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    Two Tax Bills This Year

    Tom Yamachika
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    Two Tax Bills This Year

    Our Legislature has reconvened and has adjourned for the year.  If you blinked and missed it, you probably are not alone.  This year, there was a huge focus on passing only essential items.  As a result, only 86 bills passed the Legislature this year while in a typical year 250-300 bills are sent up.

    Source:  Capitol.hawaii.gov reports compiled by Tax Foundation of Hawaii.

    If you wanted to see a new exemption or tax credit, it didn’t happen.  If you were shuddering to think that new tax increases were on the table, they didn’t happen either.  Only two of the tax bills made it up to the Governor this year.

    One bill that went up changed the renewable energy credit by disallowing it for solar farm projects of 5 MW or more that started in 2020, but providing that tax treatment would be grandfathered for certain projects pending approval as of the end of last year.

    The second bill was sponsored by the Department of Taxation.  Every year, the Department prepares a bill to specify which of the many changes to the federal income tax law get reflected in the Hawaii income tax law.  The usual practice is that the federal changes in the previous calendar year, in this case 2019, are considered in the current legislative session.  Indeed, a bill to do just that was introduced at the request of the Administration and was passed out of the Senate.  Then the pandemic hit and lots of things happened, including the passage of the federal CARES Act.  Some testifiers, including the Tax Foundation of Hawaii, urged the Legislature to adopt key provisions of the CARES Act although it became law in 2020.  The Department, in testimony, proposed to adopt a few provisions and leave others on the cutting room floor.  Without much fanfare or public discussion (the Capitol was still closed), the House adopted those provisions and the Senate agreed to them.

    As a result, Paycheck Protection Program (PPP) loan forgiveness will not be recognized as income, federal stimulus payments will not be recognized as income, the limits on people taking out retirement plan loans will be relaxed, and the new treatment of charitable deductions will be expanded to the same extent as in the CARES Act.  However, lawmakers did not adopt the provisions of the CARES Act that allowed businesses to monetize their prior net operating losses by allowing them to be applied against other income and by allowing the losses to be carried back to previous taxable years were not adopted.  At the national level, it was thought that those provisions would help struggling businesses to weather the COVID-19 economic shock.

    We don’t know why some provisions were adopted while others weren’t.  The Department of Taxation’s testimony was only that it recommended the changes, but it had no discussion or reasoning behind its recommendations.  Public discussion and debate could have brought out the Department’s reasons, which the legislators could then weigh against the concerns of businesses. 

    The results of this legislative session for tax bills were perhaps understandable, but the process left something to be desired.  Is this going to be the new normal?  We certainly hope not.

    Electric Vehicle Sweeteners Running Out?

    Tom Yamachika
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    Electric Vehicle Sweeteners Running Out?

    If you are one of the lucky people who have managed to buy an electric vehicle and get a special plate for it, you probably know that several benefits came with that special plate, including the ability to park at government parking lots (including at the airport!) and street spaces for free, and the ability to jump into carpool lanes even though there is just one person in the car.  You also might have gotten a federal tax credit for your car purchase.

    Sadly, good things don’t last forever.  The free parking benefit and the carpool lane benefit expired on June 30, 2020, according to the terms of the 2012 law that spawned them.

    For tax benefits, the pendulum has started swinging in the other direction as well.  The federal credit is up to $7,500 per qualified vehicle, depending on battery size.  But a phase-out clock starts ticking on the federal credit given for a car manufacturer once the manufacturer has sold 200,000 units.  Tesla was the first to hit the milestone, followed by GM, both in the second half of 2018.  As a result, electric vehicle credits are no longer available for new purchases from these manufacturers…but there are plenty of other manufacturers.  Here is a list of qualifying vehicles from the IRS.

    From the State of Hawaii, electric vehicle owners now can expect a $50 surcharge on their annual vehicle registration fees, thanks to a 2019 law that went into effect on January 1, 2020.  More is yet to come; the Department of Transportation has been pursuing the idea of funding improvements to highways and bridges with a Road Usage Charge, now called HiRUC, that will charge citizens per mile driven instead of (well, we think it’s instead of, but our lawmakers may have other ideas) charging for fuel purchases through our current fuel tax.  Owners of hybrids, electric vehicles, and alternative fuel vehicles can expect to pay quite a bit more under HiRUC than they are now paying under the fuel tax system.  We have written about it in more detail here. 

    Electric vehicles also benefit from laws such as HRS section 291-71 requiring places of public accommodation (shopping centers, for example) to dedicate some parking stalls for electric vehicle charging.  These laws don’t seem to be going away any time soon.  Instead, the momentum seems to be toward requiring more electric vehicle infrastructure such as chargers.  The City & County of Honolulu, for example, recently adopted Ordinance 20-10 mandating that builders of new residential or commercial buildings follow new “electric vehicle readiness compliance pathways.”  See section C406.8, Electric Vehicle Infrastructure, beginning on page 8 of the bill.  (We had written about a previous incarnation of that bill as well.)  For residential buildings, for example, if new construction or renovation adds eight or more new parking stalls, then at least 25% of the new stalls must be electric vehicle charger ready.  If new construction or renovation of commercial buildings adds 12 or more new parking stalls, at least 25% of the newly added parking stalls must be electric vehicle charger ready.  There are some exceptions and reductions in the requirements for cases such as retail establishments and affordable housing.

    Government benefits for electric vehicles, then, appear to be past their peak.  Some of them are starting to erode.  Those who are in the market for a new vehicle now and are banking on government benefits should definitely do their homework to see if the benefits they are counting on still exist or are on their way out.

    Future of Unemployment Insurance

    Tom Yamachika
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    Future of Unemployment Insurance

    Multiple readers have asked about unemployment insurance and how it is going to fare after the pandemic.  This will give you an idea of how the system works.

    State unemployment insurance (SUI) is largely funded by employers.  Most employers are charged tax that depends on two things:  the overall health of the fund into which SUI tax is collected, and the claims history of the employer.  So, an employer with a long history of chargeable claims, for example, will pay more than others.  Also, if there is lots of money built up in the fund then the tax rate goes down for everyone.

    The health of the fund determines the proper tax rate schedule.  The schedules are named after a letter of the alphabet, with A the least costly schedule and H the most expensive.  The fund health is measured at the end of the year, and that measurement is used to set the rate for the following year.  Here is a chart of the SUI rate schedule for the past 20 years:

    Source:  DLIR Reports compiled by Tax Foundation of Hawaii.

    Although the Great Recession of 2008 and related events caused the fund to run out of money and we needed to borrow around $180 million from Uncle Sam, employers were not subjected to the dreaded Schedule H because our lawmakers passed special legislation to control the SUI rates and override the normal formulas for the years 2010 through 2012 (the orange bars in the diagram). 

    What can we expect once the year ends?  Lately, the volume of unemployment claims has been so great that the authorities set up a processing center at the Hawaii Convention Center.  Our fund started off the year at nearly $600 million but has been draining rapidly.  A news release dated July 2, 2020, said that the Department of Labor and Industrial Relations already has paid out $1.85 billion in benefits.  Fortunately, federally funded benefits such as the extra $600 per week paid to those on unemployment are not charged to employers because that money does not come from our fund.  The State’s budget bill, Senate Bill 126, section 38, appropriates federal CARES act money to fund an additional weekly unemployment benefit of $100 per week once the federal $600 per week runs out.  Those benefits will not affect the SUI fund either and should not count against employers for the same reason.

    Nevertheless, with an unemployment rate peaking at 23.8% in April, a tremendous strain has been placed on the fund.  There will be a spike in SUI rates next year unless our government does something to prevent it, as it did for the years 2010‑12.  Is our government simply going to wait around for the automatic increases to take effect from the beginning of 2021?  Some businesses might not survive another hit at that time.  Perhaps some thought should be given sooner rather than later to the impact of elevated SUI rates.

    A wi-fi enabled rat trap may be in your future

    Robert Kay
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    A wi-fi enabled rat trap may be in your future

    As if COVID-19 isn’t enough to occupy our lives, according to reports from the CDC a national rodent assault is underway.  Hawaii is not immune.

    “With so many restaurants closed because of the COVID-19 lockdown,” says Ian Mateo founder of Kalihi-based Pest Tech Hawaii, “rats are finding their way into homes.” The problem is compounded, he added with people hoarding large quantities of food from Costco and Sam’s Club.  

    If the rats have already made your home their new feed lot, the first step is to seal any entrances. The best method to do this, according to Shawn Woods founder of YouTube channel and website Mousetrap Monday (https://mousetrapmonday.com/), is with silicone caulk, steel wool or copper mesh. Woods, a fount of rodent wisdom, regularly reviews seemingly every rodent trap known in existence.

    The Smart-Kill Wi-Fi Electronic Rat Trap lets you know when you have dispatched a rodent.

    The upshot is you can dispatch the rodents in any number of ways. I do not like using poison, so I tested a battery-operated electronic trap that delivers a high voltage shock.

    The upshot is you can dispatch the rodents in any number of ways. I do not like using poison, so I tested a battery-operated electronic trap that delivers a high voltage shock.
    There are several electronic traps on the market, but I selected the Smart-Kill Wi-Fi Electronic Rat Trap from a Lititz, PA firm called Victor. The cool thing about this product is that it will inform you via smartphone or another mobile device when you’ve liquidated a rodent. This is much better than finding out a few days later when the decomposing creature leaves a distinctive odor.

    To get started, download the Victor Pest app and pair it with your phone. Just follow the instructions. Be certain that you’re using the 2.4 GHz band on your router rather than the 5 GHz. Otherwise, as I learned, it won’t function.

    In addition to informing you when you’ve caught a rat it will monitor your batteries, remind you to empty the trap and even keeps a lifetime kill record. You’ll need four C-cell batteries which are good for up to 50 rat kills. It’s priced at $54.49 on Amazon.

    • Got me a rat! It’s easy to dispose of too…

    After a “catch” just power down the unit and remove the lid (if necessary) to clean to the trigger plates. (You don’t have to remove the lid to dump the rodent).

    What I liked was once set up on your network it proved to be an efficient, handy trap. Simply dump the dead rat and clean. It’s simple to bait. There’s a tiny hatch and using a tooth pick or plastic fork (you want to avoid human scent) just dab some peanut butter in the cup.

    On the minus side, the software is a bit klunky. I had to change the wi-fi network settings on my Samsung phone to get it functioning. The first time I set it up, within 10 minutes I had five “kills”, only to find dead B-52s, and no rodent. The roaches will quickly suck up the batteries.

    Perhaps the behavior of the roaches mimics the rats? It would be nice if the system used rechargeable Lithium ion batteries instead of the disposable ones.

    The conclusion? It’s quick and humane. (No dealing with sticky traps nor poison).
    The connectivity afforded by this product is very slick. You can’t use it where there are a lot of roaches so I put it in my roof space where I often hear the miscreants scamper about. Bingo, it worked like magic.

    Rob Kay, a Honolulu-based writer, covers technology and sustainability for Tech View and is the creator of Fijiguide.com. He can be reached at Robertfredkay@gmail.com.

    The Progressives Are Doing It Right Before Our Eyes

    Frank Salvato
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    The Progressives Are Doing It Right Before Our Eyes

    One of the tactics that Progressives enjoy using most is the tactic of redefinition. We see it every day and in every avenue of life. It is facilitated by the idea of political correctness which in and of itself is an attempt to redefine and actually rewrite the Bill of Rights to the US Constitution. The odd thing is this. Political correctness is not legislated. It is imposed. That’s what makes it the most dangerous weapon in the Progressives’ arsenal.

    Some of the more obvious examples of Progressive redefinition come in the form of the ever-changing labels they bestow upon groups and movements. Since the 1950s, Blacks in the United States, as a group, have seen language referring to their demographic change almost constantly. Negroes, African-American, Black-American, black with a small “B”, and now Black with a capital “B”, Progressives have always been on the hunt for what resonates with the Black demographic.

    Recently, the Associated Press – which has an unbalanced influence of our media outlets when it comes to “style,” has issued a rash of edicts mandating the redefinition of journalistic lingo. Aside from their edict about the capital “B” in the use of “Black” in news items, the AP has also decided that if the use of the words “racism” or “racist” is applicable, “racially charged” should not be used.

    The USA Today gave a platform to certain Progressive academics, who suggest that the words “violence,” “looting,” and “rioting” should not be used when referring to what happened in the streets of Minneapolis and other urban centers in the aftermath of George Floyd’s death. The academics claim these words don’t accurately reflect the protesters’ “rage” and hopelessness.

    These language usage changes may seem small and inconsequential but when the many changes are applied over time they work to “nudge” our society’s “acceptable language” to facilitate a singular ideological view. In doing so, organizations like the AP and other media outlets are incrementally engineering our culture to a preferred viewpoint.

    Then there are the passive inclusions to existing definitions that completely change the meaning of a phrase or, in this case, a perceived movement. In the article, GOP Candidate Is Latest Linked to QAnon Conspiracy Theory, reporters Jim Anderson, Nicholas Riccardi, and Alan Fram, cite a professor at the University of Miami in their attempt to marry the “Q movement” to the Deep State:

    “The QAnon theory has ricocheted around the darker corners of the internet since late 2017. It is based around an anonymous, high-ranking government official known as ‘Q’ who purportedly tears back the veil on the ‘deep state,’ often tied to satanism, child molestation and even cannibalism.”

    The key words here to pay attention to are, “…often tied to satanism, child molestation and even cannibalism.”

    The Deep State exists and that has never been more obvious than during the Trump presidency. We have experienced the Washington, DC political class – including the elected officials and the deep pockets of K Street – hyperventilating over the dismantling of the globalist construct that took the Progressive movement over a century to quietly put into place in our government. Very few people who are politically aware argue otherwise.

    Via Dictionary.com:

    “The Deep State is believed to be a clandestine network entrenched inside the government, bureaucracy, intelligence agencies, and other governmental entities. The Deep State supposedly controls state policy behind the scenes, while the democratically-elected process and elected officials are merely figureheads.”

    Dictionary.com goes on to get very partisan in expounding on this definition. But anyone who has ever had any experience interacting with the Federal government and its relationship to K Street; anyone who has dealt first-hand with elected officials’, lobbyists, foundations and NGOs, understands full-well that the Deep State not only exists, it is much more than a formidable force.

    But in the AP article, the authors try very subtly – and very disingenuously – to connect the Deep State to the QAnon theory. While the Deep State exists, QAnon is a theory they have been trying to marginalize with the absurd.

    So, why would the AP writers try to connect the two? Because by doing so it lends more legitimacy to the weak and dying notion that the Deep State is nothing more than a conspiracy theory. By trying to stain the reality of the Deep State with the idea that it is connected to “satanism, child molestation, and even cannibalism,” these Progressive operatives look to goad the populace into dismissing reality as the absurd.

    While there are many questions surrounding what serial pedophile Jeffery Epstein’s multi-million dollar donations to Deep State main players purchased for him – and what kind of twisted perversions those players engaged in through Epstein, their perversions and criminal activities do nothing to diminish the fact that the Deep State exists. If Epstein’s death and the globalist elite’s nervous fidgeting about Ghislaine Maxwell tell us nothing else, it tells us that the Deep State does exist.

    Make no mistake, Progressives exist on both sides of the aisle. The Progressives of the Right are just as nefarious (if not more so) as the Progressives of the Left. Both are all about power, wealth, and control and both wouldn’t hesitate to shred the Bill of Rights if it meant securing their power from the will of the people and the ballot box.

    That shredding starts with the manipulation of the words used to pen our liberties.

    RED CROSS ANNOUNCES NEW REGIONAL CEO: DIANE PETERS-NGUYEN

    Robert Kay
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    RED CROSS ANNOUNCES NEW REGIONAL CEO: DIANE PETERS-NGUYEN

      The American Red Cross is excited to announce the selection of Diane Peters-Nguyen as the new Regional Chief Executive Officer for the Pacific Islands Region; the region includes the state of Hawaii, Guam, the Northern Mariana Islands and American Samoa.

      Diane brings with her more than 25 years of proven success in planning and implementation, revenue development, philanthropic partnerships, marketing and communications, volunteer management, and the ability to motivate and manage diverse staff teams. She assumes her duties on Monday, July 6, 2020.

      “We’re happy to welcome Diane and look forward to working with her,” says Kitty Yannone, the Board of Directors’ Board Chair. “The experience she brings will be invaluable to our continuing mission to strengthen community ties and provide aid to those in need.”

      Diane is joining the Red Cross after completing a very successful career as the Vice President of Advancement at Chaminade over the past 12 years. She played a lead role in initiating, developing, and completing a $118 million comprehensive campaign, the most successful in the organization’s history.

      “I am so pleased to have Diane in this vital role,” said Michael J. Jordan, vice president for the Pacific Division of the American Red Cross. “She is a dynamic executive whose leadership will help ensure that we continue to provide essential services following disasters, teach lifesaving and preparedness skills and assist members of the armed forces.”

      After graduating with highest honors from Kamehameha Schools, Diane went on to earn a B.A. in French from the University of California and then achieved a Master’s Degree in International Affairs with emphasis on East Asia from George Washington University. 

      “I am honored and excited to serve as the new CEO of the Red Cross, Pacific Islands Region,” Peters-Nguyen says. “Here in Hawai’i and throughout the Pacific, the Red Cross helps people during emergencies and disasters.  Now, more than ever, this work is making a difference in people’s lives.  I look forward to working with the dedicated Red Cross team of board, staff and volunteers and our many partners as the Red Cross continues its more than one-hundred-year history of service with aloha in Hawaii and the Pacific.”

      About the American Red Cross:

      The Red Cross is a non-profit humanitarian organization which provides assistance to meet the immediate emergency needs of those affected by disasters. All Red Cross assistance to disaster victims is free. The Red Cross is not a government agency; it depends on public contributions to help others. Your gift supports the lifesaving mission of the American Red Cross in your community, across the country and around the world. To send a contribution, mail your check to: American Red Cross of Hawaii4155 Diamond Head RoadHonolulu, HI 96816  Make a secure online donation at redcross.org/hawaii or call: (808) 739-8109

      Damn the Tax Clearances, Full Speed Ahead!

      Tom Yamachika
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      Damn the Tax Clearances, Full Speed Ahead!

      Several articles in this space have been about features in Governor Ige’s emergency proclamations.  We are now on the tenth one and counting, which makes us wonder about the 60-day limit written into the emergency powers statutes (see HRS section 127A-14(d)), but that issue may be sorted out in lawsuits that were recently filed.

      We have previously written that the list of laws suspended by the proclamations is 20 pages long.  This proclamation is no exception, with the list of suspended laws beginning on page 11 and ending on page 31.

      On this 20-page list are two lines suspending HRS section 103-53, relating to tax clearances.

      That law provides (more correctly, used to provide) that people who want to do business with the State of Hawaii or municipal governments in it need to be current with their state and federal taxes.  A business that wants to bid on a government project, or that is seeking final payment on a government project it worked on, needs a piece of paper from the Department of Taxation saying that it has filed all the state and federal tax returns it needs to file, and has paid the taxes shown on those returns.  There are exceptions provided:  permission to bid or to receive final payment can be granted if the taxpayer is fighting with the Department about whether it indeed owes tax, or if the taxpayer is current on a payment plan that both the taxpayer and the Department have agreed to.

      So, could someone tell me the thinking behind why this requirement needs to be suspended?  COVID-19 upended our tourism economy and state tax revenues have fallen into the toilet.  Don’t we need to make sure that the taxpayer dollars we are spending are spent with vendors who have done their part to keep our government going? 

      The emergency powers statute, HRS section 127A-13(a), allows for suspension of “any law that impedes or tends to impede or be detrimental to the expeditious and efficient execution of, or to conflict with, emergency functions,” and allows the Governor to “[r]elieve hardships and inequities, or obstructions to the public health, safety, or welfare, found by the governor to exist in the laws and to result from the operation of federal programs or measures taken under this chapter, by suspending the laws, in whole or in part.”  Does suspending the tax clearance requirement on a categorical basis satisfy any of those legal requirements?

      We previously wrote that the Governor tinkered with the tax code in the proclamations by shutting off distribution to the counties of what little transient accommodations tax revenues we have left.  So, doing a money grab was fine under emergency powers.  But we are allowing vendors to the State to do business and be paid without making sure they pay their taxes?  Is that even a consistent philosophy?

      Again, we are not talking about people who owe taxes and legitimately can’t pay them, because of our economic collapse or otherwise.  They can get forbearances or payment plans from the Department and still be qualified to bid on or receive State contracts.  The same is true with people who have a genuine dispute with the Department over whether they legally owe tax.  So, who does this law suspension benefit?  Was this suspension really thought through?

      A look at Kym Pine

      Joan Wilder
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      A look at Kym Pine

      Kym Pine is the only candidate running for mayor that is currently holding elected office. Unlike former mayor Mufi Hannemann or former U. S. Representative Colleen Hanabusa, she is currently in office.

      Pine has held office for the last 15 years, serving as a member of the Hawaii House of Representatives for 43rd District from 2004-2012 (four terms). She was elected to the Honolulu City Council representing District 1 in 2012, serving two terms.

      At the outset of her first City Council term, Pine was supportive of Mayor Kirk Caldwell. More recently, however, she has publicly distanced herself from him.

      During the COVID-19 crisis, she repeatedly expressed frustration with Caldwell and Gov. David Ige over their apparent disconnect with the public and inability to manage a cohesive message to the public. She has publicly stated that she is a “an outsider to Honolulu politicians” and challenged Caldwell over the mismanagement of HART. She publicly supported protesters of Caldwell’s failed $32 million sports complex in Sherwood Forest.

      She also supported the neighborhood boards in opposing 13, 260-foot wind turbines in the Palehua Agricultural Lands, considered sacred Hawaiian lands.

      Pine’s party loyalty has drawn scrutiny. She was elected to the State House as the first ever Republican for the Ewa Beach-Iroquois Point area, but resigned from the Republican Party in 2016 because she said that “many of the national party’s new priorities had diverted from her long-held philosophical beliefs about inclusivity and progress,” according to Wikipedia.

      Some hardcore Democrats don’t trust her; some hardcore Republicans don’t trust her. Many call her inauthentic.

      At some point, Eric Ryan, a controversial cyber-bully, began helping Pine during her first run for City Council. It is unclear if the work was state (she was still in the State House) or campaign (she was running for her first term in City Council) related, but the relationship deteriorated. Ryan claims Pine refused to pay him what he was owed.

      Ryan launched a full-scale smear campaign in 2012 during her run for City Council, labeled “Kym Pine is a Crook.” Ryan had been in trouble for his cyber attacks before, according to Civil Beat, which labeled him a “serial slanderer.” He became the subject of a TRO from Pine, and ultimately, was arrested for his efforts.

      She also started the Hire Leeward Job Fair after Hawaii Medical Center closed, laying off 1,000 people, which is now in its seventh year. Those were her most effective efforts during her four terms in the House, where, being Republican, she was part of an ever-shrinking minority that has suffered dramatically after Republican Gov. Linda Lingle left office.

      Her record, built largely during the last eight years at City Council, shows that she champions some progressive causes that might make Republicans uncomfortable and others that would make liberals squeamish.

      She also authored Bill 10 that ensured gender equality in allocation of park permits for sports after female surfers complained that they could not obtain permits for female surf contests on the North Shore.

      However, that effort was first led by her city council colleague, Ann Kobyashi and Pine has been criticized for using social media to “take over” her colleague’s initiatives as if they were her own.

      In her first term at City Council, Pine served as the powerful Chair of the Zoning and Housing Committee, garnering mumblings that she was “too close” to developers, tying that to her campaign contributions. Many claim that the expediency of council approval of zoning changes was directly proportional to donations to her campaign.

      That support has not exactly translated to dollars in Pine’s run for mayor. Nor has it resulted in any endorsements from powerful unions, which have largely been doled out to her mayoral competitors, Colleen Hanabusa, Mufi Hannemann, Keith Amemiya and Rick Blangiardi. Either they have a short memory or the perception was not a fact. It can’t be “what have you done for me lately” because none of the people they endorsed are in a position to do more than promise…

      In her second term, she was named chair of the Council on Business, Economic Development and Tourism. During her term, the Honolulu City Council has passed legislation to limit short-term vacation rentals, Bill 85 and Bill 89. Mayor Kurt Caldwell signed Bill 89, limiting the number of legal rentals and their location, but vetoed Bill 85, which would have added additional restrictions.

      Pine has been a supporter of the rail. When the voters approved the rail in 2008, it was estimated to cost $5 billion and scheduled to begin opening in 2018. At that time, though voters approved the rail, Pine voted against the funding, saying that she did not believe that the cost estimates were accurate.Today, because of systemic issues including an incomplete EIR and poor planning for utility relocation, thanks to then-mayor Mufi Hannemann – that price has doubled – with no end in site. The Honolulu rail project is the largest public works project in Hawaii’s history – and maybe the largest boondoggle, as well. It has the highest per capita price tag of any public works project in US history.

      But Pine has supported the rail project, citing a mandate by the voters from 2008. She has voted “aye” on every proposal for funding at the Council.

      The rail, which begins in her district in West Oahu, could bring relief to her constituents from the daily hours-long drive to Honolulu for work. But critics say that the rail is not going to have enough riders to justify the enormous price tag, which may be a reality with changes that have occurred during the pandemic, including remote working.

      Worse still, HART, the acronym for the Honolulu Authority for Rapid Transportation, is the subject of a federal investigation. HART and its employees have been served with a wide swath of federal subpoenas, leading to a $200,000 budget item to pay for legal representation.

      Pine has blasted fellow candidate Mufi Hannemann, who was mayor when the rail began – and publicly, and passionately, stated that she hopes that the Feds jail those who are responsible. But his role in all this is a subject for another article.

      Fellow candidate Choon James, responded to her rant in a recent debate, saying that Kym should go to jail for voting for the rail.

      It should also be noted that Pine has not enjoyed a base of contributions from many of the usual suspects seeking political influence. Not, for example, like Keith Amemiya who has the A-list of Bishop Street contributions for some inexplicable reason, being that he is a political neophyte without any discernible qualifications for the executive position he seeks.

      At this date, Hannemann’s campaign report shows a deficit of $1,600; Blangiardi’s report is not yet on the website. Colleen Hanabusa’s list has quit a few influencers, as well, many of them the same Bishop Street law firms she has been affiliated with in the past and visitor industry peeps.

      Kym Pine seems to be out of favor with unions, the visitor industry and many of the larger corporations, which seem to be largely backing Blangiardi, Hannemann and Amemiya, perhaps because of her Republican past.

      To get a better idea of who Pine is we must look at her voting record and her public actions.

      That record includes votes against Civil Unions while at the State House. Recently, she stated that she opposed the domestic partnership bill because she favored marriage equality. At the Council she has introduced some environmental efforts such as the “Keep Hawaii Hawaii-A Promise to Our Keiki” initiative, the first-ever Styrofoam ban and phase-out of plastics, a resolution seeking a 4-day, 10-hour work schedule for city employees to reduce commuting and pollution and the “Keep Hawaii Hawaii” visitor pass to fund impacts from tourism.

      Pine has consistently supported her constituents’ efforts to clean up Leeward Oahu beaches and parks, though she has been criticized by those who say she has not done enough to fight crime, drug addiction and homelessness in the area.

      One of her initiatives included a $23 million project that allocated funds to each of the nine districts to spend on homelessness in ways that were appropriate to the district, including facilities rest stops, shelters and outreach centers. This funding was mostly unspent.

      Pine also supported legislation to regulate short-term vacation rentals, which has proved to be elusive and lacks enforcement. The same is true of legislation she supported to regulate Monster Homes.

      Enforcement problems with both issues can be traced to the Department of Planning and Permits, which is tasked with enforcement and is struggling.

      The Department is woefully understaffed and mismanaged, causing permitting nightmares for homeowners. It can take two years to get a permit to upgrade a bathroom. Pine has said she has plans to streamline the process, by putting the onus on building inspectors instead of on permitting in cases where they are licensed architects or contractors.

      In 2019, she ordered an audit of DPP. That audit, like most in Hawaii, was a scathing exposé. It revealed the poor performance matrix, interdepartmental silos that often resulted in duplicating approvals, the unwillingness to adopt modern technology, preferential treatment for politicians and appointment scheduling that favors big construction. The department, like much of Hawaii’s government, is in complete disarray, due in large part to mismanagement at the top and a culture of status quo.

      Pine also ordered an audit of Parks and Recreation. That audit, released in June, documented lack of routine maintenance. It showed that the city doesn’t document work that is done and most of the maintenance occurs as a reaction to deterioration of facilities rather than true maintenance. Vandalism continues to be high.

      To understand Pine one might have to see which way the wind is blowing. Her voting record shows she does not vote with a political ideology or philosophy. She relies largely on the sentiments of her constituents and her conscience, having no permanent allegiance to a political ally or organization. Her allegiance is mercurial, depending on what is best at the moment. That can be scary for many voters, who sometimes look to politicians for their predictability and responsiveness to special interests. In short, she can be seen as a loose cannon.

      Since COVID-19 locked down the state, it has been a challenge for politicians to reach voters. Council Member Pine was among the first to adopt online zoom town hall meetings and she has averaged about one per week. She has interviewed everyone from Kalani Souza, a Native Hawaiian Practitioner, to Honolulu Chamber Ex. Director Sherry Menor-McNamara. During the darkest days of COVID-19, she interviewed with Lt. Gov. Josh Green when Mayor Caldwell was at war with him. She held a particularly difficult town hall with a group in South Korea, where COVID-19 infections have seen significant control through massive contract tracing. She talked to restaurant owners, salon owners, dance studios and gym owners, listening to their questions and concerns and even offering assistance to provide relief. Her most recent town hall featured musicians, including Amy Hānaiali’i Gilliom and Hawaii Symphony Orchestra Director Dave Moss.

      Pine is a complex politician. She is unpredictable. She is flexible. She has clearly spent her time in office learning the finer points of the politics of governing, if not political finesse. But she is not a mystery, like Blangiardi and Amemiya, who have no political legacy. She is also not a history, like Hannemann and Hanabusa, whose best days may be behind them. She is an open book that voters should at least look at before deciding, based on an old idea or a slick PR campaign.

      Future of the Aloha Stadium

      Tom Yamachika
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      Future of the Aloha Stadium

      While everyone’s attention is focused on COVID-19 and racially charged police brutality, we should also pay some attention to major happenings here at home.

      One of them is the venerable Aloha Stadium, former home to the Aloha Bowl and now affectionately called the Rust Bucket.  The stadium was built using a then-new product called “Weathering Steel,” which was supposed to develop a thin coat of rust on the outside of the steel that would prevent the steel from rusting any further.  The makers of this product didn’t factor in Hawaii’s salt-laden moisture, however, and the stadium developed way more than a thin coat of rust.  Then there were bleachers that were supposed to move and convert its football shape into a baseball configuration but wound up being non-movable.  Hawaii residents did get some use out of the stadium but its condition has deteriorated further and now needs significant maintenance.

      To deal with this problem, our government came up with the idea of NASED, an acronym for New Aloha Stadium Entertainment District.  It even has its own nifty website.  The idea was that a design firm would be hired to come up with some plans, and then a Public-Private-Partnership would be formed by late 2020 between the State and a selected private developer to do the build-out.

      The design firm, in late 2019, produced three draft concept plans that would be put out for discussion and debated:

      Plans for restaurants, retail, entertainment, hotels, and residences are presented in the three renderings.

      The plan is for the State to put up $350 million, with $20 million coming from the general fund and the rest being borrowed through a bond issue.  That sounds like a good deal, with 25 years of maintenance costs projected to be $423 million.  But there are still some tough questions to be answered.

      The land on which the stadium sits is 98 acres owned by the State.  Access to the area is very easy, with Kamehameha Highway, the H-1 Freeway, the Moanalua Freeway (H-201), and a new Stadium rail station serving the area.   Do we really want the entire site developed as an entertainment district?  We have a major recession that is expected to continue for a while and continued high unemployment.  What about housing, especially affordable housing, that was previously identified as a high priority for our State?

      Can we afford to take the risk of building a new stadium with an entertainment center that may become a financial white elephant like our convention center?  The financial plan assumes that the State’s share is going to be $350 million, but the actual number might be nowhere near that if, for example, the selected developer uses COVID-19 as an excuse to jack up the price tag.  In any case, shouldn’t the financial drain that this project will cause be justification enough to push the pause button, as Honolulu Mayor Caldwell did on the proposed $772 million Blaisdell Center renovation project?  Will this project become Convention Center 2.0 or Rail 2.0?  Let’s make sure we are getting something we really need at a price we can afford to pay.

      Pitfalls of the Subcontractor Deduction

      Tom Yamachika
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      Pitfalls of the Subcontractor Deduction

      This week we’ll look at another general excise tax exemption that the State Auditor has put under the microscope in Report No. 20-05. It affects the construction industry, and the price tag the Auditor put on it, based on 2018 numbers, was $19 million. 

      The primary benefit of this exemption occurs when a construction contractor hires and pays other people qualifying as contractors to build a project.  Suppose, for example, a general contractor is paid $100,000 to build an annex to an existing house. The general contractor hires a plumber and an electrician, paying $5,000 to each.  Current law says that the plumber and electrician pay GET on the $5,000 each that they get, and that the general contractor is only taxed on the remaining $90,000.  If a subcontractor needs to sub out part of its job, say the electrician needs to hire another electrician and pays the second one $2,000, the same rules apply at that level.  The first electrician pays GET on only $3,000, and the total tax on the project remains the same. 

      There are, of course, wrinkles.

      First, the contractor hiring the subcontractor needs to be a contractor in the construction industry.  Many vendors who do work for the government are called contractors, but they do not qualify as contractors in the GET sense.

      Next, if money is paid to someone not a contractor, then the special treatment fails. Let’s say the plumber hired a design consultant and bought pipes from a supply house, and paid each $1,000.  The plumber still needs to pay GET on the $5,000, and the plumber’s vendors each need to pay GET on the $1,000 as well, although at the 0.5% tax rate, assuming the transaction is documented properly.

      If we suspended this GET provision as we did in 2011-2013, then all sub-vendors would be in the same situation as the plumber in this example. The general contractor would have to pay GET on the whole $100,000. Each sub-vendor, and each sub-sub-vendor, would have to pay GET as well. 

      The result would be even higher construction prices than what we are suffering through now. Is that what we want when the lack of housing, affordable or otherwise, is a major problem here?

      At the same time, the complexity of the current system is a major problem.  Many of the clients I’ve represented were confused over at least some of the aspects of the subcontract deduction system I’ve briefly explained above.

      Maybe we should transition over to a simpler system.  Guam has a gross receipts tax, and they had a subcontract deduction system like the one in Hawaii until 2010.  As we have written about before, Guam’s system is that there is no subcontract deduction, so the general contractor pays tax on the whole contract, but the subcontractors are exempt on their payments from the general contractor.  In theory, that system yields the same tax revenue as the current one, but there are fewer moving parts.  Issues about whether the subcontractors are really subcontractors or are simply wholesalers can be sorted out at the vendor level without putting the tax on the main contract at risk.  And if for policy reasons we want to forego GET on the main contract, such as if the contract is to build affordable housing, then we allow an exemption at the general contractor level instead of increasing complexity by letting the exemption propagate through to all of the subcontractors.

      How about that, lawmakers?  Let’s do something constructive for the construction industry and our economy.

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