Trade fights Hawaii proposal to cut budget

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HONOLULU -- Hawaii's tourism industry is battling proposed legislation that could reduce the state's $60 million annual tourism budget by as much as one-third in future years.

A bill advancing through the Legislature would make the new Hawaii Tourism Authority (HTA) responsible for much of the cost of developing the Hawaii Convention Center.

Supported by Gov. Ben Cayetano, H.B. 1014 transfers to HTA not only the functions of the Hawaii Convention Center Authority (HCCA) but also the center's debt service.

HTA could pay out as much as $20 million in 2003, the peak year for servicing the debt. The HTA and its 13-member board, mainly from the industry, oppose taking on the debt service but not other functions of HCCA.

The industry, however, opposes HTA's taking on even the responsibility for the convention center. Murray Towill, president of the Hawaii Hotel Association, testified on behalf of a coalition of 50 industry companies and groups against the bill.

"This is a negative move. The two authorities should be kept separate," he said. "HTA already has a huge responsibility for Hawaii's tourism marketing and strategic planning."

Many industry executives are angry. After lobbying for years for an increased and dedicated source of funding -- and being successful last year -- they see government as prepared to take much of the funding away. They see the move by government, short of funds in a state in an eight-year economic slump, as an easy way out to pay off debt.

HTA, which began operating in October, was established by legislation that also provided a dedicated source of tourism funding for the first time. Its funding of almost $60 million comes from a percentage of the state's hotel room tax and compares with $25 million appropriated for tourism marketing last year.

The HCCA was formed in 1989 to plan and develop the $360 million, 1.5-million-square-foot center, which opened in Waikiki last July. Its work largely done, the HCCA is mandated by law to expire June 30 -- after which the bill proposes HTA become the convention center's caretaker.

For the industry, there is some comfort in that the House Finance Committee, in approving the bill, extended the life of the HCCA until June 30, 2000. In addition, the state administration has proposed restructuring the convention center's financial package, making payments over longer periods. Restructuring could mean that even if the HTA takes on the debt service, it would not be out of pocket.

Funding for servicing convention center bonds also comes from a percentage of the state's hotel room tax, which was increased for that purpose in 1994. The amount collected more than covers the debt service, but with balloon payments between 2001 and 2006, there will be a gap between the amount collected and the amount paid out.

If the bill passes, HTA will have to cover the gap, providing around $7 million in 2001, $20 million in 2003, and then gradually decreasing amounts yearly after that.

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