SECTION 1. In light of heightened economic competitiveness from other states and countries, the legislature finds that it is important for Hawaii's leaders to have a clear understanding of the global forces that influence the State's economy, the State's relative competitiveness, and the available policies and opportunities that will place Hawaii on an optimal development path. To achieve this economic understanding, it is necessary to conduct an objective study of Hawaii's economic conditions, its economic prospects, and its existing economic challenges including the high cost of living and doing business, high costs of housing and consumables, outward migration of skilled and knowledgeable works, and outward investment.

The legislature further finds that a review of past and present taxation in Hawaii is a necessary part of studying the State's economy. Taxation provides revenue for programs and operations, reflects the goals and values of the community, and provides incentives and deterrents for human and corporate behavior. Over time, changing economic and social conditions call into question the relevance, effectiveness, and applicability of certain taxes. Thus, it is essential to review and evaluate state and local taxation as they have evolved over the years, as they exist currently, and as they compare to taxation in other states.

Finally, the legislature finds that an assessment of the State's economic condition should include a current evaluation of the challenges faced by commercial lessees and the economic effects of fee simple versus leasehold land tenure on the businesses and people of Hawaii. Many of the State's commercial properties have remained for years in the hands of a few large landowners who maintain a system of leasehold tenure and continue to establish long-term leases. A 2003 report by the Legislative Reference Bureau indicated that the local market lacked available fee simple commercial properties, and that supply and demand posed the primary challenge for lessees in Hawaii. Since 2003, there has been an increase of fee simple zoned properties in the outlying areas of Oahu which allows for a comparative analysis of market behaviors for fee simple and leasehold properties. Ground rents have been identified as a major expense to businesses, and have continued to increase at rates that may inhibit economic growth. Sustained economic growth is an important goal for the State's economy, and an economic analysis is necessary to determine whether a nexis exists between high lease rents and the stagnation of Hawaii's economy.

The purpose of this Act is to appropriate matching funds to the city and county of Honolulu for an independent study of the economic conditions, challenges, and opportunities facing the State and the State's most populated county, the city and county of Honolulu.

SECTION 2. (a) The city and county of Honolulu shall contract, pursuant to chapter 103D, Hawaii Revised Statutes, with one or more institutions to assess and analyze economic data and provide a written report of its findings and recommendations on Hawaii's economy. Examples of institutions that conduct this type of analysis include but is not limited to the following:

(1) Brookings Institution;

(2) SRI International;

(3) Massachusetts Institute of Technology;

(4) Hoover Institution; or

(5) Cato Institute.

(b) The independent study shall evaluate the economic conditions, challenges, and opportunities facing Hawaii, and include the following:

(1) A benchmark of Hawaii's key assets and liabilities;

(2) An analysis of the key groupings of industries that drive Hawaii's economy;

(3) An assessment of the key competitive forces, such as cost of living, cost of doing business, globalization and outsourcing, consumer trends, and new technological developments, that affect Hawaii and its industries;

(4) An initial analysis of key policies that affect Hawaii's economic global position;

(5) A comparative analysis of the history of Hawaii's tax sources and resources, its current status, and how Hawaii's current status compares to other states' tax sources and resources;

(6) An assessment of the relationship between the sources of Hawaii's state tax revenue, the sources of the city and county of Honolulu's tax revenue, and how the tax revenues are put to use;

(7) A comparative analysis of state lands, city and county of Honolulu lands, and private lands, and how each contribute to the well-being of Hawaii's citizens; and

(8) A comparative analysis of the contrast of land tenure, fee simple versus leasehold, and how each type of land tenure affects the well-being and general welfare of the people and businesses of Hawaii and the city and county of Honolulu.

(c) The city and county of Honolulu shall submit a report of the study's findings and recommendations, including any proposed legislation, to the legislature no later than twenty days prior to the convening of the regular session of 2017. The report shall include an overall strategy for addressing the economic challenges facing Hawaii and how to use the State's advantages and strengths to meet those challenges.

SECTION 3. There is appropriated out of the general revenues of the State of Hawaii the sum of $200,000 or so much thereof as may be necessary for fiscal year 2015-2016 and the same sum or so much thereof as may be necessary for fiscal year 2016-2017 as a grant-in-aid for the city and county of Honolulu to contract for an independent study on the economic conditions, challenges, and opportunities facing Hawaii and the city and county of Honolulu pursuant to this Act; provided that no funds shall be made available to the city and county of Honolulu unless the city and county of Honolulu provides matching funds equal to the amount appropriated for the purposes of this Act.

The sums appropriated shall be expended by the department of business, economic development, and tourism for the purposes of this Act.

SECTION 4. This Act shall take effect on July 1, 2015.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	489
TWENTY-EIGHTH LEGISLATURE, 2015
STATE OF HAWAII