Representative Jon Riki Karamatsu
Floor Speech on Senate Bill 44, S.D. 2, H.D. 2, C.D. 1
Tuesday, April 29, 2003
Mr. Speaker, I rise in support of this measure.
Senate Bill 44 has been amended to give the administration as much flexibility as possible. The bill, as amended, provides that if the Administration and concessionaires cannot agree on relief, the Administration can either; (1) terminate the concession contract; or (2) force the concession to remain in business on a break even, no profit basis. Even if expenses exceed income, the Administration can require the concession to pay some rents in addition to its monthly losses for a period up to 6 months. Disputes as to what constitutes break even, no profit rents would be decided by a court-appointed arbitrator. Moreover, anytime while a concession is receiving relief, the Administration can terminate the concession contract.
This measure will also allow fair market rents to be applied, which will obviously be lower after force majeure events occur such as September 11th and the War on Iraq. The fact that the bill gives the Administration the right to terminate the contract and put it out to bid ensures that it will have the opportunity of seeking fair market rents at all times. Further, the fact that the bill allows the Administration to require the concessionaire to remain in business on a break even, no profit basis provides the Administration with the option of recovering better than fair market rents since no one remains in business on a break even, no profit basis.
Some of my colleagues on the other side of the aisle mentioned that the smaller concessionaires should be separate from bigger concessionaires. Why split up a handful of companies in this regulated industry? By doing this, the administration can divide and conquer, and broker different deals with the various concessionaires. This would lead to unfairness to certain concessionaires because of their gross sales, size and type of customers.
The Administration and some members across the aisle keep mentioning Hawaii's largest concessionaire, Duty Free Shoppers, which is being targeted because of its size and the amount of money they generate for the State. DFS' Waikiki store was again mentioned as one of the reasons for the attention being placed on the company. As I stated in the past on the floor, had it not been for the DFS Waikiki store, the State would not have been able to receive approximately $2.5 billion dollars, and a good number of the $575 million unrestricted-surplus-special fund is from DFS.
On December 2, 2002, the Administration explained that Hawaii is now open for business. Those words meant a lot to me; however, actions speak louder than words. Let me emphasize that the concessionaires are businesses that hire local employees and pump millions of dollars into our State. While the House is encouraging new businesses and investments in the knowledge-based industries, it is keeping current jobs alive and revenues flowing in the regulated industries, the airlines and now the concessionaires. Yet the Administration has proposed to gut Act 221 and refused to negotiate with the concessionaires until the legislature introduced relief bills for them this session. This measure and Act 221 is as pro-business as you can get. The actions taken by the House of Representatives and Senate clearly show that yes, Hawaii is indeed open for business.
Thank you Mr. Speaker.
JON RIKI KARAMATSU 