THE TURTLE BAY BILL

by Tom Yamachika, Interim President, Tax Foundation Hawaii

Recently, something remarkable happened in the last days of our legislative session.

In Kahuku on the north shore of Oahu stands the Turtle Bay Hotel. The current owner of it and its surrounding environs has been locked in a battle with area residents over how much new development the owner would be able to construct.

After much negotiation, a deal was reached. The deal is that the hotel's owner, Replay Resort, would retain ownership of the property and be responsible for maintaining it, but would sell to the government a "conservation easement," meaning that neither the current nor any future owners would be allowed to develop most of the land. The conservation easement would include two public parks, wetlands, a trail system and oceanfront access. The area also includes an existing golf course that the public would need permission to enter.

The owner would do this in exchange for roughly $48.5 million. The state's share would be $40 million, the City and County of Honolulu would contribute $5 million, and the Trust for Public Land would add another $3.5 million.

The unusual part is how the state is going to come up with the money. A bill, titled "Relating to the Transient Accommodations Tax," was supposed to tweak existing earmarks on the TAT that now divert some of the tax collections to various special funds and the counties. In conference committee, the bill was gutted and then transformed into one that authorizes the Hawaii tourism authority to issue $40 million in bonds, and then sets up a special fund to pay back the principal and interest on the bonds. The fund is fed by a new earmark giving it $3 million of the TAT every year.

The bill's title didn't change, and the use of the earmark seems to be the only connection that the bill has with the TAT. In addition, there were public hearings on the bill's previous form but none that considered the bill with its current content. Those were just some of the procedural issues that legislators were having misgivings about...and, of course, when they have misgivings imagine what the rest of us think.

To be sure, this deal meant a lot to many people. Some have gone so far as to say that the end justifies the means. “My idea with any piece of legislation,” said Governor Abercrombie, “is to keep your eye on the prize, and not on the process.” That may be true, but we also have a state constitution that specifies the process and does so for some very good reasons.

And if there are good reasons to justify bending the rules, they can be bent. Indeed, the legislature did just that to allow extra time to consider three education-related bills and a Chamber of Commerce-sponsored bill that would have established a tax credit for manufacturing. In view of the importance of this deal, maybe the legislature could have bent the rules a little to allow for some public input.

When you break it all down, our state (through the Hawaii Tourism Authority) is paying $40 million. We're borrowing the money and paying off the debt over time. Because the repayment comes from earmarked TAT collections, we collect the money and it's out the door before we realize it. We just wonder if the use of this bill, and this funding mechanism, were essential to the deal. If there were more time to consider the issues, and if there were more allowance for input by the public and others, perhaps a better solution could have been reached to fund the same deal.

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