Rep. Karamatsu’s Floor Remarks Entered Into the Journal Regarding His Enterprise Zone Bill


Floor Speech on the Enterprise Zone Bill
Tuesday, March 4, 2003

Mr. Speaker, I rise in support of Standing Committee Report Number 849.

Mr. Speaker, the enterprise zone program was created in 1986 to encourage business activity, job creation, and economic diversification where they are most needed through regulatory flexibility and tax incentives. However, with the threat of war and economic uncertainty, time is of the essence, therefore, we must go further and work proactively to support areas losing a great number of jobs.

Current law allows each county in the State of Hawaii to select six areas for designation by the Governor as enterprise zones. House Bill 685 House Draft 2 would go further by directing the governor to work with the city and county of Honolulu to create additional enterprise zones in areas where commercial real estate have a vacancy rate of fifteen percent or more. Underutilized commercial real estate and the loss of jobs in these areas must be addressed before the situation worsens.

Although this measure would waive the requirements in sections 209E-4 and 209E-5 of the Hawaii Revised Statutes, relating to zone designation and application review, the strict eligibility requirements in section 209E-9 of the Hawaii Revised Statutes will still be applicable for these two-year period enterprise zones.

Accordingly, to be eligible, a business located in an enterprise zone must earn at least half of its annual gross revenue from trade or business within the zone. In addition, businesses must satisfy one of the following hiring requirements. “New” businesses must increase their average annual number of full time employees by at least 10 percent the first year. At the end of Year 2, the average annual number of full-time employees must not drop below the required Year One average. For “Existing” businesses, they must increase their annual average number of full-time by at least 10 percent the first year. In Year 2, existing businesses will need to continue their average annual number of full-time employees by at least 10 percent as well. Therefore, businesses must still work to receive state and city incentives.

For the sake of fiscal responsibility, House Bill 685 House Draft 2 is very specific. On Tuesday, February 25, 2003 before the House Committee on Finance, The Department of Business, Economic Development, and Tourism (DBEDT) in its written testimony, stated, “…we have determined that of the three types of commercial real estate: office, industrial and retail space, there are few geographic areas on Oahu that have a vacancy rate of 15% or more in any of these categories.” Hence, this bill will not be applied freely but rather prudently to areas in dire need.

For members concerned about “home rule,” the city and county of Honolulu can choose not to provide any of its incentives set forth in section 209E-12 of the Hawaii Revised Statutes if it is unable or unwilling to participate. Such a decision by the City will not terminate the temporary enterprise zone term of two years. Moreover, qualified businesses in these temporary enterprise zones will still be eligible to receive the state tax incentives until the zone terminates as a result of this measure’s two year sunset clause.

Finally, this measure supports our goal in diversifying our economy by allowing a variety of industries to participate in this program, including a good number from the knowledge-based industries.

Thank you Mr. Speaker.

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