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First in a series on the governor candidates and the issues.

The perception that Hawaii is a bad place to do business was never better illustrated than by the events of Aug. 28, 2007.

That was the day the Hawaii Superferry attempted to enter Nawiliwili Harbor on its inaugural trip from Oahu to Kauai. It was prevented from doing so by swimmers and surfers who shouted “Go back! Go Back!”

Three years later, the event can on the Internet.

The short-lived Superferry was brought down by environmental and community groups on the Garden Isle and Maui, even though it had the solid support of the Republican governor, the Democratic-controlled Legislature, and most county and business leaders.

A failure to conduct an environmental impact statement was the ultimate undoing of the ambitious business venture to link the main Hawaiian islands by sea transport.

But a major theme from the fiasco — carried by media around the globe — was that Hawaii is adverse to entrepreneurs. A CNBC in July ranked the state 48th when it comes to “business friendliness.”

The killing this year of Act 221 tax credits for high-tech ventures is a recent example of that theme. That decision and other anti-business bills led Pacific Business News to lament in a that the 2010 legislative session left “business bleeding.”

Honolulu’s hosting of the 2011 Asia Pacific Economic Cooperation annual meeting, however, may be a golden opportunity to help reverse the state’s image, and either a Gov. Hannemann, Gov. Abercrombie or Gov. Aiona will be the leading local host.

Each man promises to dramatically improve the state’s business climate. Civil Beat looks at their platforms.

This article is drawn primarily from answers to Civil Beat questionnaires given to Democrats Neil Abercrombie and Mufi Hannemann and Republican Duke Aiona, but also from the candidates’ websites and their remarks on the campaign trail.

The full Q&A’s for each candidate will soon be posted on Civil Beat’s topic pages.

Learning from Act 221

Each candidate mourns the death of Act 221, the law that gave high-tech companies a 100 percent tax credit. (It expires at the end of 2010.) Abercrombie called Act 221 “one of the most forward-looking (policies) in the nation,” while Hannemann calls it “landmark legislation that created a buzz for Hawaii and there is no question that it raised tremendous capital for qualifying companies. It also created higher-paying green technology jobs.”

None of the candidates would revive the same act as governor, but each would consider a variation of the bill that builds on the lessons of what was wrong with Act 221.

Abercrombie told Civil Beat, “A percentage offer of tax credit is dependent on the specifics of any follow-on bill to Act 221.”

In his “A New Day In Hawaii” comprehensive plan, Abercrombie said the key to encouraging technology and innovation in the state is “tackling government permitting and regulatory processes so that they are less burdensome, providing enhanced assistance for accessing federal funding opportunities, purchasing from local vendors, protecting and marketing Hawaii’s brands, teaching business skills, and reforming procurement processes.”

Hannemann says Act 221 did not succeed in addressing “later stages of capital formation, i.e., mezzanine capital, until the company reached an IPO, acquisition and/or sale, or licensing the technology.” Hannemann also says the law lacked “measurement mechanisms,” which “created further uncertainty and instability as attempts were made every year to change or modify the program.”

Aiona says he doesn’t foresee “any business development programs that would justify a 100 percent tax credit,” but he would propose legislation “to extend the refundable R&D tax credit under Act 221/215, which should have never been included in the same bill as language that would have prematurely ended the high tech tax credit.”

Aiona also wants public-private partnerships to develop and manage “incubation and commercialization facilities.” Like Hannemann and Abercrombie, he believes an improved education system is at the core of creating a better business environment: “I envision a Hawaii where we develop and keep local talent right here in these islands, and entrepreneurs, start-ups and innovation grow and flourish.”

Blowing in the Wind

All three candidates strongly support clean-energy programs.

“We have some of the best sites for wind in the world, and it is incumbent upon us to take advantage of this clean, renewable resource,” says Aiona.

The lieutenant governor believes the Lingle-Aiona administration deserves credit for weaning Hawaii off of fossil fuels, noting that the state signed with the U.S. Department of Energy to establish the Hawaii Clean Energy Initiative. The goal of the initiative is to use renewable resources — wind, ocean, sun, ocean, geothermal, bioenergy – to supply 70 percent or more of Hawaii’s energy needs by 2030.

Specific to Big Wind — i.e., the wind turbines project on Molokai and Lanai that will send electric power via undersea cable to Oahu — Aiona stresses that it is just one component of a comprehensive program. Utility upgrades would be needed to allow for integration of a renewable energy electrical grid. He also wants the public to be involved in the process as AECOM, the company heading the big wind project, prepares its environmental impact statement.

Hannemann also encourages community outreach to bring about acceptance of the Big Wind project as “a sustainability model,” and agrees on the need for “necessary improvements to our existing electrical distribution system to bring about ‘smart grid’ capabilities for load balancing, storage and incorporation of intermittent energy providers.” 

Like Aiona, Hannemann sees alternative energy and sustainability as part of larger effort to build a “knowledge industry base” in the islands and to create green jobs.

Abercrombie shares those views, adding, “I have said that becoming independent from foreign oil is Hawaii’s most important energy endeavor.” Emphasizing the major theme of his campaign, he says, “We cannot shy away from, or worse, exploit divisions and conflict. We need to join hands with respect, listen to each other, and move forward together without undue delay, through community-based initiatives and public education.”

In his own energy plan, Abercrombie says the success of electric utilities must be tied with the state’s clean energy goals: “A percentage increas in their return on equity for exceeding clean energy goals would bring the attention of executives, employees, sharfeholders, and Wall Street to driving the clean energy transformation.”

Taxes and Bureaucracy

Hannemann says, because of “the condition of the state treasury, and before we can consider addressing concerns over the fairness or equitability of our tax structure, we have to grow the economy.” Once that is accompplished, Hannemann says he is open to talking with businesses about “reassessing the corporate income tax, use tax, conveyance tax, and tax incentives. Similarly, we should look to see if we can increase low-income, childcare, and renter tax credits and standard deductions.”

Hannemann suggests getting recommendations from the Tax Review Commission on this matters as well as on possibly eliminating unfair tax breaks and loopholes.

Abercrombie says, “Reasonable people don’t mind paying taxes if they have faith they are receiving full value for their dollars.” The problem, as he sees it, as to do with lack of trust in government, adding, “This has little to do with the public employee who is doing his or her best with decreasing support.”

In short, tax increases won’t happen without serious discussion of how revenues are spent.

Aiona — who observes that “residents and businesses suffer from one of the highest overall tax rates in the nation” — says there are some taxes for which marginal rates can be reduced.

The Republican candidate is most concerned about what he calls a “fair and transparent tax system,” by which he means pursuing delinquent filers, making offshore business doing business in the state pay their share of taxes, and having “a full accounting of all tax exemptions and tax credits” in order to “plug all unnecessary and unfair loopholes.” Case in point: too many exemptions and credits for “special interests” when it comes to the general excise tax.

All three men say the best way to help small business is to streamline the permitting and regulatory process and reform the procurement system. Improving the education system is critical to producing a highly skilled work force, and making sure that roads, harbors and airports are up to par will help residents and businesses alike.

For More Information

Aiona’s plan for jobs and the economy can be viewed , Hannemann’s action plan for the economy can be viewed , and Abercrombie’s many position papers can be viewed .