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Hawaii
Business / August
2010 /  How to Revitalize Hawaii’s Economy

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Hawaii Business : Government

How to Revitalize Hawaii’s Economy

Dozens of ideas to get the Islands back on track

By Steven Petranik
http://www.hawaiibusiness.com/Hawaii-Business/August-2010/How-to-Revitalize-Hawaii-rsquos-Economy/”mailto:[email-masked]”

(page 1 of 3)

From left: Belsby,
Okimoto, Dancil, Petranik (back to camera),

Chock, Fukunaga, Sullivan and Nishizaki.

Photos: David Croxford

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,

government permitting process. “I don’t see why we couldn’t

cooperate between state, county and federal
in other areas
as
well.”

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,
but
right now, the tourist industry is the quick fix for
Hawaii.”

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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