. If you look at tech centers around the country, they all center on universities and their engineering, computer science, medical schools. They find a niche. I know (UH) President Greenwood has made that one of her top three things to do, and she did appoint an innovation council. She wants to figure out a better way to commercialize technology coming out of the university, and that’s a great first step.
Okimoto: In agriculture, part of the problem is developing infrastructure. We’re losing a lot of our ag industries like the pig industry, chicken, all of the livestock, because we can’t keep up with the infrastructure –building of slaughterhouses, processing facilities and the new ways to ensure food safety. Part of the problem is getting government permits. I had to put up a facility just to wash the produce for food safety. When I started four years ago, our estimated cost was nearly half a million dollars. By the time I finished, it was $2 million. That was after two years going through the permitting – county and state – and that was actually an expedited process. Most small guys are not able to do that. I talked with some people about bringing back chickens. Just for the processing facility you’re looking at $30 million and you need an FDA inspector in there at all times. That’s what makes the system not work for small farmers. Corporate farmers are the only ones that can afford this infrastructure. And that’s what we lack here in Hawaii. Agriculture is going to need that help going forward.
Belsby: There are bright spots on the horizon, because, for the last several years, we were trying to copy Mainland models on technology, intellectual property, economic development in general. Now, we’ve found where our competitive advantage is and it appears that renewable and green energy are valued propositions for Hawaii. It’s interesting that companies like General Electric, Shell Oil, First Wind – large multinational companies – are here doing business, whether it’s wind, solar or otherwise. Admittedly, they are relying upon federal laws or federal credits, but they’re not relying upon state support.
Petranik: Are there regulation fixes that government can do to help businesses?
Okimoto: One thing is having a one-stop (permit) center where you have county and state in the same building so you’re not going back and forth. That would help construction guys and everyone. It could be done more efficiently and without duplication.
Nishizaki says, “Industries helping each other is great,
Nishizaki: A study done last year about the loss of Waikiki Beach (due to sand erosion) said that would lead to a $2 billion decline in revenue for Hawaii. About four years ago, our company decided we were going to spend our own money to bring the public beach back to Gray’s Beach in front of the Sheraton Waikiki. That was four years ago. Our consultants told us our timeline would be 18 months to get it done. The timeline is still 18 months. We actually have to go through 25 different agencies – state, county and federal. At the federal level, we were told this was navigable water. This is at our shoreline! We have spent over $600,000 in private funds already.
Fukunaga: It’s difficult to get all the levels of government to cooperate, but I’ll point to one success: Hawaii is the only state that has a consolidated permitting process for a film production. We said this industry is important for our long-term economic prosperity, so we devised a permitting system that crosses federal, state and local governments. I don’t see why we couldn’t cooperate and work together between state, county, and federal in other areas as well.
Dancil: Take an example from technology: importation of species. When I started my last biotech company, I just wanted to bring in this one virus strain – very normal, off the shelf – I had to get this letter from this person, get this letter from this other person, go talk to another person, and talk to one other person. Like the film industry, we want a consolidated approach.
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