East Maui retailers seek enterprise zone tax breaks

Pacific Business News (Honolulu)
February 18, 2002

Christy L. Cain
Pacific Business News

It's been one year since Dawn Lono opened her flower business in Hana, Maui, but she's not ready to celebrate. The combination of Sept. 11, dengue fever and road closures to Hana have negatively impacted her flower shipment and retail business, decreasing her revenue by half.

Lono isn't giving up on her businesses, Ohana Lei and Flowers and Na Pua Ohana. Instead, she's crossing her fingers that proposed legislation will pass to extend enterprise zone benefits to east Maui retailers.

Enterprise zones allow qualified businesses tax breaks for up to seven years if certain hiring requirements are met. Under current law, a "qualified business" includes farmers, manufacturers, wholesalers, high-tech developers, researchers and those engaging in the production of electric power from wind energy for sale to a public utility.

Each county may nominate up to six enterprise zones for designation by the governor. Maui County already has three -- Lanai, Molokai and Hana.

"The enterprise zone is the state's way of saying this is a special area of economic development and it's given special exemptions. This is simply adding retailers into the Hana enterprise zone," said Sen. J. Kalani English, D-Kahului-Wailuku-Upcountry, who introduced the bill.

Winning passage may not be so simple.

"Every time the issue of including retailers comes up, the reason to not include them is the same: There is no way to avoid creating unfair advantages for some retailers and not others," said Tom Brandt, enterprise zone coordinator for the state Department of Business, Economic Development and Tourism.

"At first, any kind of business was going to be included in this legislation," Brandt said. "But there was opposition saying there is too much head-to-head competition for retailers. There's no way the government could draw boundaries that would include some retailers in enterprise zones and leave some out."

Hana's unique situation could justify including retailers, said Carol Pregill, executive director of the Retail Merchants of Hawaii.

"Generally, incentives should be across the board," Pregill said. "But this is a specific area that has seen certain unusual circumstances. We all got hit by 9-11, but Hana got hit really hard with dengue fever."

Extending the zone to retailers may result in a loss of $750,000 to $900,000 in annual general excise tax collections, but could result in millions of dollars in savings from reduced social service costs, English said.

"Not collecting the excise tax will be offset by reducing the public service taxes spent on social services, welfare and unemployment," English said. "We're willing to give up some money to save a lot of money and help businesses and a small town survive. If we don't do something, businesses will close and we'll end up having to spend about $10 million on social services."

Reach Christy L. Cain at ccain@ bizjournals.com or at 955-8038.

© 2002 American City Business Journals Inc.

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