Honolulu’s next mayor will inherit an economy battered by COVID-19, with the island’s largest industry at best — and this isn’t certain — just emerging from a virtual shut-down that has cost Oahu tens of thousands of jobs.
While citizens often look to mayors for solutions in such circumstances, the powers of the county leaders are limited when it comes to stimulating the local economy, said Colin Moore, a professor of political science and director of the Public Policy Center at the University of Hawaii.
“It’s a little limited,” said Moore. “And it’s very limited in this environment.”
Still, he said, Honolulu’s next mayor does have the power over certain key things, like property taxes and building permits, for instance. Imposing a higher property tax on vacant rental properties has been floated as a way to raise revenue or discourage people from letting homes sit empty in a place with a housing shortage.
Sumner LaCroix, an economics professor emeritus at the University of Hawaii Manoa, agreed most of the power over the local economy is in the hands of the state government. But he said, “The next mayor will have considerable power to shape the Honolulu economy.”
For instance, LaCroix said the next mayor should move to quickly eliminate the backlog of pending construction permits at the Honolulu Department of Planning and Permitting. Another opportunity: loosened density restrictions in renovated walk-up apartment buildings, which advocates see as a key to helping create more affordable housing in town. The new framework hasn’t been used because of regulatory red tape, LaCroix said.
“The next mayor should make it a priority to get this type of renovation activity moving,” he said.
The mayor also can help with transportation issues, La Croix said. That includes bringing the Honolulu rail project to completion without major new cost overruns. Another issue: traffic, which – before the pandemic, at least – clogs roads, creating long commute times and deteriorating the quality of life for many residents. The response to the pandemic has shown it doesn’t have to be that way, LaCroix said.
During a series of interviews, each of the mayoral candidates – insurance executive Keith Amemiya, former television executive Rick Blangiardi, former U.S. Rep. Colleen Hanabusa, former Honolulu Mayor Mufi Hannemann and Honolulu City Councilwoman Kymberly Pine – discussed a number of critical economic issues facing Honolulu, including several touched on by LaCroix and Moore.
Hawaii has suffered a severe economic crisis — perhaps more than any other state in the U.S. — and Honolulu has borne the brunt of that. Honolulu’s unemployment rate shot from just over 2% in December to almost 21% in May. While the rate dropped to 12.5% in June, there were still almost 81,000 fewer people employed in June than in December, according to the latest numbers from the U.S. Department of Labor.
The blow has been softened significantly by the federal CARES Act, which has most notably provided unemployed people an additional $600 per week on top of state unemployment benefits. But that goes away at the end of July.
While the Hawaii Legislature has stepped in with a $100 a week boost and housing assistance for some, it’s not likely to fill the gap for the most vulnerable families. The mayoral candidates all see this. The question is how to deal with it.
To Amemiya and Hanabusa, the answer is simple.
“To be blunt, we need to do what we can to get money into their hands, whether it’s federal money, state money, or county money, CARES Act money,” Amemiya said.
Hanabusa pointed to a new round of federal money that passed out of the U.S. House only to get stalled in the Senate.
“We have to have somebody who can go up to basically Congress and tell them ‘You have got to fund this,’” she said.
Blangiardi, Hannemann and Pine all focused on helping businesses get back on their feet. Blangiardi said the key is to identify businesses that have survived the crisis and to help them – with federal financial aid, protective equipment if needed and any other assistance.
Hannemann not surprisingly looked at tourism, specifically travel from outside the state: “That’s where the real dollars come in to stimulate the economy,” he said.
Pine, who chairs the City Council’s Business, Economic Development and Tourism Committee, had perhaps the most expansive vision, looking beyond tourism to other major players in the economy like the military and facilities like the Pearl Harbor Naval Shipyard and small businesses clustered around these major employers. Many of these are ripe for growth and could get a big boost from CARES Act money.
One thing all the candidates agree on is that before the COVID-19 crisis, Hawaii had too many tourists. The number of annual visitors grew to 10 million in 2019, and was expected to keep growing.
“We’ve been wholesaling to the masses for a long time,” Blangiardi said. “We’ve subordinated our residents in pursuit of that money.”
The question is how to change things.
Blangiardi said the industry will naturally recalibrate as it undergoes a slow and painful recovery. Amemiya and Hannemann both spoke of cracking down on illegal vacation rentals, which have allowed the number of visitors to grow despite almost no new hotel rooms being built in recent years.
Pine, who has held City Council committee hearings studying over-tourism, has posed a number of ideas to deal with the negative side effects of the visitor industry, including measures requiring hotels to track how much guests are using beaches and other natural resources.
“In 1989 Hawaii brought in $18 billion in tourism to the state,” adjusted for inflation, she said. “Hawaii today brings in $17 billion but with double the tourists,” she said, referring to the numbers before COVID-19.
Pine said one way to help offset the negative side effects of so many tourists is to have hotels and resorts track how many guests are using beaches and other natural resources.
Others agreed with the idea of additional fees for tourists to use natural resources.
“You can impose a tourist passport tax, to levy against tourists, and it’ll be used to help provide or pay down infrastructure,” Amemiya said. “It’ll help to maintain our tourist attractions, like our natural tourist attractions, whether it’s the Koko Head stairs or other natural hikes.”
Among the businesses hardest hit by COVID-19 are Oahu’s hotels and resorts. A 14-day quarantine on arriving visitors put a lid on travel to Hawaii. And even without tourists, hotels often have six-or seven-figure monthly bills just to keep up their premises.
Plus the properties have huge property tax bills: Oahu’s largest corporate taxpayer, Kyo-Ya Co., which owns the iconic Royal Hawaiian and Moana Surfrider hotels, paid $34 million in property taxes in 2019 — the largest of any taxpayer in Honolulu. Hilton paid $31 million.
With virtually no revenue coming in for most of the year so far and the quarantine in place at least through the end of the summer travel season at the end of August, it’s far from clear how properties can pay such big bills. But the candidates were decidedly mixed on whether the hotels should get a break.
Amemiya said it was worth considering. Hannemann, who is president and chief executive of the Hawaii Lodging and Tourism Association, went further.
“I will look at giving property tax breaks to everyone across the board, every business, not just hotels,” he said.
But Hanabusa and Blangiardi were less inclined to help the hotels. Hanabusa said residents deserve a break before any hotels.
“Most of your big resorts are not owned by people here, they are owned offshore, they’re in a global economic base, so the question is, ‘How much are they hurting versus our people are hurting?” she said.
Blangiardi went further, calling tourism an “extractive” industry, like mining, and saying that shuttered hotels should not get a tax break; in fact, he said they possibly should pay more.
“I actually want them to make a bigger contribution,” he said. “I’m not going to raise property taxes for residents, but if there’s anybody we would look at … it would be the hotels.”
If there’s one area where Pine stands out from other candidates, it’s her ideas about diversifying Hawaii’s economy.
Discussing areas with growth potential, for instance, she talks in specifics: not just the military, but Pearl Harbor Naval Shipyard. Not simply information technology, but cybersecurity — an area where Hawaii has some 3,500 civilian and military employees working for the National Security Agency.
As for agriculture, she’s all about breadfruit, also known as ulu.
“A lot of people teased me when I said there is a great opportunity for the breadfruit industry and they think I just mean just eating breadfruit,” she said. “They don’t understand the complexities and new inventions that have come out of breadfruit.”
Others are looking at more basic issues, chiefly lowering costs of living by creating more housing, something that also will create construction jobs.
“One issue I want to undertake and start from day one is to increase the affordable housing inventory in Hawaii,” Amemiya said. “We’re currently 22,000 units short on Oahu. That’s a huge amount. That is a big reason we have a higher cost of living.”
Blangiardi said affordable housing is key to keeping people in Hawaii. As for diversifying the economy, he said opportunities lie in construction, energy and agriculture.
Hannemann agreed construction could present opportunities for jobs.
“Whether there’s a Trump administration or Biden administration, there will be an economic stimulus package,” he said. “Especially in the area of construction, there could be an opportunity there to be able to create new jobs in that area.”
Hanabusa agreed on the need to diversify but was perhaps the least specific.
“We need to find a new economic base,” she said. “However, in the meantime, Honolulu can take the lead in stabilizing what we have now and hopefully keeping us in some kind of a sense of balance.”
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