hawaii's economic momentum update from the governor

Update from the GovernorHawai‘i’s Economic Momentum

April 24, 2014

A Look Back

Hawai‘i Gross Domestic Product

(GDP) Shrank(U.S. Bureau of Economic

Analysis)

2011 – Hawai‘i’s Economy Floundering

Tourism Still Recovering• Japan earthquake and tsunami weighed on sector• Visitor arrivals grew nominally 3.5% from 2010 (UH Economic Research

Organization/UHERO)• Revenue Per Available Room (RevPAR) remained low at $139, below pre-recession

levels

-0.2%

6.6% 7.9% 9.3% 8.5%Statewide

Unemployment high

Maui Hawai‘i Kaua‘i

Construction sector down from 2010

- 18.7% Contracting General Excise (GE) tax

base down

- 7.9% Construction income down

- 5.0% Construction job count down

STILL IN RECESSION

• Cost-Cutting Measures Implemented• Furloughs• Under-funded programs• Crippled services

• Reserve Funding Ratios and Reserve Balances Poor

• Credit Rating Downgraded (Moody’s)

• State Comprehensive Annual Finance Report (CAFR) for FY2009 and FY2010 produced up to a year late

Budget Shortfall Forecast

- $220 Million

2011 – Dire Fiscal Condition

Economic Turnaround

• Over $1 Billion Turnaround Achieved through spending reduction measures and increasing revenues, which resulted in increasing positive ending balances during FY11, FY12 and FY13

2013 – Fiscal Health Restored

+ $880 MillionPositive Balance

• Public Worker Contracts Reached for FY14 and Beyond

No Labor Disruptions

Affordable and Sustainable Wage and Benefit Increases

No Layoffs

No Furloughs

2013 – Fiscal Health Restored

• Restoring Critical Services through Strategic Targeted Process• Ceased ineffectively funded programs• Evaluated future funding based on a sustainability framework• Restored services in agricultural inspections, watershed

protection, etc.

• Recapitalizing Reserves to Higher Than Pre-Recession Levels• Established targeted reserve plan and fiscal ending balance

targets• Recapitalization plan to begin in 2014

• Effectively Managing Liabilities• Pension reform measures passed• Other Post-Employment Benefits (OPEB) pre-funding now law

Positive Comments from Credit Rating Agency

“Due in large part to the state’s current and projected fiscal position, as well as its recently formalized commitment to addressing its retirement liabilities, we (S&P) see Hawaii’s credit quality poised to strengthen.”

– Standard & Poor’s Rating ReviewOctober 9, 2013

Growing and Strengthening Economy

____________________Source: State Policy Reports, Federal Funds Information for States, March 2014

Hawai‘i Ranks 12th among statesin terms of Economic Momentum

Factors Rank Personal Income 22nd

Unemployment 15th

Employment 10th

Population Change 8th


• Tourism set record highs in 2013 for:Arrivals, Visitor Spending, Hotel Occupancy, and Revenue Per Available Room (RevPAR)

• Real estate market strong with high sales velocity, stable prices and very low foreclosures

• Military presence growing, contributing to Hawai‘i’s economy and security

• State contributing significantly – maintaining employment levels and investing in infrastructure

Construction Economic Driver


• DBEDT First Quarter 2014 Economic Forecast • Expects the construction industry to lead as Hawai‘i’s

overall economy grows each year through 2017

• DBEDT Research & Economic Analysis Division Report on Construction• Completed February 2014; first of its kind in nearly 14

years• Predicts the construction industry will grow by 12.4% in

2014 and 8.3% in 2015

As construction continues to accelerate to meet demands such as affordable housing, we can expect increased jobs, strong revenue and continued economic improvement


• Hawai‘i Asset Growth Outpaced Liability Growth for First Time in Seven Years

• State Comprehensive Annual Financial Report (CAFR) for the fiscal year ending June 30, 2013, shows the state’s net position – assets less liabilities – for primary governmental activities increased for the first time since 2006

• From $4.5 billion to $4.8 billion, a gain of $307.1 million• Represents an increase of 6.8 percent over 2012

• Council on Revenues’ Updated Forecast (3/11/2014) Latest forecast appears to signal revenue growth has “peaked” – at least for the short term – but council acknowledged economy is stable, strong and growing Stable in FY14 5.5% growth in FY15 Continued growth every year through 2020


____________________Source: State of Hawai‘i Department of Taxation

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

$3,446,385,000.00

$3,997,539,000.00

$4,434,993,000.00

$4,585,580,000.00

$4,641,872,000.00

$4,202,301,000.00

$4,364,266,000.00

$4,324,442,000.00

$4,973,895,000.00

$5,466,924,000.00

$5,466,923,000.00

$5,767,604,000.00 $6,055,984,000.00

$6,407,231,000.00

$6,804,479,000.00

$7,171,921,000.00

$7,559,205,000.00

GENERAL FUND TAX REVENUESfy2004-2013 (ACTUAL)fy2014-2020 (forecast)

Tax Revenue Growing Faster than National Average


____________________Source: “Fiscal 50: State Trends and Analysis,” The Pew Charitable Trusts.

State Contributing to Our Economy


• State’s improved fiscal position allows us to move forward with confidence on investing in state infrastructure and facilities through Capital Improvement Project (CIP)

• Proactive CIP program also stimulating local economy and generating jobs for local residents

• Administration releasing CIP funds with increased efficiency


____________________

3.4+ Billion in CIP Funds Released Since Governor Took Office


• Honolulu International Airport• FAA approval of the final environmental assessment has been received

that will allow the commencement of a $750 million New Day Works Project Program

• HNL has not undergone improvements of this magnitude in more than 20 years

• Honolulu Harbor Pier 29• $29 million project to restore harbor capacity and improve safety and

efficiency• State received $24.5 million in federal stimulus funds, covering

approximately 85% of the total project cost

• Kapolei Interchange• $26 million project to improve traffic operations and reduce traffic

congestion• Project completed in August 2012

• Saddle Road on Hawai‘i Island• $30.8 million realignment project• Renamed the Daniel K. Inouye Highway

CIP Highlights

Key Indicators

____________________Source: DLIR

• Record 658,450 in Hawai‘i’s Labor Force

• March 2014 – Statewide Unemployment Rate 4.5%• Improved in all counties

Local Economy Out-Performing Nation and Other States Comparably Rated to Hawai‘i

Key Indicators – Comparative State Metrics

____________________Source: DBEDT, Bureau of Labor Statistics, U.S. Department of Labor.

Local Economy Performed Well During the Great Recession and Out-Performed Other States Comparably Rated to Hawai‘i


____________________Source: DBEDT, Bureau of Labor Statistics, U.S. Department of Labor.

State Building Back Reserves


____________________Source: “Fiscal 50: State Trends and Analysis,” The Pew Charitable Trusts.

Honolulu Assessed Valuation (FY)(4)

Days on Market(2)

Comparative Foreclosure Rates(3)

Median Single Family Home Prices (CY)(1)

Hawai‘i’s Real Estate Market is Very Stable and Provides Support to the Overall Economy

Diverse and Growing Economy – Real Estate

Bill

ion

s

FY 2013 and FY 2014 saw a 3% increase each in assessed valuation

6.0%

Honolulu represents 70% of the total Hawai'i real estate market, illustrating the consistency and strength of the Hawai'i market

____________________(1) National Association of Realtors. 2013 median single family home prices is through second quarter.(2) www.realtor.com and Honolulu Board of Realtors. Reflects July 2013.(3) www.realtytrac.com. As of July 2013. (4) Net taxable property value.

Median Single Family Home Prices (CY)(1)

Hawai‘i Real Estate Strong and Supporting Overall Economy

Real Estate Industry

6.0%

Honolulu represents 70% of the total Hawai‘i real estate market, illustrating the consistency and strength of the Hawai‘i market


Days on Market(2)

Hawai‘i Real Estate Strong and Supporting the Economy

Real Estate Industry

Honolulu represents 70% of the total Hawai'i real estate market, illustrating the consistency and strength of the Hawai'i market


Affordable HousingAn Abercrombie Administration Priority

Significant Reinvestment in the Urban Core of Honolulu Ensures Strong Demand for Labor and Future Revenue Growth for the State

Case Study: New Development in Honolulu

Major developers including Alexander & Baldwin, Howard Hughes Corporation and Kamehameha Schools have large projects planned for the urban core

Honolulu’s rail system will be incorporated into transit oriented development throughout Kaka‘ako

Major expansion and renovation is underway of Ala Moana Shopping Center – the nation’s highest grossing mall per square foot. Bloomingdale’s will open as a new anchor tenant in 2015

The new International Market Place project in Waikiki will feature Saks Fifth Avenue as its primary tenant

The estimated value of projects approved by the Hawai‘i Community Development Authority (HCDA) totals $2.2 billion

The Hawai‘i Housing Finance and Development Corporation is planning 9,955 new affordable housing units statewide through 2018 (includes 7,300 in Honolulu)

Supporting the Growth of Our Economy

“…developers to play their part in delivering the 5,700 new housing units that are needed in Hawaii each year.”

“…HCDA has overseen the development of 1,766 affordable and reserve housing units in the Kakaako Community Development District. An additional 1,612 reserve and workforce housing units are either under construction or will soon break ground.”

HCDA Affordable Housing Projects

Projects Under Construction Market Reserve Total

Halekauwila Place*

- 204 204

Waihonua 341 - 341

680 Ala Moana - 54 54

801 South Street A

- 635 635

Symphony 288 100 388

Rycroft Terrace - 162 162

Total Units 629 1155 1784

Reserve = Affordable Housing

*Completed in March 2014


Permitted Projects Market Reserve Total

Waihonua 2 - 72 72

404 Ward 49 375 424

Waiea 177 - 177

Anaha 318 - 318

The Collection 467 - 467

801 South Street B 49 361 410

803 Waimanu 24 121 145

Total Units 1133 1304 2437


Projects Market Reserve Total

KS Land Block A: Keauhou Lane

338 294 632

KS Land Block B 75 108 183

Total Units 413 402 815

Mahalo

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