Honolulu, Hawaii
                                                     , 1999

                                   RE:  S.B. No. 944
                                        S.D. 1

Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii


     Your Committee on Economic Development, to which was
referred S.B. No. 944 entitled: 


begs leave to report as follows:
     The purpose of this measure is to provide an income tax
credit for the amount of the general excise tax on commercial
construction costs for a period of seven years.

     Your Committee received testimony in support of this measure
from the Land Use Research Foundation of Hawaii, the General
Contractors Association of Hawaii, the Pacific Resource
Partnership, Hawaiian Dredging Construction Company, Hawai`i
Hotel Association, Waikiki Improvement Association, Queen Emma
Foundation, Hilton Hawaiian Village, and Outrigger Hotels &
Resorts.  The Department of Taxation testified in opposition.
The Department of Business, Economic Development, and Tourism,
the Tax Foundation of Hawaii, and one individual submitted

     Your Committee finds that in today's increasingly
competitive tourism market, upgrades and renovations to Hawaii's
visitor destination areas are critical.  However, high
construction costs, particularly at a time when many resorts and
hotels are suffering from lower occupancy, are an impediment to
revitalizing these areas.

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                                   STAND. COM. REP. NO. 102
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     Your Committee further finds that the construction industry
as a whole is recovering very slowly from the declines of the
1990s.  And for the first time this decade, public sector
construction spending exceeded the private sector in 1998.

     Your Committee is concerned that without incentives, the
lack of investment in Hawaii will continue to have a negative
impact on private sector funding, placing a heavy reliance on
government funds for new construction projects.  Your Committee
believes this measure is an important component in attracting new
capital and additional economic development to the State.  

     Your Committee finds the intent of this measure is to allow
the tax credit to all commercial construction, not just hotel
construction.  The reference to chapter 237D appears to narrow
the intent of the measure.  Therefore, your Committee has amended
this measure by deleting the reference to chapter 237D.

     As affirmed by the record of votes of the members of your
Committee on Economic Development that is attached to this
report, your Committee is in accord with the intent and purpose
of S.B. No. 944, as amended herein, and recommends that it pass
Second Reading in the form attached hereto as S.B. No. 944,
S.D. 1, and be referred to the Committee on Ways and Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Economic

                                   LORRAINE R. INOUYE, Chair

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