Caught off guard by an unprecedented economic disaster, Hawaii state and local officials, along with our congressional delegation, have been scrambling to put together comprehensive economic recovery plans.
So far, the response has been a patchwork of programs, some of which have already come and gone. These include measures to give people money to pay rent on housing, state and local grants for businesses and a food card so unemployed people can eat at restaurants and give those businesses much-needed revenue.
With our economic future still murky, Civil Beat asked seven business leaders what they think the government could or should do. Their answers provide seeds for discussions and possibly a plan.
Peter Ho, chairman, president and chief executive, Bank of Hawaii
What’s needed: Liquidity, which is to say cash, to help businesses pay bills through the prolonged economic downturn.
How this could be done: This most likely requires Congress to pass another stimulus bill, such as the HEROES Act, which has stalled.
Ho likens the situation many businesses face to survivors of a sinking ship in cold water. They might not drown immediately, thanks to life rafts and life preservers, Ho said during a recent briefing of the state House Select Committee on COVID-19 Economic and Financial Preparedness. But they’ll eventually die of exposure. And the life rafts are deflating.
Over the summer, thousands of small Hawaii businesses managed to share some $2.5 billion in forgivable loans under the CARES Act’s Paycheck Protection Program, which was administered by the U.S. Small Business Administration and the local banks. Despite some challenges the program was a success, Ho said.
“The problem is it’s not clear that there’s a PPP II coming along any time soon,” Ho said.
The state’s share of CARES Act money will only go so far, said Ho, who co-chairs the committee with House Speaker Scott Saiki.
“It’s unclear if there’s a federal fix there,” he said. “Right now, there’s not.”
Mark Mugiishi, president and chief executive, HMSA
What’s needed: An effective rapid, accessible public health surveillance testing strategy.
How this could be done: This requires buy-in at both the federal and state levels, Mugiishi says, including the Federal Drug Administration, the federal Centers for Disease Control and Prevention, and the Hawaii Department of Health. It also requires the development of cheap, fast tests.
Hawaii’s testing program focuses on people suspected of having COVID-19. While such diagnostic testing is important, Mugiishi says the state should complement this with more widespread testing, even of people who don’t show signs of illness.
He says the speed, frequency and affordability of such tests is more important than the test’s sensitivity or accuracy. It’s a strategy espoused by a number of public health experts.
“Imagine a strategy that allows us to test everyone who wants to go to an athletic event, a concert, a nightclub, a gala, or even to work and school,” Mugiishi said. “This type of $1, 1-minute test would allow us to reboot our economy even prior to widespread vaccination of the population because you can control prevalence in common areas.”
The issue is getting such tests to the market at prices cheap enough.
This would require innovation and cooperation among entrepreneurs to develop and make the tests, Mugiishi says, as well as cooperation among the FDA, U.S. Congress, the Hawaii Health Department and others to create processes for approvals, funding and implementing a local strategy.
Ryan Tanaka, president, Island Business Management
What’s needed: Rental assistance for businesses.
How this could be done: Until Congress steps in with more stimulus money, state and local governments should provide additional funds, he said.
Tanaka, who works as a financial consultant, has taken the initiative to quantify what many suspected: that beleaguered businesses are struggling to pay their rent.
Tanaka surveyed nearly 1,500 businesses statewide and found that, while just under 60% reported being caught up on rent payments, the other roughly 40% were not caught up — and nearly 10% had not made any payments during the period.
Honolulu has stepped up with business grants, using CARES Act money, Tanaka said.
Likewise, the state has launched a restaurant card for unemployed people to encourage them to eat at restaurants, and a grant program to help businesses pay for new business models they’ve had to adopt.
“There are financial programs out here,” he said. “These are helping, but even collectively they’re not enough.”
The study indicates that during the third quarter $62 million in commercial rent was going unpaid. About 58% of businesses hadn’t gotten any relief, and only 5.4% had been able to restructure leases to adapt to COVID-19.
Tanaka envisions giving commercial tenants grants to cover lease payments.
“We’re so close,” he said. “We can actually solve this problem.”
As Tanaka sees it, tenants will be able to use the promise of grant money to negotiate new deals with landlords.
“Landlords are smart,” he said. “They don’t want empty properties.”
Jonathan McManus, owner and operator of Hotel Wailea, co-owner of Senia restaurant, partner with Chef Chris Kajioka in Miro restaurant
What’s needed: State tax incentives for restaurant investors.
How this could be done: The state could provide tax credits for cash investment in restaurants, similar to credits provided for motion picture production and, previously, technology.
Restaurants in Hawaii are suffering, saddled with expensive leases and other fixed costs, McManus says. Social distancing rules erode thin margins further by reducing capacity.
Shutdown orders are even worse. It’s leading to a crisis for independent restaurants and the disintegration of an economic safety net that provides work for tens of thousands of residents.
A tax credit program could provide emergency liquidity, McManus said. He envisions something that would apply only for a couple of years. He notes that the lost revenue to the state is at least partially made up for by payroll and excise taxes paid by restaurants and their vendors.
“Restaurants have been in survival mode for almost 12 months, and the drought of cash will have drastic consequences in the independent restaurant community in Hawaii,” McManus said. “My fear is without legislative help to induce investors to invest and reinvest in restaurants we will wind up with an entire industry of private equity chain restaurants.”
Nathaniel Kinney, executive director, Construction Alliance
What’s needed: Streamlined permitting for construction.
How this could be done: City departments can work more efficiently to process permits.
Hawaii’s burdensome land-use laws have long been the bane of developers, even as environmentalists say they’re necessary to preserve the state’s precious waters, mountains and forests.
While Kinney — whose group represents the state’s 15,000-member unions of carpenters, laborers, cement masons, bricklayers and operating engineers — envisions broad changes to the state’s regime of land-use laws, he sees a short-term fix in getting cities to move faster on the permitting process. Even simple projects, like home improvements and commercial renovations, simply take too long.
“This is one of those things that gums up everything, and construction is something that really pushes money into the economy,” he said. “Either we’re going to admit that this is so dysfunctional and we need to fix it. Or we’re going to say this is the way it is and we’re just going to limp along and the recovery is just going to limp.”
Danya Hakeem, director of innovation for agriculture and a circular economy, the Elemental Excelerator
What’s needed: Comprehensive government support of agriculture.
How this could be done: The sweeping changes called for will require commitment by the governor and Legislature.
Hakeem’s sweeping policy recommendations call for initiatives like “Good Food Purchasing” programs that ultimately mandate state institutions purchase local products and the creation of long-term contracts so farmers can plan.
And, she says, there’s a need for financial support: government grants and tax credits to support local food production; a tax credit bill sponsored by the influential Senate Ways and Means Committee chairman and agriculture industry supporter Sen. Donovan Dela Cruz died in March when the coronavirus took center stage.
Hakeem also says the governor should clarify the roles and mandates of the Hawaii Department of Agriculture and Agribusiness Development Corp., which was established to help transition from plantation-based to diversified agriculture.
“ADC manages 3,300 acres and wields much power over land eyed for Hawaii’s diversified-ag economy,” she said in a statement. “Over the past five years, ADC has been allotted more than $250 million in state funds to buy land and do market research, but has been extremely ineffective to date.”
Keoni Lee, Aina Aloha Economic Futures
What is needed: To build trust and collaboration throughout the community.
How this can be done: Leaders need to bring more voices to the table, and people need to be willing to step up and work with the leaders in relationship building and good communication.
Lee, who is also the chief executive of the business incubator Hawaii Investment Ready, said people should collaborate more and be willing to make personal sacrifices for the greater good.
One challenge, he said, is that people often take advantage of situations for personal gain and end up at the top of the economic order. Others experience trade-offs as a continuing bad deal.
“There’s nothing out there to tell them otherwise,” Lee said.
An example, he said, is frequent controversy over the siting of renewable energy projects. Although renewable energy projects benefit everyone by decreasing carbon emissions, people often don’t want large projects near their homes and certain areas frequently get too many eyesore projects.
An example, he said, is Kahuku, the location of a disproportionate share of Oahu’s wind farms. A solution, he said, is to involve people in making decisions.
Renewable energy projects are merely an example. More people should be involved in establishing economic policies, he said.
“How do we figure this out together, rather than me just operating in my silo?” he said.
Ultimately, Lee said, there should be “a norm of everyone giving.”
“If we all give, there will be abundance,” he said.
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