Kirstin Downey – Honolulu Civil Beat https://www.civilbeat.org Honolulu Civil Beat - Investigative Reporting Sun, 21 Apr 2019 10:01:55 +0000 en-US hourly 1 https://wordpress.org/?v=5.0.3 Case: Trump ‘Has Not Been Exonerated’ By Mueller Report https://www.civilbeat.org/2019/04/case-trump-has-not-been-exonerated-by-mueller-report/ Fri, 19 Apr 2019 01:53:18 +0000 https://www.civilbeat.org/?p=1328903 U.S. Rep. Ed Case, Hawaii’s newest congressman who had promised to take a wait-and-see approach to the investigation of President Trump by Special Counsel Robert Mueller, said Thursday he was shocked by revelations in the 448-page redacted version of the report. Speaking to reporters at the State Capitol, Case said an unedited version needs to […]

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U.S. Rep. Ed Case, Hawaii’s newest congressman who had promised to take a wait-and-see approach to the investigation of President Trump by Special Counsel Robert Mueller, said Thursday he was shocked by revelations in the 448-page redacted version of the report.

Speaking to reporters at the State Capitol, Case said an unedited version needs to be released immediately, and that Congress should turn to the courts if the Trump administration is unwilling to do so.

“Clearly what I have read of the report is highly disturbing and although Mr Mueller did not find overt collusion, certainly many, many people turned a blind eye” to Russian intervention in the 2016 presidential election, Case said.

“There is compelling evidence” that a number of people engaged in activities that “could rise to the level of a crime,” said Case, a moderate Democrat.

Congressman Ed Case speaks about the Mueller report at the capitol rotunda.

Congressman Ed Case, right, talked to reporters in the Hawaii Capitol Rotunda on Thursday about the Mueller Report.

Cory Lum/Civil Beat

Contrary to Trump’s assertion that the report found there was no collusion with Russia or obstruction of justice, Case said the report makes a strong case for the opposite.

“He has not been exonerated … Nobody can read that report and consider that the president has been exonerated.”

Case said that the summary of the report released in March by Attorney General William P. Barr misled the American public.

“I think you see a pretty deliberate effort to cherry-pick for interpretations” that would place Trump in a favorable light, Case said.

President Trump has called the investigation a “witch hunt” that is interfering with getting things done in Washington.

Case acknowledged that the investigation has been “highly divisive,” but added, “the fact that (investigations) are polarizing and disruptive does not mean that you don’t do them. That is our job.”

His views were echoed from Vietnam by U.S. Sen. Mazie Hirono.

“Despite the Attorney General’s attempt to spin the Mueller Report in Donald Trump’s favor, it’s clear the Special Counsel’s investigation found serious wrongdoing by the President and many of his associates,” the Hawaii Democrat said in a statement Thursday.

Hirono is participating in a military fact-finding mission to Asia with Senate colleagues.

“The Special Counsel also confirmed what our intelligence community had already unanimously concluded: that the Russian government interfered in the 2016 election to elect Donald Trump,” she said.

“Although the Special Counsel felt he couldn’t meet the high bar necessary to prove criminal conspiracy with the Russians, he demonstrated that Donald Trump and his campaign were willing to engage with our foremost adversary to gain an advantage in the 2016 election. This is just wrong, plain and simple.”

Congressman Ed Case speaks about the Mueller report.

Case said before he took office in January that he was taking a wait-and-see approach to the Mueller investigation. On Thursday, he had reached some conclusions.

Cory Lum/Civil Beat

The redacted report released Thursday provided evidence that the Russians had sought to interfere with the U.S. election to derail the campaign of Hillary Clinton and promote Trump.

“The Russian government interfered in the 2016 presidential election in sweeping and systematic fashion,” the report stated.

It also found that the Russians had hacked the Democratic National Committee’s computer network, causing sensitive emails to be publicly released, some of them through the organization Wikileaks.

At a press conference in Washington on Thursday, Barr said the full Mueller report did not find “any evidence that members of the Trump campaign or anyone associated with the campaign conspired or coordinated with the Russian government in its hacking operations.”

In early April, Case told voters at a town hall meeting in Ewa Beach that he did not believe the initial Mueller report, as represented by Barr, merited an effort to impeach the president. But he said that he would be willing to pursue the impeachment of Trump if he believed the facts showed that the president had behaved unacceptably.

“I am not shy about exercising that responsibility if I feel it’s warranted,” Case said at the time.

On Thursday, Case said that he continues to believe that impeachment may not be the way to proceed.

But he urged people to read the report for themselves.

“You can’t read this report without re-evaluating your conclusions to date,” Case said.

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Moving Hawaii’s Technology Out Of The Dark Ages https://www.civilbeat.org/2019/04/moving-hawaiis-technology-out-of-the-dark-ages/ Mon, 08 Apr 2019 10:01:35 +0000 https://www.civilbeat.org/?p=1326933 The effort to drag Hawaii’s state government into the 21st century is taking decades, but information technology advocates are seeing signs of progress. A few key bills are moving through the Legislature, including one to create a chief data officer and a data task force and another that would require the state to update and review […]

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The effort to drag Hawaii’s state government into the 21st century is taking decades, but information technology advocates are seeing signs of progress.

A few key bills are moving through the Legislature, including one to create a chief data officer and a data task force and another that would require the state to update and review its information technology plan every four years.

There’s still far to go: The state’s level of information technology competence has been called “medieval” by Hawaii Business and “ancient” by the Washington Post.

Christine Sakuda is the executive director of Transform Hawaii Government.

“The systems are archaic, old and really need to be modernized,” said Christine Sakuda, executive director of Transform Hawaii Government, a nonprofit that promotes better technological skills in state agencies. “Many of the departments’ critical systems — what the government needs to perform vital services — is decades old and dated.”

One initiative by Gov. David Ige, launched early in his administration, has come to fruition. In January, the state shifted from a 50-year-old system of paper payment statements for state workers to electronic payment, allowing more than 20,000 employees to have direct-deposit at their banks. The payroll system issued checks for 66,182 employees.

“It’s really streamlined it and made it more efficient,” Sakuda said.

Sakuda is championing several bills she hopes will push things forward.

House Bill 532, for example, establishes a new post of chief data officer and a data task force in the Office of Enterprise Technology to help all the agencies update and manage data. It is moving forward in the Legislature, along with a parallel bill, Senate Bill 1001.

Contact Key Lawmakers

Sen. Glenn Wakai, a member of the Senate Technology Committee and the sponsor of SB 1001, said he believed the measure, in one form or another, would have significant public benefits because it is difficult for any single department to keep abreast of ever-changing technological innovations.

“There are so many opportunities for data analytics to spur and inform efficient and prudent decision-making, but often our public sector leaders are not up-to-speed with the latest advances,” he said in an email.

Until January when a new electronic payroll system went into effect, Hawaii still issued paper paychecks to state workers.

Cory Lum/Civil Beat

Since it is impossible for each agency to hire data experts, a person serving as chief data officer for the state could provide that expertise for others, Wakai said.

The proposed legislation would also establish a data task force that would bring together representatives from various parts of the government to share information and establish state data-management procedures. The panel would include members from the judiciary, the health department, human services and other sectors, and also include two four members of the public.

“The task force was conceived as a method of ensuring the CDO is not operating in a silo, and relevant stakeholders are vested in the process from the beginning,” he said.

Wakai identified two sticking points so far. The Senate version of the bill proposed that the group should be composed of 12 members. But in the House, the number was reduced to eight. Although he sponsored the Senate version, Wakai said he agreed that eight members would be the right number.

The other obstacle, he said, is the cost, estimating the new enterprise would cost between $100,000 and $150,000 annually.

The state Office of Information Practices has also endorsed the bill.

“Everybody supports it,” said Jennifer Brooks, an OIP staff attorney.

Sakuda said she is seeing an evolution in thinking about the state’s need to sharpen its information technology skills.

“There’s an understanding by the Legislature of the need for leadership resources for the journey to becoming a digital government,” she said.

A second set of bills — Senate Bill 219 and House Bill 531 — would require the Office of Enterprise Technology Service’s chief information officer to update the state’s data plan every four years, which would allow deliberations to occur in a more timely manner. Both have made substantial progress toward passage.

Meanwhile, technology advocates are also applauding the appointment of a new chief information officer at the Department of Accounting and General Services, Douglas Murdock, who was confirmed on March 27.

Murdock, a former Air Force judge advocate, had previously served as state comptroller and director of DAGS, where he was involved in planning the overhaul of the state’s outdated payroll system.

Murdock told lawmakers he intends to continue to develop the state’s human resource management system to track employees’ time and attendance. He said he will implement new employee recruitment technologies and build cybersecurity awareness throughout the state government.

Sakuda testified in support of Murdock’s nomination, noting that he had independently begun participating last year on a task force developing the state’s information technology strategic plan.

“It is highly encouraging that Mr. Murdock serves on a working group convened last year to begin the plan’s development, and since his appointment this year has expressed support for its completion,” she wrote. “Such a plan will serve as a ‘North Star’ roadmap to chart the course for state IT and data across all state agencies over several years.”

The Hawaii Community Foundation’s Omidyar Ohana Fund supports Transform Hawaii Government. Pierre Omidyar is the CEO and publisher of Civil Beat.

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Surprising Support For New Tax On Hawaii’s Powerful Real Estate Interests https://www.civilbeat.org/2019/04/surprising-support-for-new-tax-on-hawaiis-powerful-real-estate-interests/ Fri, 05 Apr 2019 10:01:41 +0000 https://www.civilbeat.org/?p=1326422 A bill that would make Hawaii only the second state in the nation to pass a tax on a fast-growing type of property ownership known as real estate investment trusts is making surprising progress in the Legislature. REITs are now estimated to own more than $18 billion in real estate in Hawaii. That’s the highest […]

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A bill that would make Hawaii only the second state in the nation to pass a tax on a fast-growing type of property ownership known as real estate investment trusts is making surprising progress in the Legislature.

REITs are now estimated to own more than $18 billion in real estate in Hawaii. That’s the highest amount per capita in the United States, according to legislative testimony. REITs have snapped up many of the state’s marquee properties.

Since 2014, supporters of a REIT tax have made little progress in the Legislature, stymied by some of the biggest real estate interests in Hawaii and elsewhere.

But this session has been different.

Hilton Hawaiian Village entrance. 29 july 2015. photograph Cory Lum/Civil Beat

Hilton Hawaiian Village in Waikiki is one of many marquee properties in Hawaii owned by REITs

Cory Lum/Civil Beat

Senate Bill 301, which would impose a 6.2 percent corporate income tax on REITs, has passed the full Senate with a near unanimous vote. And it’s been approved by three House committees.

But the full House must still pass the measure — and the Senate and the House would still have to agree on a single version of the bill — before it heads to the desk of Gov. David Ige. The Senate’s chief budget writer believes Ige is opposed to the tax.

Powerful Opposition

Supporters call the proposed new tax an equity issue. Opponents call it foolhardy and short-sighted.

The only other state that has passed a REIT tax is New Hampshire. That was more than 50 years ago.

Hundreds of local church parishioners, a bevy of progressive activist groups and about a dozen owners of small businesses in the state have allied in opposition to the owners of some of Hawaii’s premiere real estate, including Ala Moana Shopping Center, Hilton Hawaiian Village and the International Market Place.

They are charging that the offshore real estate owners operating as REITs are tax dodgers who need to be compelled to pay more into state coffers.

“Corporations that make profits here using our resources should pay taxes here, it’s that simple,” said Sen. Sharon Moriwaki, a member of the Senate Ways and Means Committee who co-sponsored the legislation. “It’s about time the state started to get our fair share for our people. Our people are hurting.”

Sharon Moriwaki Con Con Panel.

Sen. Sharon Moriwaki is a co-sponsor of Senate Bill 301, which would tax REITs.

Cory Lum/Civil Beat

Lining up in opposition are an army of REIT executives.

There’s Michigan-based Taubman, owner of the International Market Place in Waikiki, Virginia-based Park Hotels and Resorts, which owns Hilton Hawaiian Village, Maryland-based Host Hotel & Resorts, which owns the Hyatt Regency on Maui, and Canada-based Brookfield Property Real Estate Investment Trust, which owns the Ala Moana Center.

One of the REITs, Alexander & Baldwin, is among Hawaii’s biggest landowners and an original Big Five company, with local roots dating back to the 1860s.

All have testified against the measure, warning that Hawaii’s proposal would be inconsistent with federal tax law and could have a chilling effect on investment.

Dara F. Bernstein, senior vice president and tax counsel for the National Association of Real Estate Investment Trusts, said if the law passed, “REITs would start looking out of state.”

“It would send a negative signal to other companies: Be careful of investing here; the tax system could change,” she said.

The proposed legislation is “whackadoodle” and out of line with federal tax law, said Paul Brewbaker, a local economist.

The bill’s ultimate prospects are uncertain.

In addition to passing the Senate, the bill has passed through three House committees — Economic Development and Business, Consumer Protection and Commerce and Finance.

But according to Senate Ways and Means Chairman Donovan Dela Cruz, a critical decision-maker in budget negotiations, there is some concern that any extra revenue the measure might produce for the state could be offset by a longer-term negative effect on the local economy.

Dela Cruz also said that Ige has said he does not support the measure. A spokeswoman for Ige said the governor would not comment on specific bills at this point in session.

Growing Size Of REITs

REITs were created by Congress in the 1960s to democratize real estate ownership by allowing small investors to own a share of investment-grade properties.

They are securities that operate under a complex set of rules that require them to distribute at least 90 percent of their taxable income to shareholders annually in the form of dividends. REITs are allowed to deduct those dividends from their taxable income, legally avoiding federal taxes.

Shareholders, meanwhile, are taxed on dividend income in their own home states or countries, not in the places where the income was generated.

For the most part, that means not in Hawaii.

In the past decade, as stock market investments have soared, REITs have become gargantuan.

The market capitalization of the industry grew five-fold from 2008 to 2018, reaching more than $1 trillion last year. That means they have vast amounts of capital to invest, and they are making purchases all over the country.

Only one state, New Hampshire, taxes REITs. In 1970, the state enacted an 8.2 percent business profits tax, and included the income of real estate investment trusts within it. The state taxes on the “entity” level and considers taxing one business but not another a form of unfair discrimination.

“I can understand Hawaii’s point of view on this,”said Joe Lofrano, an official at the New Hampshire Department of Revenue Administration. “They aren’t getting money from it. Hawaii’s infrastructure is probably falling apart because they aren’t getting any revenue from it. (REITs) are out-of-staters and they are not paying tax.”

Contact Key Lawmakers

REITS arrived in Hawaii in a big way in a short time.

In 2003, a Massachusetts-based REIT, HRPT Properties Trust, bought about 200 acres of industrial and commercial property east of the airport from the Damon Estate, an old family trust established by the son of a missionary, Samuel Mills Damon.

More than 180 long-established small businesses operated on leased land on the property.

Soon afterward, tenants were reporting their rents had doubled or tripled and some said they would be forced out of business. By 2009, the conflict had turned into a bitter legal battle, covered closely by local newspapers.

Michael Fergus, a local real estate developer and accountant, had long been aware of REITs. In fact, he had invested in them in the past. But what happened in Mapunapuna was the first time he had heard of the negative consequences of REIT ownership in Hawaii.

The area “went from being owned by a relatively benevolent group that cared about the leaseholders to the current guys, who were super-aggressive on rents and were driving people out of Mapunapuna, driving them out of business,” Fergus recalled.

“I thought, ‘These guys are just shipping money out of Hawaii.’”

Michael Fergus thinks real estate investment trusts aren't paying their fair share

Hawaii businessman Michael Fergus began lobbying in 2014 to tax REITs.

In the next 15 years, more and more Hawaii real estate was purchased by REITS.

“All of a sudden the local business community said, ‘Wow, this is having a big impact,’” said Peter Savio, who develops affordable housing projects.

“There’s tremendous demand for our real estate. Most of it is not owned locally anymore. When I was a child, every office building, every shopping center, every hotel, every industrial part, was locally owned,” he said.

It chafed many local businesspeople to realize that while they were required to pay corporate income tax to the state, REITs are not.

“If we have to be owned by mainland businesses, we should at least make them pay taxes,” Fergus said. “How can we survive as a state if people who own all the real estate aren’t paying taxes? It’s nuts.”

Advocates for REITs note the trusts do pay taxes, including general excise taxes and property taxes, and that their commercial tenants generate hefty GET taxes. They also say their investments expand business opportunities and create thousands of jobs.

But some local business people said it wasn’t enough.

Ala Moana center Nordstrom

Ala Moana Center has undergone significant expansion since being acquired by a Canadian-based REIT.

Cory Lum/Civil Beat

In 2014, Fergus and Savio began lobbying for passage of a bill that would force REITs operating here to pay taxes on their corporate profits. Until this year, bills were proposed, but made minimal headway before dying.

Stepped Up Organizing

Early this year, Fergus and his allies decided to expand their outreach. They approached community groups and asked for a meeting to explain the legislation and get their support.

Evelyn Azcon Hao, a retired elementary school principal who serves as president of Faith Action for Community Equity, an alliance of churches and progressive community groups, was inclined to listen.

“They’ve been around, they’re locals,” Hao said. “They’re kamaainas.”

They met at Church of the Crossroads in Honolulu, and Hao said she found the discussion eye-opening.

“I never knew anything about it,” she said. “The surprising thing is not too many people know about this concept of ‘REITs.’ It was new. We had to educate ourselves.”

The issue also aligned with her concerns about the growing gap between the rich and poor in Hawaii.

At Kuhio Elementary, where she had served as principal, more than 80 percent of the students qualify for free or reduced-price lunches. When the shabby apartment buildings where they lived were renovated and rents rose, the families lost their homes, causing the children’s school performance to suffer.

It bothered her that the owners of Hawaii’s most famous properties were profiting without paying the same income tax that a local privately-owned company would pay.

“We are all doing our fair share,” she said. “This doesn’t seem right.”

In the next months, Hao placed more than 150 calls and emails to friends explaining the legislation to them. Some 18 religious groups are part of their confederation, including St. Elizabeth’s in Kalihi, St. John Vianney in Kailua, Temple Emanu-El on the Pali Highway and My-Ryang Sa Buddist Temple in Palolo Valley.

“They were all shocked,” she said. Some began circulating petitions. Hundreds of state residents signed on in support of SB 301, including members of the Sierra Club and the League of Women Voters.

The bill would require REITs to pay state corporate income taxes on their full income, without deducting the dividends they pay to shareholders. An amendment would direct 10 percent of the tax money into economic development in the state. It’s not clear how much money the bill would produce for the state.

The groundswell of support for the measure came as a surprise to Sen. Gilbert Keith-Agaran, vice chair of the Senate Ways and Means Committee, and a co-sponsor of the legislation. He is still considering the issue himself and doesn’t know if the bill will pass or not, but he thinks it is hitting a nerve.

Gilbert Keith-Agaran, vice chair of the Senate Ways and Means Committee, co-sponsored the bill to apply the corporate income tax to REITs.

“Throughout the country, policymakers need to look at whether there is some of kind of equity question,” Keith-Agaran said. “If we pass this, will it be a trend?”

Fergus hopes the movement to tax REITs will go national.

“The REITs are afraid of this spreading all over the country,” he said.

REIT backers meanwhile, are also waiting and watching.

“We’re hopeful that it won’t pass, that the legislature once again won’t pass it,” said Bernstein, the REIT trade group official, who is monitoring the situation carefully from Washington D.C.

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Some Hawaii Taxes And Fees Are Almost Certain To Rise https://www.civilbeat.org/2019/03/some-hawaii-taxes-and-fees-are-almost-certain-to-rise/ Fri, 29 Mar 2019 10:01:10 +0000 https://www.civilbeat.org/?p=1325559 Tax hikes are probably coming to Hawaii, at least for some people. With revenue growth slowing, government salaries on the rise and a raft of big-ticket items on the official wish list, state Sen. Donovan Dela Cruz, chairman of the Ways and Means Committee, is looking for new ways to raise cash. Dela Cruz recently […]

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Tax hikes are probably coming to Hawaii, at least for some people.

With revenue growth slowing, government salaries on the rise and a raft of big-ticket items on the official wish list, state Sen. Donovan Dela Cruz, chairman of the Ways and Means Committee, is looking for new ways to raise cash.

Dela Cruz recently chided Gov. David Ige for not proposing his own revenue enhancers, but the senator isn’t waiting around for that to happen.

Almost a dozen options are under consideration. Dela Cruz is the sponsor or a co-sponsor of many of them, and Sylvia Luke, chairwoman of the House Finance Committee, is supporting some of them in the other chamber.

Two measures, Senate Bill 1361, which would increase the tax rate for estates valued at more than $10 million, and Senate Bill 396, which would make more internet-based sales subject to taxation, have already passed the Legislature and been sent to the governor to sign. They will be enacted unless he vetoes them.

Sen Donovan Dela Cruz during floor session.

Sen. Donovan Dela Cruz said the numbers don’t add up without some revenue enhancement.

Cory Lum/Civil Beat

Senate Bill 380, a proposed tax on the resort fees charged by hotels, meanwhile, edged closer to passage Thursday and Luke said she expected it to arrive soon on the governor’s desk.

Other proposals include new or additional taxes on short-term rentals advertised on platforms like Airbnb, on commercial leases, on real estate investment trusts (known as REITs) and on time shares.

Jodi Leong, a spokeswoman for Ige, said the governor would not comment publicly on proposed legislation to “allow for a fair public hearing.” She said bills that have been passed go through a legal and departmental analysis before the governor himself reviews them.

Dela Cruz said it is essential to enact some of the proposed tax and fee increases to balance the $16 billion biennial budget that was just approved by the Legislature and to add money to help the elderly and the homeless.

Dela Cruz said the bad news that came March 12 from the Council on Revenues, which forecast the state’s income growth slipping to 3 percent, down from 4.2 percent in the previous quarter, pushed him to that conclusion. The state’s general fund grew only 2.1 percent in the first eight months of the year, compared to 6.9 percent for the same period in the previous year.

“Holy shit, we need this more than we thought,” he recalls thinking when he heard the latest revenue forecast.

That night, he went to a white board and began listing bills that would mean more money in state coffers. He identified about 12, one that was revenue neutral and two where possible proceeds were unknown, and he began thinking about how they would fit into the state’s budget picture.

Senate Ways and Means Committee tax hike calculation

A whiteboard used by Dela Cruz to track proposed tax hikes and how much they would generate.

Jim Simon/Civil Beat

He said he was looking for ways to increase taxes on the wealthy and avoid them for lower-income people.

His proposed estate tax increase, for example, would increase a portion of the tax on estates worth more than $10 million from 15.7 percent to 20 percent, which he says would produce about $5 million a year for the state.

It’s gotten mixed reviews.

Tom Yamachika, president of the Hawaii Tax Foundation, said it would give Hawaii one of the highest estate taxes in the nation and likely cause what he called a “brain drain” as wealthy people move away to escape it.

Jared Watumull, a scion of the Watumull real estate fortune, told lawmakers it would create an “undue hardship on small business owners and farmers and their ability to pass their business to their heirs.” He suggested instead that the state should eliminate the estate tax altogether.

But Gary Hooser, executive director of the nonprofit Pono Hawaii Initiative, said people with “eight-figure estates” can afford to spend a bit more given the widening income gap.

Internet Sales And Vacation Rentals

Dela Cruz was also at the forefront, along with WAM vice chair Sen. Gilbert Keith-Agaran and committee member Sen. Kai Kahele, as co-sponsors of a measure to tax more internet purchases, which he says would raise $4 million the first year and about $10 million annually in subsequent years.

Last year Hawaii began taxing goods bought on the internet. Senate Bill 396 would expand the tax to include goods from companies that only use firms like Amazon as what the bill defines as “marketplace facilitators.” In other words, according to Yamachika, consumers would pay sales tax not just on items they buy from Amazon itself but also from companies that use Amazon as a platform to sell their own goods.

At a media briefing last week, Luke said tax hikes are not yet being assumed as part of the proposed budget, but are being considered as “possible revenue generators.” She pointed to Airbnb operators and resort fees as good possibilities.

This ad appeared on the Airbnb website advertising properties for rent in Waikiki.

Screenshot

Senate Bill 1292 would require operators of short-term rentals to pay the transient accommodation tax, with the platforms that host the listings acting as the tax collection agent on behalf of the state. Owners who fail to register with the state Department of Taxation would face citation and monetary fines.

The hotel industry has typically opposed such measures as legitimizing vacation rentals that are often operated illegally.

Contact Key Lawmakers

Short-term rentals advertised by companies like Airbnb are controversial because they disrupt neighborhoods and reduce the stock of affordable housing, Luke said last week.

Those issues are the responsibility of the state’s counties to resolve because they are zoning problems, Luke said, but nevertheless the properties are being operated as hotels and should be required to pay the same taxes as hotels.

“We are leaving a lot of tax revenue on the table,” she said, noting that it has been estimated that the state would generate $45 million to $50 million a year if it collected the money.

Taxing short-term rentals might also make them less attractive to the operators, she said.

Luke suggested it is also time to crack down on Hawaii rental owners who have been advertising on those platforms while hiding their income from the state.

“We don’t think some of these homeowners are actually paying TAT, the transient accommodation tax,” she said.

Resort Taxes And Real Estate Trusts

Resort fees are controversial new charges imposed by hotels that bill customers for things they used to get for free, including in some cases towels or access to the beach, drawing criticism from the Federal Trade Commission. SB 380 would extend the transient accommodation tax that hotels in Hawaii pay to include these fees as well.

To Luke, resort fees are a new source of revenue for hotels that they should be forced to share with the state. The measure passed the House Finance Committee on Thursday.

“They don’t pay taxes on that resort fee, so we are trying to close that loophole,” she told reporters recently, adding that she believed that would bring in about $10 million a year.

Waikiki Beach Hotels visitor industry aerial.

Many hotels now charge resort fees, and some legislative leaders want a piece of the action.

Cory Lum/Civil Beat

Real estate investment trusts are another possible target for the Legislature. Senate Bill 301 would disallow the dividend deduction customary for properties held as securities by real estate investment trusts. Under federal law, REITs disperse their income to their shareholders, which allows them to avoid corporate tax in the locations of their properties, although shareholders pay taxes on that income in their home states or countries.

The tax changes would affect some of the state’s most prosperous industries, and the fight to block them is unfolding both in hearings and behind the scenes.

“It depends on who has the most well-connected lobbyists,” said Scott Foster, a spokesman for Hawaii Advocates for Consumer Rights, who has previously and unsuccessfully urged the state to raise taxes on REITs and Airbnb operations.

It also helps legislation if well-heeled corporations don’t oppose them. Airbnb welcomes taxes on its lodging operators; it makes it less likely that local governments will impose restrictions on their growth.

Amazon fought a bitter battle over a decade to avoid charging taxes on products it sold via the internet while its bricks-and-mortar competitors were forced to collect them. But after losing repeatedly in the courts, Amazon now says it has embraced the prospect of collecting sales taxes.

“Based on our experience in complying with similar laws in other states, we believe (the bill) will level the playing field for all retailers, an outcome that we have long supported,” said Braden Cox, Amazon’s director of U.S. state and local public policy, in testimony to the Legislature on March 15.

In both cases, of course, the taxes are actually paid by the companies’ customers.

The other proposed tax hikes include Senate Bill 395, introduced by Dela Cruz and Keith-Agaran, which would impose a conveyance tax on some short-term leases; Senate Bill 382, introduced by a group of senators including Dela Cruz, which would increase taxes tied to time-share management fees; and Senate Bill 495, introduced by Dela Cruz, which would change language in state income tax rules so that some out-of-state businesses could be subject to taxation.

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Lawmakers Move Swiftly On Spending Plan, But That’s Not The End Of The Debate https://www.civilbeat.org/2019/03/lawmakers-move-swiftly-on-spending-plan-but-thats-not-the-end-of-the-debate/ Tue, 26 Mar 2019 10:01:52 +0000 https://www.civilbeat.org/?p=1325205 The Legislature is preparing to send a streamlined, two-year $16 billion general budget plan to Gov. David Ige within the next few days. House Bill 2 was “decked” on Monday, which means the biennial budget proposal has been provided to lawmakers for a 48-hour review before being voted on by the full House and Senate. But […]

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The Legislature is preparing to send a streamlined, two-year $16 billion general budget plan to Gov. David Ige within the next few days.

House Bill 2 was “decked” on Monday, which means the biennial budget proposal has been provided to lawmakers for a 48-hour review before being voted on by the full House and Senate.

But many of the biggest spending questions remain unresolved, guaranteeing a great deal more political wrangling over the budget before the session is scheduled to end May 2.

The budget, negotiated by House Finance Chairwoman Sylvia Luke and Senate Ways and Means Chairman Donavon Dela Cruz, doesn’t yet include any money for such high-profile items as disaster aid for the Big Island, the expansion of pre-K education and more tuition support for college students.

Joint Finance WAM budget meeting Chair Rep Sylvia Luke WAM Chair Sen Donovan Delacruz.

House Budget Committee chair Sylvia Luke and Senate Ways and Means chair Donovan Dela Cruz have upended the normal budget process this session.

Cory Lum/Civil Beat

That funding still needs to be negotiated.

Some existing economic development initiatives and programs that serve the elderly and the homeless are also in limbo as a result of a new budgeting procedure in the Legislature that allows for extra scrutiny of targeted departments and agencies. HB 2 also includes no grants to nonprofit agencies, which typically cost around $30 million a year.

Dela Cruz expects the budget bill to be on the governor’s desk by the end of March.

The state is finding itself tighter on money than expected at this point because the Council on Revenues has predicted slower economic growth and less revenue coming in to the state coffers than previously forecast. So Dela Cruz thinks tax hikes, including some that target the affluent, will be needed to balance the budget.

Governor David Ige press conference post State of State address.

The top Senate budget writer says Gov. David Ige needs to make tough decisions about how to pay for the programs he wants.

Cory Lum/Civil Beat

Ige will now need to make some decisions that the governor has so far avoided, including finding more money to pay for initiatives he has championed, Dela Cruz said.

“We would have hoped (the governor and his staff) would have some revenue-generating bills, but they don’t,” he said. “You’ve got to anticipate, especially in this time, you need to put some hard thought into what kinds of taxes you can raise without impacting the middle and lower class.”

The governor’s office, meanwhile, has begun its review of HB 2, looking for places where it differs from Ige’s proposal in December.

In addition to not including more money for additional pre-K classrooms, Ige’s UH Hawaii Promise scholarship program and some ambitious housing proposals aren’t yet funded.

A Swift Timeline

This year, the budget process has been speeded up by Dela Cruz and Luke.

They said it was done purposely to leave more time for debate later in the session and to find money for initiatives sought by lawmakers or the governor. An early schedule for the budget debate also leaves the Legislature more time to override any vetoes that may come from Ige’s office.

Time is always tight for the Legislature. Like many states, Hawaii has a part-time Legislature, with sessions typically running from around mid-January to early May.

The legislative session opened Jan. 16. HB 2, the primary budget-funding bill, was approved by the House unanimously two weeks later and moved to the Senate on Feb. 1. The normal deadline is in early March. The Senate drafted its own version and unanimously passed it March 15, more than a month earlier than normal. Conferees spent only about a week consolidating the two versions.

Luke told KITV that she believed this was the fastest budget bill ever passed in Hawaii.

The new budget plan calls for $4 million for security enhancements to the State Capitol; $276,500 to digitize archival records; about $9.5 million to add 139 new positions at the new Hawaii State Hospital building during the next two years; $3 million to hire 53 workers at the new mauka concourse of Daniel K. Inouye International Airport; and $1 million to address invasive species in the state’s biosecurity plan.

But there is no specific funding yet for the costs of collective bargaining of raises for unionized teacher and state workers, estimated at $40 million per year for wages and another $40 million for fringe benefits for each 1 percent pay hike. Many are predicting a 3 percent increase.

In a press briefing Friday, Luke said that lawmakers have made a deliberate decision not to place a dollar amount on how much the state might need to pony up as a result of upcoming contract talks.

“We never want to put aside a large amount for collective bargaining” because it undermines the effectiveness of the arbitration procedure, she said.

Another big ticket item that remains unfunded is disaster relief for the Big Island. Lawmakers have estimated about $60 million is needed.

There are other issues looming in the capital budget, as well, such as a proposed new $350 million facility to replace crumbling Aloha Stadium.

‘They Are Panicking’

The new budgeting procedure calls for review of department budgets by the committee chairs who oversee those departments.

That’s resulted in some specific programs, including the Agribusiness Development Corp., agencies within the Commerce and Consumer Affairs Department, the Department of Transportation’s commercial harbors and the Hawaii Energy Office, being set aside from the current budget for further review.

Legislators are expected to approve and send a budget to the governor’s office by the end of March, about a month earlier than normal.

Anthony Quintano/Civil Beat

Funding for additions to programs for housing, the homeless and the elderly are also undecided, leaving many advocates in the dark.

Dela Cruz said existing programs for the elderly and the homeless were not included in the current budget because they require extra consideration, particularly in light of efforts to increase funding. He said it is important to look at programs not just individually but how they operate together.

The new budget scrutiny, which requires agency heads to provide more detailed financial information to the Legislature than they had been asked for in the past and in a tight time window, has caused great concern among social service agencies, said Jim Shon, head of the nonprofit Kokua Council, which advocates for the elderly.

“They are panicking,” said Shon, a former legislator and now director of the Hawaii Educational Policy Center at the University of Hawaii.

Advocates of the change in budget procedure, which is known as “zero-based budgeting,” say it has boosted accountability by requiring state department heads and agencies to explain and justify their budgets to committee chairs.

But critics say the procedure was rolled out precipitously and chaotically, and that the process has been more time-consuming for agencies than in previous years.

Many social service agencies have found the changes “very unsettling,” said Lisa Maruyama, president and chief executive officer of the Hawaii Alliance of Nonprofit Organizations.

“The process at the Legislature is very different. Budget decisions have been given to committees,” she said in a recent interview. “It’s less clear to understand who the decision-makers are at any point in the process … We’re getting a lot of, ‘I don’t know what’s going on.’”

Dela Cruz acknowledged that some officials did not quickly recognize the magnitude of the change.

“It’s new for them,” he said. “Some agencies are politically astute, some are politically savvy, and some are just absent. If you are absent you are probably going to have a hard reaction. Must be present to win. You have to be involved.”

He said some state department heads had gotten too comfortable in the old system.

“Departments are used to it being delayed, they think they have a lot of time,” he said. “They like the delay because they can try to get stuff in.”

There have been some slip-ups.

Sen. Donna Mercado Kim, the chairwoman of the Senate Higher Education Committee, long known for her testy relations with the University of Hawaii, created a backlash by her proposal to cut $30 million over two years and eliminate 220 faculty and staff positions. Kim told the Star-Advertiser that she was trying to improve accountability at the university.

Within three days, on March 22, Kim had backtracked. In a press release, Kim said she had completed her review and found that widespread cuts would not be necessary.

Shon, of the Kokua Council, said the new budget initiative has had an “admirable goal — let’s democratize the budget.”

But he said that some committee chairs used the mandate to shake things up more aggressively. “It appears a lot of committees went beyond ‘let’s cut a little here,’ into eliminating positions. You could see that in spectacular fashion with Sen. Kim,” he said.

When they realized the changes were getting out of control, Luke and Donovan asserted control, he said, shutting down the discussion and finalizing the budget plan March 22.

“They basically said, ‘Thank you for sharing,’” Shon said.

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The Boat People Of The Ala Wai Fear They’re Getting Forced Out https://www.civilbeat.org/2019/03/the-boat-people-of-the-ala-wai-fear-theyre-getting-forced-out/ Mon, 25 Mar 2019 10:01:01 +0000 https://www.civilbeat.org/?p=1324851 Gentrification is coming to one of the last remaining pockets of affordable housing in Waikiki on the Ala Moana waterfront. Proposed legislation that would raise slip rental fees could have sweeping effects on the eccentric and eclectic community of boat owners — including those who live aboard their vessels full time — clustered at the […]

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Gentrification is coming to one of the last remaining pockets of affordable housing in Waikiki on the Ala Moana waterfront.

Proposed legislation that would raise slip rental fees could have sweeping effects on the eccentric and eclectic community of boat owners — including those who live aboard their vessels full time — clustered at the Ala Wai Harbor, a decaying 11-acre parcel of docks, slips, vacant land and pockmarked parking lots.

The harbor entrance off Ala Moana Boulevard is dwarfed by massive resort hotel complexes. Wedged behind the Ilikai Marina and Hilton Hawaiian Village, it’s a surviving fragment of a time when even an itinerant boater could have a view of the sea.

Ala Wai Boat Harbor Waikiki aerial.

Ala Wai Harbor in Waikiki is home to a tight-knit community of liveaboard boaters.

Cory Lum/Civil Beat

Under a bill proposed by the governor and moving ahead in the Legislature, the cost of maintaining a boat in the Ala Wai is likely to substantially rise.

Senate Bill 1257 would change the rent amount that boat owners pay for their slips at harbors around Hawaii, including the two state-owned marinas on Oahu where people are permitted to live aboard their boats. Instead of a set, stable price, the fees charged are likely to climb because they will be set by an appraiser based on market rates. The exact prices are still under negotiation in the legislature.

The Department of Land and Natural Resources supports the legislation, which would set new rules for how its Division of Boating and Ocean Recreation manages those two marinas.

The largest is Ala Wai, where monthly rental fees would rise from $9 to $13 per linear foot if the bill passes in the form he expects, the governor signs it and two regulatory boards affirm the action, said DOBOR administrator Ed Underwood.

“A town grew up around the harbor here. Now the state is saying, ‘You guys — no more.’” — Boat owner James Callahan

The state says the rent increases are overdue and that the money will help pay for improvement of harbor facilities. Harbors built in the 1950s and 1960s have deteriorated to the point that they have been called a public embarrassment. State officials have estimated the cost of deferred maintenance at $310 million.

The legislation comes in the wake of a new strategic plan issued by DOBOR this year that would seek to convert the Ala Wai property from a funky water-based community into a profit-making opportunity for the state. It explicitly identifies the Ala Wai marina as ripe for redevelopment because of its proximity to Ala Moana Center and location at the gateway to Waikiki.

“Although Ala Wai stands out as the highest net-income-generating harbor, its earning potential remains untapped,” the agency said in the plan.

‘Not Supposed To Be Floating Condos’

The Ala Wai boat harbor, Underwood said, was never intended to house people permanently but as a location where they could live aboard vessels when they weren’t at sea.

“They’re not supposed to be floating condos, which is what it has turned into,” Underwood said, noting that rental rates have not risen since 1991. “People don’t use the boats. They use it for housing and that was never the intent at the Ala Wai.”

As housing prices have risen, more and more people have made the marina their permanent home, and now they say they could be forced to move.

Ala Wai Harbor damaged slip.

Ala Wai harbor has more liveaboards than any harbor in the state, but also a lot of deferred maintenance.

Cory Lum/Civil Beat

“I’m very worried,” said Troy Lynch, a handyman who has lived on a power fishing boat at the harbor for nine years. “I don’t know what I’d have to do. I would just sell my boat and go share a room, or something drastic like that.”

Others who are more able to afford a rent increase worry the changes would disrupt a vibrant community they love.

“Some people are wealthy; others aren’t able to afford it,” said Christa Arrabito, a retired public school teacher who lives at the marina and has found a new career as a diver who cleans the bottoms of boats, including those of her neighbors at Ala Wai. “Some people have said they are selling their boats immediately. A lot of people have said their plans are on hold as they don’t know what will happen.”

For James Callahan, living on his own boat has been a dream since young adulthood when he worked on a boat in Fiji. He moved to Hawaii, attended the university, and found a job and a boat of his own.

James Callahan Holiday Mansion 38 live in boat at the Ala Wai Harbor.

James Callahan in the galley of his 38-foot boat at Ala Wai Harbor.

Cory Lum/Civil Beat

Now he is anxious about the proposed changes. He currently pays $515 a month to rent a slip for his power boat, a 38-foot coastal cruiser he calls Solar System, plus about $70 a month for electricity.

“I don’t think I will be forced out,” he said, acknowledging the current rent is “very cheap.” But the other costs of owning a boat, including maintenance of at least $2,000 a year, make the prospect of future rent hikes more troubling as prices rise.

“I’m not sure how they will calculate it,” Callahan said. “It could really change my game plan.”

And he wonders how things will change if his neighbors move.

“A town grew up around the harbor here,” Callahan said. “Now the state is saying, ‘You guys — no more.’”

‘The Simple Life’

Yumi Booth, who lives at the Ala Wai with her husband, Clarence, and 15-year-old dog, Rascal, worries that not just a living space but a more relaxed way of life is under assault. They own few possessions and work at beach concessions in Waikiki.

“We love living on a boat,” she said. “It’s the simple life. We save money, we don’t need to drive, we bicycle to work.”

Only two state-owned marinas on Oahu allow liveaboards. Ala Wai has 129 slips and the Keehi Lagoon harbor has 35. Many boaters also live in both places illegally, coming and going at night and trying to avoid attention.

“Why are we subsidizing those guys? They’re boaters. C’mon. That’s recreation.” — Honolulu resident Darren Okino

People who live there legally signed up on waiting lists and in many cases waited years before getting one of the coveted permits. The average wait for a liveaboard slip is five to 10 years, Underwood said at a Waikiki Neighborhood Board meeting in August.

Callahan was among those who waited a long time, checking regularly to make sure his application was up to date.

“The list is very long and it doesn’t move,” he said. “By an act of God, I got one three years later.”

For Ala Wai residents, the tone of the debate over the proposed changes has grown poisonous.

They believe the state has purposely mismanaged the harbor to improve the case for turning to a “private partnership” that they believe will lead to for-profit management.

Ala Wai Yacht Harbor sunken boats. There is actually two boats, one atop another.

A sunken boat at Ala Wai Small Boat Harbor. Locals say there’s a second vessel below this one, a sign of a lack of harbor maintenance.

Cory Lum/Civil Beat

They also fear being displaced by rich people with expensive yachts who can afford higher rents.

At a public meeting crowded with boat owners in Waikiki where Underwood spoke, Ala Wai boat owner Bruce Baxter said the state was behaving heartlessly.

“You want to abandon the people who are currently living there … you would prefer to throw us to the sharks and let some private company, some corporation, make the money?” he heatedly asked Underwood.

Others are enraged by what they see as the incompetence of state officials managing the marinas, pointing out that many slips that fall into disrepair are left vacant, generating no income.

At the meeting, Ala Wai boat owner Les Parsons lashed out at Underwood, criticizing the poor conditions of marina facilities and suggesting he should be fired.

“Why do you have the job you have, really I want to know,” Parsons said to Underwood.

Underwood responded mildly, “You’d have to ask my boss, Les, I don’t know.”

Parsons pressed on: “Is any work being done at Ala Wai at the present time?”

Underwood offered a list of projects he said were underway.

Later, Parsons backtracked, saying, “I hope I didn’t get too rough with you.”

“I’m used to it, Les,” Underwood said.

Underwood told Civil Beat that some people are upset because they don’t want to pay higher rent. Others, he said, accuse the agency of mismanagement because they don’t understand it operates according to complicated rules for how maintenance can be managed and funded.

‘No Place For The Local People’

Some people have little sympathy for boat owners who they believe have benefited from artificially low rental rates and facility charges.

At the Waikiki meeting, Underwood said they have been paying only $5 a month for electricity. Boat owners quickly countered that they would pay more if the state had ever installed electricity meters as other marinas have. (Some boaters also pay more because their boats are moored in parts of the harbor where they can connect to power on their own.)

Darren Okino, a Honolulu resident, grew irate as he listened to the boaters’ complaints at the meeting.

“Five dollars electric? My 600-square-foot apartment in Makiki is $180 a month,” said Okino. “Why are we subsidizing those guys? They’re boaters. C’mon. That’s recreation. That’s not a community requirement.”

Booth, who has lived at the marina since 2000, says she understands if she and her husband have to pay more, and considers herself very fortunate to live there at all. But she said the changes underway at Ala Wai represent an unsettling transition for Hawaii.

“There’s no place for the local people to hang out anymore,” she said. “It makes me so sad. Now everything is so fancy, it’s all about money. It’s everywhere.”

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Ige Turns To Private Prison Firm For New Oahu Jail https://www.civilbeat.org/2019/03/ige-turns-to-private-prison-firm-for-new-oahu-jail/ Fri, 22 Mar 2019 10:01:00 +0000 https://www.civilbeat.org/?p=1324930 Gov. David Ige has authorized his staff to begin discussions with private prison companies to build a new detention center on Oahu. In a statement, the governor confirmed that discussions have recently begun, adding that “it’s early in the process.” “Members of my team have been actively researching financing options for a new jail on […]

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Gov. David Ige has authorized his staff to begin discussions with private prison companies to build a new detention center on Oahu.

In a statement, the governor confirmed that discussions have recently begun, adding that “it’s early in the process.”

“Members of my team have been actively researching financing options for a new jail on Oahu,” he told Civil Beat in an email. “We’re exploring public-private partnerships because we know we don’t have $525 million in public capital improvement program funding readily available right now.”

OCCC Oahu Community Correctional Center Dillingham side.

Oahu Community Correctional Center is overcrowded and due for replacement.

Cory Lum/Civil Beat

In an interview last week, Senate Ways and Means Committee Chairman Donovan Dela Cruz said he believes the state may be preparing to lease space in a facility that would be owned by a private company, a plan he indicated he would consider supporting.

As of Feb. 28, the state was holding 5,360 inmates in facilities that were built to house 3,500, according to the Hawaii Department of Public Safety.

The governor has said in the past that building a new jail would cost $525 million. The Legislature has not publicly discussed major appropriations for jail construction this year despite two state task force reports on prison conditions and bail practices as well as a more recent problem with overcrowding at the Maui Correctional Center that led to a riot and significant damage.

Moreover, on Tuesday, two state Senate committees deferred House Bill 1177, a measure that proposed the purchase of the Federal Detention Center, a 12-story building near the Daniel K. Inouye International Airport, to ease overcrowding at state correctional facilities.

The measure had been supported by Rep. Gregg Takayama, chairman of the House Public Safety, Veterans and Military Affairs Committee, who said the federal facility could hold up to 1,200 inmates and would be less expensive than building a new jail.

Senate committee members said little about why they killed the House bill, although Sen. Clarence Nishihara said the center did not offer a “rehabilitative setting.”

Criminal justice reform advocates opposed the purchase of the Federal Detention Center, saying that the state’s focus should be on rehabilitating inmates and reducing the number of people held in jail and prison rather than building or buying more institutions in which to house them.

CoreCivic is viewed as a prime candidate for a private prison because the state has a long-standing relationship with the Tennessee-based company.

More than 20 years ago, as a temporary measure, Hawaii began shipping prisoners to the mainland because it did not have enough detention space even then to house people convicted of crimes. Today approximately 1,450 inmates from Hawaii are held in a detention center in the Arizona desert called Saguaro Correctional Center, which is operated by CoreCivic. The company was previously known as Corrections Corporation of America.

Cindy McMillan, a spokeswoman for the governor, said that the state must find ways to house people who are charged and convicted of crimes.

“The state is obligated to execute the orders of the judiciary,” she said. “We are all aware there is over-crowding and we have capital improvement projects underway across the state. At the end of the day, the state must take those the judiciary sends.”

McMillan said that the governor had been willing to look at the plan to purchase the Federal Detention Center but that the Senate had killed it.

DPS has repeatedly urged state officials to find a way to increase the capacity of the state’s jails and prisons. The agency is pursuing plans to add additional cells on Kauai, Maui and the Big Island. According to a department newsletter published last month, the state is preparing draft environmental assessments in preparation for such plans.

In August, Ige announced the state had completed its review of an environmental impact statement that calls for relocating Oahu Community Correctional Center from Kalihi to the site of the Animal Quarantine Station in Halawa, a cost estimated to be $525 million. The governor hopes to redevelop the former OCCC site for redevelopment because it is located on the rail route.

The state is also moving forward with the design and construction of an expansion of the Women’s Community Correctional Center in Kailua, to prepare for the transfer of women there from OCCC. In October, Hawaii News Now reported that state officials had set aside $40 million for the project, which will allow for construction of a new 180-bed facility there.

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Nonprofits Get 3 Nerve-Wracking Minutes To Make Pitch To Legislators https://www.civilbeat.org/2019/03/nonprofits-get-3-nerve-wracking-minutes-to-make-pitch-to-legislators/ Fri, 15 Mar 2019 10:01:47 +0000 https://www.civilbeat.org/?p=1323827 In a cavernous auditorium underneath the Capitol, a long line of supplicants waited anxiously for a turn at the podium. Tuesday marked an annual ritual in Hawaii, the day when nonprofit organizations that have submitted the right paperwork are invited to appear before a panel of stern lawmakers to make their pitch for money. Some […]

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In a cavernous auditorium underneath the Capitol, a long line of supplicants waited anxiously for a turn at the podium.

Tuesday marked an annual ritual in Hawaii, the day when nonprofit organizations that have submitted the right paperwork are invited to appear before a panel of stern lawmakers to make their pitch for money.

Some 295 organizations have asked for grant-in-aid funding this year; only a fraction of them will get it later in the legislative session.

Organizations requesting Legislature Grants in Aid line up at the podium to request funds from the legislators.

Representatives of organizations requesting state grants-in-aid line up to make their pitches.

Cory Lum/Civil Beat

Applicants are given only three minutes to introduce themselves, explain what their group does and ask for state money so they can do it better. Only one person per nonprofit group is allowed to speak.

“It’s challenging to stand out in that lineup,” said Lisa Maruyama, president and chief executive officer of the Hawaii Alliance of Nonprofit Organizations. “It’s not easy to articulate the value of your organization in three minutes.”

The Tuesday session was a first for Eileen Lynn, a member of the Ewa Beach Lions Club, which hopes for a $30,000 grant. She stayed up late Monday writing and rewriting her testimony, huddling with her husband, another Lions Club member, about the exact wording she should use.

“I was very nervous,” she said a few minutes after stepping away from the lectern. “I was cold and shaking, so I wore my jacket.”

Ewa Beach Lions club members Eileen Lynn, left, and Eleanor Rolark, are hoping to get a state grant

Eileen Lynn, left, and Eleanor Rolark of the Ewa Beach Lions Club breathe a sigh of relief after Lynn made their case for a state grant.

Kirstin Downey

Lynn wasn’t worried about whether the cause was worthy. She feels confident about the group’s mission, particularly its work helping kids with special needs and providing vision care to schoolchildren who are not otherwise getting their eyes checked before heading to classrooms.

Last year the club tested 1,159 children and referred 144 of them to school officials for help with bad eyesight. Kids who can’t see “will fall behind,” Lynn said. If the club gets the money it’s seeking, it could buy a second optical refractor and insurance for it, which would allow it to test even more kids for vision problems.

But she was also anxious for good reason. It’s easy to make a mistake during the application process, and a single error can mean losing a shot at state money for a whole year. Last year the club sought a similar grant and failed after submitting its application just a few minutes late, according to Lynn and fellow member Eleanor Rolark.

Another nervous applicant sitting nearby was Nancy Bottelo, chief executive officer of Special Olympics Hawaii. She is seeking $1 million to help complete a building in Kapolei that will allow the group to provide health services for people with disabilities.

“There are so many worthy charities here asking for money, and there are more nonprofits than there is money to be given, so I hope they see the merits of our projects and give us the money for it,” Bottelo said.

About One-Third Succeed

Bottelo and Lynn know they face stiff competition. Among the many other applicants this year are:

• The Blood Bank of Hawaii, displaced by rail construction, which is asking for $2 million to build a new facility in Kapolei;

• The Honolulu Men’s Shed, which wants $25,700 to buy safety and woodworking equipment for a club that provides a safe haven for senior men to work shoulder to shoulder on crafts and construction projects;

• Amateur Boxing of Hawaii, which wants $50,000 to teach more kids to box and prepare them for competitions;

• The Napili Bay and Beach Foundation, which wants $125,000 to replace a decaying beach access structure on Maui.

Grants in Aid hearing Chair Senator Gil Keith Agaran.

Rep. Scott Nishimoto, right, and Sen. Gilbert Keith-Agaran listen to the nonprofit representatives in open session, but their decisions are made behind closed doors.

Cory Lum/Civil Beat

In recent years, about a third to a half of the groups that have applied have gotten money. In January 2018, for example, 270 nonprofits applied for grants, and in April, the Legislature announced that about 120 would receive a total of just over $30 million. In 2016, 276 nonprofits applied, and the Legislature approved 104 of them, handing out about $36.7 million. It was even tougher in 2015, when 280 applied but only 91 got money.

While representatives of many nonprofits are eager to take a shot, some privately call the process daunting and mysterious. Groups make their pitches openly but the decision-making happens behind closed doors and applicants often aren’t told why they didn’t make the grade.

“Nobody can predict the pattern,” Maruyama said. “It’s not clear how decision-making is occurring.”

Having Friends In The Legislature Helps

The available money varies each year, said Dane Wicker, clerk to the Senate Ways and Means Committee, whose members decide who gets money in cooperation with the House Finance Committee.

“If an organization is filling a void for the state that’s always a plus, something that we don’t need to foot on the state side,” Wicker said, particularly when the promised results are seen as high-priority needs.

He said senators tend to watch out for their own districts, favoring organizations and programs that “are a priority to their constituents.”

Lisa Maruyama, president and chief executive officer of the Hawaii Alliance of Nonprofit Organizations, said, “It’s not clear how decision-making is occurring.”

Courtesy

On the Senate side, the grants-in-aid process is overseen by Ways and Means Committee Chairman Donovan Dela Cruz and Sen. Gilbert Keith-Agaran, the committee’s vice chair. On the House side, the process is led by Rep. Scott Nishimoto.

One change this year is that lawmakers are traveling to Maui and the Big Island to repeat the process, giving neighbor island nonprofits an easier opportunity to make their case without flying to Honolulu, Wicker said. He said that some groups had told lawmakers that traveling to Oahu was not financially feasible.

With so much competition, applicants know that they must have a friend in the Legislature, or two or three, to make sure that their proposal gets the attention of lawmakers who jam this job in among all the others they are doing during the 60-day legislative session.

Lynn of the Ewa Beach Lions Club is hoping for help from Sen. Kurt Fevella, a member of the Senate Ways and Means Committee who represents Ewa Beach. The sole Republican senator is a member of the club. When Lynn and Rolark came to the Capitol, he lent them his parking space — spaces are notoriously scarce during a legislative session.

Doing What The State Used To Do

In some cases, the nonprofits asking for money are doing work the state used to do but stopped because of budget cuts.

The Lions Club is a good example. The state used to consider vision-screening of schoolchildren an essential service, but it stopped administering the screenings in 1995 amid budget cuts made when the national economy slumped and Hawaii tourism took a nosedive.

Contact Key Lawmakers

 

 

The former Department of Health Hearing and Vision Program had conducted vision screening from 1978 to 1995, but the program was terminated by legislators who reasoned that health care providers could do it instead.

Yoga in prisons was a state program that got cut in 2009. The nonprofit Yoga School of Kailua has maintained the service for inmates, and is seeking a $72,155 grant to expand yoga instruction in jails with the encouragement of Sen. Laura Thielen.

“So little is being done for inmates in correctional institutions,” said applicant Thomas DiGrazia. “This is their lifeline.”

But even if they win another grant, the future is uncertain, DiGrazia said.

That underscores a central problem for nonprofits. While they are grateful to get help through grants-in-aid, which Maruyama called a “wonderful source” of income, a more consistent source of funding would allow nonprofits to plan better.

Regular appropriations in the state budget could be much more helpful, but for now, “I don’t want to knock a resource,” she said.

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Revenue Council Predicts Slowdown In State Economic Growth https://www.civilbeat.org/2019/03/revenue-council-predicts-slowdown-in-state-economic-growth/ Wed, 13 Mar 2019 10:01:42 +0000 https://www.civilbeat.org/?p=1323616 Hawaii’s economy is slowing down after a couple of turbocharged years, and that’s going to affect how much the state government has to spend. The state Council on Revenues, a panel of tax professionals, business leaders and economists that advises the state on budget-planning, said that while the economy is still growing, increases in tax […]

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Hawaii’s economy is slowing down after a couple of turbocharged years, and that’s going to affect how much the state government has to spend.

The state Council on Revenues, a panel of tax professionals, business leaders and economists that advises the state on budget-planning, said that while the economy is still growing, increases in tax revenue are likely to be lower and slower.

After deliberating Tuesday afternoon, the panel unanimously endorsed a projection of a 3 percent increase in the state’s general fund during the last four months of fiscal year 2019, which means that state legislators will have about $80 million less to spend for this fiscal year than they had hoped.

Council on Revenues Member JACK P. SUYDERHOUD.

Council on Revenues member Jack Suyderhoud, center, concurred that the growth rate is slowing.

Cory Lum/Civil Beat

The January forecast had been for a 4.2 percent annual increase in the general fund. A year ago, the panel projected a 5.3 percent growth rate.

The amount in question — $80 million — is still a small portion of the state’s operating budget of roughly $7.2 billion for fiscal year 2019. But the council’s projections are also used in setting budgets for coming years because Hawaii operates on a six-year budgeting plan.

By Tuesday night, the chairs of the two legislative budget committees — the House Finance Committee and Senate Ways and Means Committee — had already worked the latest projection into their planning.

“It’s significant but not a serious concern,” said Rep. Sylvia Luke, chair of the Finance Committee. “It’s a concern but won’t change the priorities of the Legislature.”

She said that she did not expect that it would affect, for example, the approximately $60 million being set aside for disaster relief for the Big Island. But she did say it could affect money for the Hawaii Promise program, which would provide free in-state tuition at more state colleges. (Correction: An earlier version of the story incorrectly quoted Rep. Sylvia Luke saying she believed the decrease in anticipated revenues would not affect the Hawaii Promise program.)

On the other hand, she said, she could see it having an effect on the money available in coming years for housing and homeless programs and human services.

“We could have some adjustments depending on what the big priorities are,” she said.

Ways and Means Committee Chair Sen. Donovan Dela Cruz noted that there is no immediate impact because the governor has indicated the state has a $750 million budget carryover for this year, which gives the state a buffer.

Longer term, he said, finding new revenue streams, including imposing taxes on vacation rental properties, could help counteract decreased tax growth. He said that several pieces of legislation proposed this year would add more money to the state’s coffers.

Tuesday’s projection was notably less rosy than those of recent quarters.

“Our economic growth is tapering and revenue growth is tapering,” said council member Jack Suyderhoud, professor emeritus of business economics at the University of Hawaii.

The group reached consensus around the 3 percent figure after a lively and wide-ranging discussion that included review of tax revenue figures, general excise tax reports, developments in tourism and national and international financial and economic trends.

Although they saw some reason for optimism, including record tourism, the nation’s high gross domestic product and a still-robust performance by the stock market, they also pointed to a lower-than-expected job creation rate in Hawaii and a decline this year in estimated taxes by state residents. They repeatedly stressed that economic indicators were inconsistent, which made them on balance more pessimistic than optimistic.

“Everybody is being very cautious,” said Council on Revenues Chairman Kurt Kawafuchi, a tax attorney and former state tax director.

Council on Revenues Chair Kurt Kawafuchi during meeting.

Council on Revenues Chair Kurt Kawafuchi led a lively discussion Tuesday.

Cory Lum/Civil Beat

“We take it very seriously, trying to forecast,” Kawafuchi said. “We know what’s at stake — various programs, and affecting people’s lives.”

One particular unknown in the deliberations is what effect the arrival of Southwest Airlines will have on the islands. While it is going to bring more visitors, they may be more cost-conscious than those that arrive on higher-end carriers and may spend less money once they get here.

The numbers naturally have to decline after the previous period of record growth in the state, several council members said.

In fiscal year 2018, tax revenue in the state grew 7.6 percent, fueled by record tourism, a federal tax-law change that gave some taxpayers more money and booming levels of construction.

It’s not likely that will be duplicated, according to the panel.

“Last year was a sugar high,” said Carl Bonham, a professor of economics and executive director of the University of Hawaii’s Economic Research Organization, and a council member.

The two women on the council — Marilyn Niwao, a tax lawyer from Maui, and banking executive Kristi Maynard — were more bearish about the economy.

Council on Revenues Member Marilyn Niwao.

Council on Revenues member Marilyn Niwao sees some ominous economic signs.

Cory Lum/Civil Beat

“I see restaurants going out of business, retail suffering because of the internet … I think we’re not going to find a pot of gold here,” Niwao said in initially urging that the forecast be set lower than 3 percent.

Her views were echoed by Maynard: “The more I think about it, the lower my number is going,” she said.

But Suyderhoud, Bonham and economic analyst Christopher Grandy viewed the state’s fiscal prospects more positively.

“I think there’s more underlying strength in the economy,” said Suyderhoud after the meeting.

The post Revenue Council Predicts Slowdown In State Economic Growth appeared first on Honolulu Civil Beat.

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Hawaii Prisons: ‘You Can’t Have A System Policing Itself’ https://www.civilbeat.org/2019/03/hawaii-prisons-you-cant-have-a-system-policing-itself/ Tue, 05 Mar 2019 10:01:26 +0000 https://www.civilbeat.org/?p=1322469 There may soon be fresh sets of eyes peering over the walls into the state’s eight jails and prisons. A guard’s fatal shooting of what authorities said was an escaping inmate near the Oahu Community Correctional Center on Friday was the latest high-profile event to occur at the state’s long-troubled detention facilities that are dealing […]

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There may soon be fresh sets of eyes peering over the walls into the state’s eight jails and prisons.

A guard’s fatal shooting of what authorities said was an escaping inmate near the Oahu Community Correctional Center on Friday was the latest high-profile event to occur at the state’s long-troubled detention facilities that are dealing with overcrowding, unexplained inmate deaths, attacks on guards and reports of sexual assaults.

Now the Hawaii Legislature is considering setting up a five-member commission to provide  independent oversight of the Department of Public Safety’s Corrections Division. House Bill 1552 has passed the House and is moving to the Senate where a companion measure, Senate Bill 1424, has stalled.

“You can’t have a system policing itself,” said Sen. Clarence Nishihara, chairman of the Senate Public Safety, Intergovernmental and Military Affairs Committee. “You need oversight … It’s overdue.”

A guard walks a corridor at the Oahu Community Correctional Center.

Cory Lum/Civil Beat

But will it happen? He isn’t sure.

“There’s resistance from within the system to oversight,” he said.

Friday’s incident in which an inmate who apparently broke out of jail ran free and was shot, is just the kind of thing a commission could address, said Rep. Gregg Takayama, chairman of the House Public Safety, Veterans and Military Affairs Committee.

“There was a major security breach at OCCC if an inmate is able to get through a secured door and a security gate without being stopped,” Takayama said in an email. “No one wants to see the loss of life but this could have been far worse if innocent bystanders were abducted or shot accidentally. This is an instance in which an oversight inquiry could benefit all our correctional facilities by determining what went wrong and helping prevent a reoccurrence.”

The proposed creation of the commission comes at the urging of a blue-ribbon task force including judges, prosecutors, parole authorities, criminal justice reformers and Native Hawaiian activists who found the corrections system is “not producing acceptable, cost-effective, or sustainable outcomes and needs immediate and profound change.”

“One of the issues that surfaced in a negative way is the need for more communication between DPS and the community,” said task force member Meda Chesney-Lind, a criminologist and professor of women’s studies at the University of Hawaii. “They see themselves as walled off — both literally and figuratively. There’s not a lot of transparency about their activities.”

Chesney-Lind said that reports of suicides or accounts of the segregation of mentally ill inmates in isolation cells illuminate what she called “terrible situations” in need of more government accountability. She said these events “reverberate through the system.”

It’s uncertain how much of what the task force recommended will be given the force of law. The state’s two most influential legislators on criminal justice issues — Nishihara and Takayama — were both active members of the task force with a “pretty significant involvement in the discussions,” Chesney-Lind said.

Rep Gregg Takayama during leg briefing on prisons.

Sen. Clarence Nishihara, left, and Rep. Gregg Takayama are pushing for creation of an independent commission to oversee Hawaii’s jails and prisons after serving on a task force that recommended it.

Cory Lum/Civil Beat

Now they are tasked with seeing how many of the task force’s recommendations they can shepherd into law. Both Nishihara and Takayama have said they are hopeful of passage of the independent commission bill.

“I’m kind of hopeful they will pass this guy,” Nishihara told Civil Beat. “I think we can get the votes for it on the Senate side.”

The task force also recommended the state try to find ways to reduce the number of Native Hawaiians in the criminal justice system; seek to reduce the inmate population; create a sentencing reform commission to downgrade offenses and shorten sentences; create a corrections academy to train workers; improve re-entry programs; develop a realistic plan to bring prisoners back from for-profit prisons on the mainland; move inmates into small-scale community-based detention facilities rather than austere prisons and improve care and provide better treatment for mentally ill and drug-addicted inmates.

Few of these ideas received consideration in the Legislature this session. A law requiring the state to bring back prisoners from the mainland died in committee when Takayama called it “laudable” but “unrealistic.”

Takayama gave the oversight commission bill an 80 percent chance of passage. He added that it will require sustained lobbying by criminal justice reformers and other community members.

DPS officials have presented written testimony to legislators saying they support creation of the oversight commission and have added that that the full costs of creating it should be taken into consideration, including salaries and the expense of renting offices.

Correction: A previous version of this report said the DPS neither supported nor opposed the legislation.

In a request for comment from Civil Beat, a DPS spokeswoman declined to elaborate on the department’s position on Monday.

The Office of Hawaiian Affairs staff has recommended that its Board of Trustees support it, and a number of criminal justice reform advocates have endorsed it.

Recent Troubles

If it is created, the commission could find itself with a lot to investigate.

The task force found that a number of recent events underscored the need for an impartial review and investigation mechanism.

In January 2017, the American Civil Liberties Union Hawaii filed a complaint with the U.S. Department of Justice alleging unconstitutional conditions at Hawaii’s detention facilities, including “woefully inadequate” medical and psychiatric care and unsanitary living quarters.

In March 2017, the Honolulu Star-Advertiser reported that 10 women at the Women’s Community Correctional Center in Kailua said they had been sexually assaulted by male and female guards. In July, a Maui jury convicted a guard of second-degree sexual assault of an inmate.

In September 2017, three correctional officers were attacked by inmates at the Oahu Community Correctional Center who were, according to the task force, “angry and frustrated over long periods of lockdown due to staffing shortages.”

From June 2017 to January 2018, there were five suicides at Hawaii’s detention centers, the task force reported.

The legislation calls for the creation of a five-member commission with members to be appointed by the governor, the Senate president, the speaker of the House, the Supreme Court chief justice and the chairman of the OHA Board of Trustees. Commissioners would not be paid, but would be reimbursed for their expenses.

Investigative Powers

The commission would employ a coordinator with experience in criminal justice and who has “a firm commitment to the correctional system’s transition from a punitive model to a rehabilitative and therapeutic model.”

The coordinator, who would serve a two-year term, would supervise the operations of the commission and receive “allegations of any violations of the laws of this state or rules pertaining” to DPS. The coordinator would be authorized to hire staff, including a minimum of two researchers and one clerical assistant. He or she would be required to report within 30 days on any allegation of violations of the rules and “whether prosecution for a criminal investigation is warranted.”

Contact Key Lawmakers

And the coordinator could also initiate investigations into any cases where abuses are reported and make recommendations for how to remedy problems that emerge.

The coordinator would be authorized to make inquiries as needed and enter detention facilities without giving prior notice to DPS officials.

The commission would be charged with overseeing the state’s correctional system with jurisdiction over investigating complaints; establishing maximum inmate population limits; working with the department to monitor and review inmate re-entry programs and ensure re-entry programs and supports are operating properly.

According to the legislation, the commission “may hold public meetings,” although it is not apparently required to do so.

The commission would report on its activities yearly to the governor and Legislature.

There would be some daunting bureaucratic hurdles in creating the commission. It first would require two other existing entities — the Re-entry Commission and the Corrections Population Management Commission — to be subsumed within it.

Task force member and reform advocate Robert Merce said the consolidation makes sense and would make oversight of the corrections system more efficient and effective.

But Kat Brady, coordinator of the Community Alliance on Prisons, told legislators she fears that trying to wrap two other commissions into a new one could prove unwieldy and burdensome.

Nishihara thinks the biggest hurdle ultimately would be direct opposition from the public safety department.

“Resistance to change,” he said. “It’ll take quite a bit of effort on the part of the commission to overcome resistance to it.”

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