hawaii’s economy: challenges and opportunities hawaii economic association october 3, 2014...
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Hawaii’s Economy: Challenges and Opportunities
Hawaii Economic Association
October 3, 2014
Presented by Richard Lim, Director
Hawaii State Department of Business, Economic Development & Tourism
http://hawaii.gov/dbedt
Overview
Long Term Economic Trends
Fiscal Headwinds
Growth Strategy
• Infrastructure• Housing and Urban Revitalization• Hi Growth Initiative – Supporting the Innovation Sector
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
US HI
Perc
ent
Source: U.S. Bureau of Economic Analysis
Economic Growth in Past 20 YearsUS annual growth = 2.5% , Hawaii annual growth = 1.2%
Overview
Long Term Economic Trends
Fiscal Headwinds
Growth Strategy
• Infrastructure• Housing and Urban Revitalization• Hi Growth Initiative – Supporting the Innovation Sector
Budget(2010)
Total Expenses $5,700 million
• Medicaid $ 800• ERS/EUTF $1,220• Education $1,800• HHS $ 700• Debt service $ 560
• Everything else $ 620 million
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
0
20
40
60
80
100
120
140
160
180
200Non Discretionary
Visitor Spending
Economic GrowthAnnual average growth = 1.2%
Annual average growth = 0.7%
Annual average growth = 2.9%
Hawaii Government Non-Discretionary Spending, Visitor Spending and Economic
Growth, Index: 1993 =100
Source: B&F and DBEDT
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
0
50
100
150
200
250
DOE UH
DOH DHS
Visitor Economy
DOE = 3.7%
UH = 3.8%
DOH=2.6%
DHS = 3.8%
Visitor = 0.7%
Government Spending on Education, Health, and Human Services
Index: 1993 = 100
Economy =1.2%
% are annual average growth rate 1993 - 2013
8
Hawaii Visitor ArrivalsAnnual growth: 1960-1990 = 11%; 1990 –
2013 = 0.8%
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
Hotel Inventory Flat
Annual growth rate: 1965-1990 = 7.07%; 1990-2013 = 0.16%
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
2000 2005 2010 20130.0
10.0
20.0
30.0
40.0
32.9
36.437.4
41.6
Source: Hawaii Tourism Authority
Visitor spending on hotels as % of total spending
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
0
10,000
20,000
30,000
40,000
50,000
60,000
Active Duty Military Personnel in Hawaii
The Contribution of Tourism and Federal Government to Hawaii’s economy
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
20130.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
Tourism
Perc
ent
Significant Losses In GET & Use Tax Revenue Are Expected Due To
Electronic Commerce
Annual national state and local sales taxes losses on
e-commerce will grow to $11.4 billion in 2012
Donald Bruce, “State and Local Government Sales Tax Revenue Losses from Electronic Commerce”, The University of Tennessee (April 13, 2009)
2007 2008 2009 2010 2011 2012$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
Est. Sales and Use Tax Collections
14
Implications
Significant fiscal challenges
Long term systemic headwinds
Requires growth strategy
Overview
Long Term Economic Trends
Fiscal Headwinds
Growth Strategy
• Infrastructure• Housing and Urban Revitalization• Hi Growth Initiative - Innovation Sector
Growth Strategy: Infrastructure
Long Term Economic Trends
Fiscal Headwinds
Growth Strategy
• Infrastructure• Housing and Urban Revitalization• Hi Growth Initiative – Supporting the Innovation Sector
1717
Alaska: 3,022 mi
U.S. Mainland: 2,471 mi
Mexico: 3,397 mi
Costa Rica: 4,822 mi
Colombia: 5,551 mi
Chile: 6,698 mi
Ecuador: 5,450 mi
New Zealand: 4,613 mi
Taiwan: 5,285 mi
Fiji: 3,157 mi
Australia: 5,205 mi
Japan: 4,036 mi
China: 5,251 mi
Russia: 5,312 mi
Canada: 3,550 mi
Indonesia: 6,276 mi
Papua New Guinea: 4,492 mi
Hawaii
Infrastructure: Airlift, Broadband, Energy
18
Boosts economic activity
Creates jobs
Improves productivity and competitiveness
Benefits lower and middle income
Can you imagine doing business without it?
Infrastructure: Broadband
19
Renewable Energy • Energy Security: Rising oil prices are a hidden tax
that could derail the economy• Import substitution: Money spent on renewables
stays in Hawaii• Test Bed: Catalyst for innovation sector
LNG• Efficient generation: Allow more renewables • Cost: 25-45% lower cost
Jobs• Renewable energy development creates jobs
Infrastructure: Energy
20
Role of LNG in Hawaii
LNG is viewed as a transitional replacement for residual oil and
other petroleum products in current fuel mix
Goal
Reduce electricity rates
Improve grid resiliency and renewable penetration via flexible, quick start, fuel efficient, gas-fired generation
A cleaner and lower-cost replacement fuel for ground fleet and marine transportation
Growth Strategy: Housing and Urban Revitalization
Long Term Economic Trends
Fiscal Headwinds
Growth Strategy
• Infrastructure
•Housing and Urban Revitalization• Hi Growth Initiative – Supporting the Innovation Sector
22
1961-1970 1971-1980 1981-1990 1991-2000 2001-2010 2011-2013 -
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Population
Oahu housing development has trailed population growth
Population and Housing
Source: U.S. Census Bureau and Honolulu County Building Department
23
Average Annual Planned Units
1961-1970
1971-1980
1981-1990
1991-2000
2001-2010
2011-2013
0
2,000
4,000
6,000
8,000
10,000
12,000
8,404
10,983
6,464
5,268 5,754
2,816
Source: State of Hawaii Data Book
Statewide planned housing units now are only 49 percent of what they were during 2000’s
24
1960 1970 1980 1990 2000 20100
20,000
40,000
60,000
80,000
100,000
120,000
0%
10%
20%
30%
40%
50%
60%
20.1%
# of HouseholdsShare of total HH
# o
f H
ouse
hold
s
Share
of
tota
l House
hold
19601970
19801990
20002010
0
20,000
40,000
60,000
80,000
100,000
120,000
0%
10%
20%
30%
40%
50%
60%
23.3%
# of HouseholdsShare of total HH
# o
f H
ouse
hold
s
Share
of
tota
l House
hold
“Married Couple with own Children” Households
Living Alone
Hawaii Household Demographic
In 1960, 56% of Hawaii’s households were “traditional” households. But by 2010, the traditional households accounted for only 20% of total
households.
25
Total estimated construction cost of 14 new projects in Kakaako is $2.3 billion
Total output (sales) generated = $4.8 billion
Total household income generated = $1.4 billion
Total state tax revenues generated = $253 million
Total jobs created/supported = 21,160 job years
Kakaako: Economic Impact of Construction
Growth Strategy: HI Growth Initiative
Long Term Economic Trends
Fiscal Headwinds
Growth Strategy
• Infrastructure• Housing and Urban Revitalization
•Hi Growth Initiative – Supporting the Innovation Sector
Innovation Sector Most Effective at Creating Jobs throughout Economy
Traded/Export Sector
# Jobs1 Average Wages3
Employment Multiplier2
Innovation 64,488 $65,500 5
Skilled Manufacturing 17,600 $38,900 2.5
Hospitality Service 139,000 $26,800 1
1 UHERO; 2 Moretti, 2010; 3 DBEDT
28
Educated Entrepreneurial Workforce is Key Competitive
Advantage for Innovation Sector
• Hawaii’s high quality of life appeals to this workforce• Top 10 State for in-migration of educated entrepreneurial
workforce• Top 15 State for educated workforce
• Hawaii is cultivating entrepreneurial talent• No. 1 ranked State for growth in entrepreneurial activity
Source: The 2014 State New Economy Index, Information Technology & Innovation Foundation
Honolulu Startup Weekend Maui Startup Weekend
Innovation Sector RequiresSimilar Ecosystem Investment
as Other Key Industries
INFRASTRUCTURE
WORKFORCE CAPITAL
Airports Beach Parks Branding and
Marketing
Tourism Training Programs
Gigabit Broadband
Innovation Hubs
Industry and Investor Networking Events
Accelerator Programs
Commerciali-zation Programs
Tradeshow Programs
Investment Capital
SBIR Grants
Tou
rism
Inn
ovati
on
Grants to Support People, Place and Culture
Irrigation Farmland Seed
Development
Agriculture Extension Programs
Agriculture Loan Programs
Ag
ricu
ltu
re
30
Proves Comprehensive
State Program Can Spark Innovation Sector Growth
Coordinating entity
Dedicated funding stream
Long-term commitment
Mahalo
Hawaii State Department of Business, Economic
Development & Tourismwww.hawaii.gov/dbedt