HOUSE OF REPRESENTATIVES             H.C.R. NO.13          
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                     HOUSE CONCURRENT
                        RESOLUTION
REQUESTING A FINANCIAL AND MANAGEMENT AUDIT OF DUTY FREE
   SHOPPERS' CURRENT FOUR-YEAR CONTRACT WITH THE STATE.



 1       WHEREAS, Duty Free Shoppers (DFS) Hawaii operates eight
 2   duty-free shops at Honolulu International Airport, retail
 3   concessions in the Kona and Kahului airports, and a major duty-
 4   free and retail business in Waikiki; and
 5   
 6       WHEREAS, since 1968, DFS Hawaii has been running the duty-
 7   free stores throughout the State; and
 8   
 9       WHEREAS, at the height of the Japanese travel boom in
10   Hawaii, DFS bid more than $1,000,000,000 in 1988 for a four-
11   year contract; and
12   
13       WHEREAS, in its most recent contract with the State, DFS
14   bid $401,000,000, but as DFS turned out to be the only bidder,
15   the State accepted DFS' offer of a minimum of $102,000,000 for
16   fiscal year 1997-1998, $104,000,000 for fiscal year 1998-1999,
17   $106,000,000 for fiscal year 1999-2000, and $108,000,000 for
18   fiscal year 2000-2001; and
19   
20       WHEREAS, the current contract requires DFS to pay at least
21   those amounts or 20 percent of its revenues, whichever is
22   greater; and
23   
24       WHEREAS, DFS, which has also extensive non duty-free retail
25   holdings at Honolulu International Airport and elsewhere in the
26   State, missed its March 1, 1998, quarterly payment for the
27   duty-free concession, and a month later, DFS Hawaii announced
28   it would be laying off several hundred of its 1,660 Hawaii
29   employees, in stages, through 1998; and
30   
31       WHEREAS, as of January 12, 1999, DFS Hawaii is $58,000,000
32   in arrears in concession fees, of which $54,500,000 is the
33   principal amount and the $3,500,000 is the interest from late
34   fees; and
35   
36       WHEREAS, declining tourist arrivals from Asia, particularly
37   Japan, changed tourist spending habits, and a poor Japanese
38   economy are some of the reasons cited for DFS' late payments to
39   the State; and

 
Page 2                                                     
                                  H.C.R. NO.13          
                                                        
                                                        

 
 1       WHEREAS, the State and DFS Hawaii are currently working on
 2   an agreement to work out a payment schedule for DFS to repay
 3   their late fees and to fulfill its terms of the contract; now,
 4   therefore,
 5   
 6       BE IT RESOLVED by the House of Representatives of the
 7   Twentieth Legislature of the State of Hawaii, Regular Session
 8   of 1999, the Senate concurring, that the Office of the
 9   Legislative Auditor is requested to conduct a financial and
10   management audit of Duty Free Shoppers' current four-year
11   contract with the State; and
12   
13       BE IT FURTHER RESOLVED that the Office of the Legislative
14   Auditor submit a report of its findings and recommendations to
15   the Legislature no later than twenty days prior to the
16   convening of the Regular Session of 2000; and
17   
18       BE IT FURTHER RESOLVED that certified copies of this
19   Concurrent Resolution be transmitted to the Legislative
20   Auditor, the President of Duty Free Shoppers Hawaii, and the
21   Director of Transportation.
22   
23 
24 
25 
26                         OFFERED BY:  ____________________________
 
27 ___________________________          ____________________________
 
28 ___________________________          ____________________________
 
29 ___________________________          ____________________________
 
30 ___________________________          ____________________________
 
31 ___________________________          ____________________________
 
32 ___________________________          ____________________________
 
33 ___________________________          ____________________________
 

 
 
 
 
 
 
Page 3                                                     
                                  H.C.R. NO.13          
                                                        
                                                        

 
 1 ___________________________          ____________________________
 
 2 ___________________________          ____________________________
 
 3 ___________________________          ____________________________
 
 4 ___________________________          ____________________________
 
 5 ___________________________          ____________________________
 
 6 ___________________________          ____________________________
 
 7 ___________________________          ____________________________
 
 8 ___________________________          ____________________________
 
 9 ___________________________          ____________________________
 
10 ___________________________          ____________________________
 
11 ___________________________          ____________________________
 
12 ___________________________          ____________________________