House Standing Committee on Finance

Aloha. We are reconvening the House Committee on Finance. It's January 16th and around 9am in Room 308. We're here for the purposes of departmental budget briefings, and we're joined today by the Department of Commerce and Consumer Affairs. Please, whenever you're ready. Yeah. Please approach the bench and... Yeah, go for it. Thank you for joining us today.

Aloha. And Happy New Year, Chair Todd, Vice Chair Takenouchi, and Members of the House Finance Committee. I'm Nadine Ando, the Director of the DCCA, and I'm here with members of the department relating to the DCCA's budget request for fiscal year 2027.

We appreciate this opportunity to come before you as you consider our budget request and thank you for the time to review our requests and related submissions. We're here to briefly summarize what's in our budget requests and to answer any questions Members of the Committee may have for us.

In that regard, I'd like to start by introducing members of the Department who are here today. First, Dean Hazama, Deputy Director. William Nhieu, our Communications Officer. Kyle Ladao, Legislative Coordinator. Michael Wun, Business Management Officer. Jayson Horiuchi, Program Administrator for Hawaii Post Secondary Education Authorization Program. Ty Nohara, Commissioner of Securities in the Business Registration Division.

Randy Leong, Administrator for Cable Television Division. Michael Angelo, Consumer Advocate with the Division of Consumer Advocacy. Dwight Young, Financial Institutions Commissioner. Rhoda Castillo, Acting Information Systems Manager of the Information Systems and Communications Office. Scott Saiki, Insurance Commissioner for the Insurance Division. Denise Balanay, Senior Hearings Officer in the Office of Administrative Hearings.

Thomas Mana Moriarty, Executive Director of the Office of Consumer Protection. Esther Brown, Compliance and Enforcement Officer with the Regulated Industries Complaints Office. And with the PUC, Jon Itomura, the Chair and Commissioner of PUC. Along with Jodi Endo Chai, the PUC's Executive Officer.

So, as was noted in the written submission that we filed with the committee, all requests budget requests are ceiling increases for the use of the department's special funds. As was noted in the written testimony, the DCCA's funding source is unique among departments, as its programs and operations are funded by its own revenue generation.

That said, the DCCA is mindful of the Legislature's fiscal oversight of the DCCA's funding and seeks legislative approval requested ceiling increases to expand our department special funds to meet operational needs and to make improvements in support of its mission to provide important commerce and consumer related services to the public. So the requests are as listed.

I believe it's table four of our submission. The, briefly summarizing. Funding for fringe benefits to fully fund employer obligations to provide for payment of increased benefits across seven programs totaling $1,178,302.

Second is the DCA operations funding, a ceiling increase of $595,959 for the PUC to fund the operations of the Division of Consumer Advocacy pursuant to HRS section 269-33. An increased ceiling for central services assessments pay, as CSA paid out by the department has been more than the line item allowed for it, resulting in operational deficiencies.

And as outlined in Table 4, that would be a total of $400,000. That consists of $200,000 for our RICO Division and $200,000 for the Business Registration Division. Lastly is a funding request to increase ceiling to for communications to expand its outreach to the public. And that request is in the amount of $20,000. So we are here to answer any questions that the committee may have with regard to our requests and anything in particular with regards to our department.

Sure. I have a very quick one, and then I'll turn it over to Chair Matayoshi and any Members of the Committee. And this doesn't necessarily apply, you know, a ton to your department, but I figured I'd ask anyway. With, you know, restrictions, any need for an emergency appropriation of any sort. I know you guys are mostly fee generated, so...

Yeah, we... Fortunately, we are not affected. We don't rely on any federal funding. And so we're not affected by those funding cuts. But as far as any restrictions or anything that we have nothing. No concerns this year.

Yeah, sort of figured. Okay. Chair Matayoshi, you have anything going to start with or?

Thank you, Chair. Do you have an update on the roof repair project?

So about 85% of the actual roof surface has been repaired. We have about 15% remaining. We also have work on our main entry area to the building, which is called our arcade, primarily because it has columns and all of that in there. That works, it has started. Scheduled to be completed by the end of this year.

On budget, on time, everything?

On budget so far and on time.

For the roof? Okay. So the $400,000 that you're... Well, actually, let me start a little bit higher. You're requesting about $600,000 for Division of Consumer Advocacy. That's your second item that you requested. What exactly is that 600,000 for?

Actually, it's not, it's not for... So the, by statute the PUC passes funding for Consumer Advocacy to do their operations. Their budget line item on the PUC doesn't match what they're actually passing today. So they're just asking. It's more of a housekeeping thing. They are actually passing the money, but they want that what they're actually passing to kind of match what the line item is on their budget.

So PUC is funding. The money goes through PUC to Consumer Advocate? And then they're... You're saying that the budget doesn't match because they're supposed to give them about $600,000 more than they're getting?

No, it's the other way. So they're paying about 4.78 now, but that budget line item is short 590 something thousand. So they're not going to be passing them any more additional money. It's just matching the amount that they're actually passing.

Am I the only one lost here? Okay, so you're asking for an increase in 600,000. That money will filter through PUC to the Consumer Advocate. Right?

We're asking for PUC ceiling to be increased.

Yeah, but the money is meant for the Office of the Consumer Advocate. Are there any additional services being offered? Or what... Why? Is the number just off or are they increasing services?

No, so they're actually passing the amount they're supposed to. But on the PUC side, on their budget, on their budget side, that amount that they're passing is actually 590 something thousand below what they're actually passing the money over.

Okay, so everything is status quo. Why did... That's a pretty large discrepancy. What happened?

I think over the... This has happened like over the years and just, you know, it wasn't corrected. So over time it just kind of adds up to that amount.

So this is a cumulative amount over how many years?

10 years. About 10 years.

This is never... So like a 100,000. I mean that's a lot. I'm kind of struggling to figure out why this is happening now instead of 10 years ago. Who was eating the costs? If everything was satisfied, all the money was getting paid, no one was getting shorted any, where's the gap here? 70 grand a year. Was it just not getting paid out?

I'm the ASO for the PUC. What happened in general is there's a lot of pay increase, like the union pay increase for the last couple years. And usually when that happened we don't, we don't get our side increase to offset that. Right.

And then there's another approximately almost 3% coming up in July 1st, and this for this fiscal year for their, for their pay increase. So the 3% out of their budget, it's just this year. And then the 2%, 2.45 or something for last year.

Okay, but you've been paying the pay increase, right?

Yes. So we absorb that cost out of the PUC. Normally is what happened is whenever the Consumer Advocate budget go up, whatever the amount that increased for them, our side have to go up so we can transfer that money over to them. And sometimes it's like pay raise and those kind of things come through the union. It doesn't impact our budget until the following year.

Okay. But it's been going on for a long period of time. Where has the money been coming from to fund those pay increases? I'm just... It seems like everyone has been getting paid what they were supposed to. It's been 10 years since you've come in to raise the cap to account for this. I'm just struggling to figure out what's been going on in the background.

Yeah, I'm not quite sure about the ten year thing. It's only last couple years, right? Definitely there's a union agreement last year, right. There was increase in July 1st, and then there's another increase this July.

But you're asking for 1.1 million for the first line item to fund employer obligations. I'm assuming those are the union negotiated union increases too, right? Or is that a separate item?

The 1.1, the first item, if you look on Table 4. I think it's broken down which programs are looking at the fringe increase, the ceiling increase for fringe to cover fringe. And I think those are the seven that are listed, the various divisions that are listed. So that is not, the PUC is not among those seven.

So in other words, the seven that were listed in that first item, the funding for the fringe, that's for divisions under DCCA. And so that's to catch up and pay the fringe. But 901, CCA 901 is the PUC and they're not among the seven programs.

So you broke, you broke the PUC out of the second line item because you wanted, you need also needed that catch up. Is that what happened?

No, I don't think that... I don't believe the PUC was included in the first line item for the fringe.

Because it was a multi-year catch up that you broke it out or because otherwise why wasn't it included in the first line item?

Well, that's true. I think you are correct. I think it's probably because the number for the PUC is more cumulative, and that's why it's separately listed. Rest of the line items for fringe are for the various divisions under DCCA, and it is for last to catch up for what we have to pay. That is for the year. So it's specific for that year. Whereas a piece...

That doesn't matter as much. I think the core of my question is the money, that about 70,000 a year for the last 10 years. About 60,000 a year-ish. If you're for... Anyway, the money was being paid. I just don't know. I'm assuming you keep a normal balance sheet. So the money had to come from somewhere. I'm just wondering where that came from. Was the DCCA funds that were more flexible and then you eat away at that?

These are PUC funds. So this is for specific to the DCA. So PUC provides the funding for our Division of Consumer Advocacy. So that's separate from, you know, all the other divisions that are being funded.

Okay. So in that case, PUC was short 60,000 a year for 10 years in order to do this because you guys didn't ask for more money or ask for the cap to increase? That's the part that bothers me I think is that...

Yeah, I don't know if it's a 10 year period. I think, I think. But apparently given whatever the annual amount that's typically included in their budget, they were not including these additional increases that had to be paid. So I understand your question, which is where was the money coming from to be able to pay that?

I'm just kind of concerned that PUC was getting shorted for years because DCCA just kind of forgot to ask. Even if it wasn't 10 years, 600,000 is quite a bit.

Yeah. Because like for us, I mean the pay increase alone for last, the one that the union approved and all that and also the commissioner pay increase, those came up to about $305,000 just this year. Right. But we can't ask for that money until we come in here. So basically we're asking for that.

And then there's another increase this right In July, what, 2.9 for bargaining unit 13. So that's why the PUC is at about that dollar amount. The other part where the DCCA, you know, they have a similar increase but they're smaller. So we're offset where we're asking for that to offset our budget.

Okay, maybe I can get a better breakdown later. Chair, do you want to open? I don't want to...

Sure. Let's open up real quick, and then we'll cycle back. Members of the Committee, questions for the department? I have a relatively small one. Maybe someone can speak to trends in kind of new types of fraud, particularly around AI and maybe what your needs as a department may be going forward if you've seen an uptick, or is it just replacing previous types of fraud? Since you do reference it in your testimony. I was just kind of curious what. That looks like for the art.

Good morning, and thank you. Mana Moriarty with the Office of Consumer Protection.

I just want to say, you have my favorite name in state government also.

I thought that was your first name.

It's incredible. It's incredible. Good job on your parents. Or you if you change your name to Mana Moriarty.

Shout out to my dad, James Moriarty.

Like a Sherlock Holmes villain or something.

A local one.

All right. Sorry. Sorry to distract. Go ahead.

No, but I actually want to take this opportunity to thank Chair Matayoshi for hosting the Info briefing in December where we talked about fraud, the proliferation of fraud. There was a really good panel there from Department of Law Enforcement, HPD, AARP, the alphabet soup, including OCP.

So our, from our perspective, we're trying to maintain a pulse of the types of frauds that are being escalated by the scalability that AI affords. That consists of sometimes receiving complaints and referring them to the appropriate agencies. And I say referrals, because let's be super clear about this.

That fraud, the type of fraud we're talking about, where there are dollar losses, this is criminal activity. Our department and our office specifically does not have the criminal law enforcement authority to go after these actors in a prosecutorial fashion.

What we can do from our role is serve as a hub to coordinate with criminal law enforcement, local, state, federal. And we do that. We have good relationships with the majority of local and state officials. We work with the FBI in appropriate cases. We work with the Attorney General's Office.

We would love to continue to build the relationship with HPD, which I think is taking this threat of fraud seriously and recognizing criminal aspects. One thing that is, I think, apparent is that our criminal prosecutorial apparatus is not necessarily where it needs to be.

And that is a conclusion that I've reached because if you look at the number of prosecutions for fraud, they're sort of strikingly low. And I'm not trying to point fingers at anybody. There are some great efforts being made at prosecuting public corruption. Fraud presents challenges because it's facilitated through online sources, many of whom reside outside the jurisdiction.

The ability of our criminal law enforcement to effectively serve subpoenas, trace blockchain, trace transfers through blockchain analysis. It's an area where I think we need to expand capacity. Take that all with a grain of salt, because I'm not the person in charge of that. Right. And our...

Our department is not the person in charge of those particular functions. Where we can assist is, I think, in raising awareness and in sharing our experience in combating things that we can prosecute civilly that also sometimes cross the line into criminal. Where we have worked with our law enforcement partners on the criminal side, for example, in the area of, like, deed fraud. Our office has taken a pretty active role in that, in investigations.

Okay, yeah. I mean, feel free to kind of continue to engage with the committee and with your Chair as with the session. Any needs emerge, if there's a way we can kind of better provide you with what you need to service the public in that way, or even just from a strategic point of view.

If it requires coordination, just let us know. You folks also field complaints on things like shrinkflation or those people who are intentionally or companies intentionally misrepresenting quantity of goods. That sort of stuff. I'll give you a very specific example that irritates me. All right. Very, it makes sense with the body type, right.

You go to like, the Honolulu Airport. You buy a sandwich, it's like $9. And the way they make the packaging, it looks like there's a lot in the sandwich. And then you open it and it's just because they put it in the clear plastic section and there's actually nothing outside of it. You field those kinds of complaints, too? I know that's very specific. It's usually a ham and cheese. They get you with the ham and cheese. You field that sort of thing, too?

So occasionally we get complaints of that nature, and we have to figure out where the consumer harm is. Just like any set of facts that's presented to us, what is the harm, what is the scope? And those are some of the factors we're going to look at whether to pursue an investigation. And when we apply law to facts, what I would be curious in this case is what do you think the misrepresentation is?

It tells you that there's going to be a lot of meat and cheese. But it's because that's where you can see. Everything else that's not visible, there's nothing there. Right. There's a lot of that going on. So maybe I need to take some pictures and do an investigation on my own and then follow up. Is that appropriate?

It's always helpful to have evidence to look at.

Let me know what you think. Okay. Members, additional questions for the department? If not, Chair.

I'm also pissed about that sandwich thing. So prosecutorial follow up. Going back to Chair's fraud issue. I mean, we've obviously discussed this a lot. Thank you for coming to the info briefing. I feel like you unintentionally maybe raised your hand just now. Yeah, I mean. Okay, so you don't have prosecutorial power. Fair enough.

We don't want to give it to you. I mean, that would be inappropriate. Could you though provide services to law enforcement or prosecutors through blockchain tracking, things like that? Not with your staff you have right now. But could your office be expanded to do things like that?

Provide an expert witness such like that to allow them to better prosecute? There are other things that you could do to assist the consumer in the pursuit of the prosecution. Not a civil action. I'm talking more criminal. I don't want you to necessarily get involved in civil. But are there things that you think that your office could possibly be expanded to do in order to better assist with that?

Yeah. One thing we've been tapping into, I think, which dovetails with maybe the answer to this question, is looking at trying to get a technologist on board. Somebody who is a non-lawyer but has a deep understanding of some of the technological systems that are used to. What we were thinking was privacy. That are...

So in privacy cases where data is stolen without an individual's consent, we need to be able to point to the hack, the transfer. Those cases lend themselves to expert witnesses. Blockchain analysis is not part of our current capacity.

And we would have to expand and take on and find the appropriate personnel that has that background to be able to do it. I don't see conceptually why they shouldn't reside in our office. With maybe one slight caveat. If the criminal law enforcement agencies prefer them in house, they would honor that preference.

You mean can afford them in house too? I mean, that's really the root of it. I think law enforcement doesn't have the resources to pursue a lot of these things. That's why you don't see them being prosecuted a lot. But DCCA has got some cash, and your job is to protect the consumer.

Fraud is rampant right now. Maybe we can have a conversation between you folks and law enforcement to see if there are any resources that they could better use that could be housed in DCCA to allow them to better pursue these criminals. I don't want to be barking up the wrong tree or, you know, chasing dead money here.

If it's going to be too difficult for the prosecutors, even with your help, to prosecute them anyway, kind of why bother? But if there are resources that they might be able to use that your offices could provide as services to them, maybe that's a way to, one way to pursue fraud better.

And I don't want to belabor the point, but there are two things that maybe make that an even better idea than you might think. One is that there's a real availability of resources out there because the federal agencies have been systematically eliminating positions and firing individuals with this skill set that were working at the federal government, particularly at the Consumer Financial Protection Bureau. And second, sort of unlike some of the other divisions at DCCA, we're not necessarily fee funded.

We are funded by what we go out and earn through our civil prosecutions. We're funded through our enforcement activity. And if we were able to have additional resources, we would bring additional enforcement actions and we would bring in more enforcement to possibly carry more personnel. So that's a consideration that we've also been thinking about in house.

Okay. So if there are any federal agents listening to this discussion, job resumes, please. All right. Yeah, let's talk. Let's see though what law enforcement needs. You're talking more civil action, though, not criminal, right? I was talking more assisting criminal prosecutions. But civil, that's another good idea. I like your expansion.

One of your budget items to $20,000 for communications for expanding outreach to the public. I'm assuming that's more PSAs, kind of information about how to avoid fraud, how to avoid, like hire a licensed contractor, that kind of thing, or what does it entail?

I'm going to call up... Will, do you want to speak to that?

The reason I'm asking is this number is awfully low. 20 grand. I feel like we could use a lot more of this preventative measure.

Thank you. William Nhieu, Communications Officer for Department of Commerce Consumer Affairs. Yes. $20,000 is for expansion of public outreach and consumer efforts. It is a... Is just a figure that's supplemented by...

We already have a communications budget, and it's just a small figure to expand more for on the ground. So it includes neighbor island visits. We want to ensure that we hit each neighbor island every year at least once. It is for social media advertising and public service announcements on television as well.

But it is supplemented by funds from downstream through the department. The license contractor campaign that you mentioned is, we funded it recently, last year through the Contractor Education Trust Fund. We have the director's office budget as well that we use monies for. So this is a small increase that we're asking for.

So what's the base right now?

I think the past year we spent about $100,000.

Okay. Could this be used to... I mean, we passed a number of bills, and we're looking at a number that are in the queue for safety checks. I know I had a bill a couple of years ago to try to get rid of those super high beam headlights, to make sure that the headlights are hitting the ground at the regulated distance away. And we put that into the safety check statute. I just got my safety check.

They did it outside, so there's no way to check that. I'm just saying, if some of this money could be used for either educating the safety check locations. I think the word is not getting out from the bills that we're passing to the actual locations that are enforcing it. I'd like to see that done more.

I know Darius, the Transportation Chair, has a bill regarding license plate covers and things like that. I think I have one too. But a lot of... We're trying to catch a lot of these violations at the safety check level where they have to get a yearly thing.

There's someone licensed who's going to be doing the safety check before with the safety check. It doesn't seem like that information is getting through the DCCA back to, back to them. So if you can comment on that.

Yeah, we should. We'll take a look and see what we can do.

Have you alerted them of the headlight thing or any other... Okay, it's been years. And then funding for anti-fraud. How much are you spending on fraud education right now? Out of the 100,000, or soon to be 120.

It's all anti fraud pretty much. It's all.

Yeah, it does center around anti-fraud. So, you know, we, we go to outreach events for kupunas and things like that. So it kind of ties into that areas as well.

Okay, how about condo board education? I know that's a big topic coming up in our realm at least. Is this the same fund or is it a different separate fund? Okay.

They have their own. They have their... The condo has their own fund.

Is DCCA able to offer more informational resources to condo boards? Because it seems like a lot of them are struggling right now.

Right. We have that condo education trust fund and there is use of that money to provide for more education. I know they do a condo-rama event every year, maybe twice a year, sometimes once a year. But I know they're also using it for other purposes to get the word out. But certainly we can spend more time talking to them about, you know...

I know DCCA needs to use its resources kind of within the same nexus, but could DCCA offer to like host websites for condos? I mean, to allow them to better post and make available their condominium documents, for example?

One of the complaints I've gotten is that the smaller associations don't have the money or the time, the resources to post their documents online. There are other larger ones that use some kind of website. I can't remember what it is, but to kind of post their meeting minutes and things like that. Is that a service that DCCA could provide for condos using the condo fees just to make it more uniform?

Yeah, they have a website that has resources on it, so we could add stuff to that website.

But I believe there's also in... Cindy, come up.

The other thing too, if they post their budgets and things like that, you'll have direct access to it. I mean it would allow maybe some oversight if we decide to go that way.

Cindy Matsushita, Administrator for the Professional Vocational Licensing Division. We have, we have begun discussions regarding the possibility of hosting a portal that you just, such as what you described.

For all the condo, to access condo documents.

Or just kind of post condo thing. I mean, I don't even posting, you know, so and so's baby luau was Saturday, but you know, to post legitimate condo related items.

Yeah, I believe the discussions that we were having were surrounding CCNRs or condos.

CCNR declaration, bylaws, all of the meeting minutes, budget.

Yes. All those associated documents.

Okay. Where is that in the process?

It's in discussions right now. There's software system considerations as well as, you know, considerations of what types of documents we would be posting, things like that. So still in its discussion phase.

Okay. Yeah. Please keep me updated. I think that's a good idea. I'm glad you guys are going in that direction. I have one more question for Mana. But do you want to open it up to... No, no, no, please. I'm about to switch topics entirely. So.

Okay. So you folks are projecting a surge in complaints surrounding the expiration of foreclosure moratoriums related to Covid and disasters. And I was wondering, because it looks like we're entering into a period of economic downturn and the underlying debt structure remains the same for most of those folks.

Have you been in conversations with leadership or with other legislators about legislative remedies or how the state might address that surge in... Because I see the complaints related to an actual situation or we're going to have a real problem.

I think we can speak to it more broadly. Have our Financial Insurance Institutions Commissioner.

Dwight Young, Commissioner, Financial Institutions. It is possible that there are going to be more foreclosures coming up. Our general practice is to point them towards their servicer or their lender to see if they can work some things out. We have not had anything at the moment as far as the surge complaints, so it's kind of wait and see.

Servicers have been very cooperative, especially with the Lahaina Fire. They came out, they did seminars for the residents. We believe that they are willing to work with their clients. It is in their best interest as a servicer to work with their client rather than to foreclose on property.

Okay, so you're not even... You're not seeing then a surge?

We haven't yet, and we don't have a lot of increase in that regard at this time.

Members, any additional questions? Chair.

Most exciting department. You guys don't have questions for DCCA? Okay. Actually, I have two questions. One's kind of a brief one, though, for the... About a year ago, I asked you guys to start looking into some of your license fees I understand have not been raised and a decade. And you were going to look into that. Can you give me an update on your analysis of the license fees and some that have not been raised in a very long time, at least in an inflationary style?

So whether or not look at increasing any of the license fees.

I don't have a long history with DCCA. I've been here for about nine months. But we are open to the discussion. It has come up maybe once or twice during my tenure. I'm not sure what the history is, but we're open to it.

Okay. I'm not letting this one go. It's been a year. I haven't heard anything. So I'd like some analysis done. I mean, the fact that licensing fees have not been... We're about to get into a budget crunch, and I think those fees have been lagging.

I think that DCCA can offer certain support services like I just talked about with Mana, that could possibly be at least supporting of other departments. But without the funds coming in, I don't want to off balance you folks. So I would like some analysis done, someone to at least take a look on that, just what pure inflation would have raised.

We will take a look at that. I guess, like in any kind of circumstance where, you know, the projections for how the economy is going to be going next year. Whenever we are looking at increasing licensing fees for professionals who are also in that category of the public that's being affected by inflation and budget concerns overall, you sort of have to balance it.

Because we are looking at professions that are governed by their boards and commissions. They have to determine whether or not something like that would make sense for them at this particular time.

So not to be tone deaf to the idea that there is an overall need to find ways to increase our state revenue in times of more economic distress. The idea that, you know, we're looking at increasing fees for people for their professions at a time when they may be also feeling the brunt of that, it's kind of... It has to... It's a sensitive concern.

I understand that. But in that case, you folks should have been raising it over the last 10 years, and then you could decrease it now when we have an economic downturn. This isn't to say that we should be necessarily increasing it during economic bad times, but it almost speaks to a failure to account for increases in these fees over a very long period of time before your own tenure.

Yes, of course, before my tenure.

But it should have. I think that there's been some neglect in this area, so I'd like some analysis done. If it hasn't been raised in the last decade, I mean, McDonald's extra value meal prices have doubled in the last decade, maybe tripled. Right. So, DCCA.

It's nice that you keep your fees low, but I'm not sure anyone could really complain about a fee being raised to an inflationary degree after they've reaped 10 years of a static fee too. So I understand your point, but I don't think it applies here. That's all.

We will look into it and we will provide you with more information.

Okay, when should I follow up with you folks next?

Maybe give us a couple of weeks, we can look into it.

Okay, that sounds fair. Thank you. So my last actual question is actually for Mana again. Mana, we talked about that landlord tenant helpline. That was you guys? I can't remember which working group this was.

Yes. We operate the Landlord Tenant Information Center.

And that's a free line for landlords or tenants to come to you, not for legal advice, but for legal information, I would say. Is that fair?

Correct. So our staff is trained to help them identify the issues that they're going through. And our staff will make reference to appropriate statutes in the residential landlord tenant code where appropriate.

We've had some changes to that program as part of the department wide initiative to set up a call center and caller support. So that the first level of interface is now our call support team, which is our vendor team in Honolulu.

We have assisted more than 5,000 people since we were last before this committee through our call tracking measures. The callers include landlords, tenants, and anybody with a question. They do not have to identify them themselves as a landlord or a tenant. And we're currently, as you mentioned, a member of the legislative working group to take a look, a fresh look at the residential landlord tenant code and see where revisions are needed.

I think it's a great service that you're offering. I remember we talked about possibly expanding it or getting better coverage. I honestly never even heard of this resource. And I followed you for legal lines and things like that. I just wish we had, we had known about this so I could direct people to you folks when we hear about people in distress. I thought we talked about kind of trying to expand that program somehow. How is that going?

One of the things that the call center operation has enabled us to do is to shift from a completely in house manned operation to a vendor supported operation. And as some of you know who were here at this brief briefing last year, the hours of operation was a concern for some Members of this Committee.

With only one, with a full time staff presence on Oahu, we had been answering calls from 7:45 to 12:30 daily. With the expansion to a vendor supported operation, we're answering calls now from 7:45 to 4:30 regular state office working hours. Our call back service remains. You get a call back within 24 hours regardless of when you call. That has not changed. We have delivered that 24 hour callback service consistently as far as I've been aware of this program.

Okay, great work. I appreciate it. Thank you.

Anything else? Members, anything additional for the department? Okay, well, thank you very much for all your hard work. Thank you for attending. We're going to recess briefly to allow for the transition to the department of Business, Economic Development, and Tourism. Recess.

Aloha. We are reconvening the House Committee on Finance. We have a budget briefing today as. Part of our 9am agenda from the. Department of Business, Economic Development, Development and Tourism. Please proceed when you're ready.

Thank you. I'm not used to this high tech. There's no microphone and you guys can hear us? Yeah, just.

Just in case you're already not aware, green is on, red is off as much as possible. If you're gonna have a side conversation, just shield your mouth because it'll be a directional mic and might pick it up.

Otherwise, it is high tech. Good morning, Chair Todd, Vice Chair Kitagawa Members of the finance community, thank you for having us. Oh, I'm sorry. I'm so sorry. Thank you for that. We sent you our packet in advance.

So other than read the introductory letter that we wrote, I think it's important because there's a lot of new Members on this Committee that we introduce all the agencies and I'll make sure that they stand when I introduce them so that you know who the different departments are. I remember when I was a freshman, it's a blur.

We have 17 agencies, so it's not easy to keep track of them. Some of the senior Members, hopefully it would be easy at this point. But anyway, we'll just go through that. So our newest or one of our newest hires is our new ASO and that is Sayuri Sugimoto.

Sayuri handles HR and everything to do with the Administration of DBEDT in order of the program ID numbers, Business Development and Support Division. That's Dennis Ling.

Aloha chairs, Vice Chair Committee Members.

Dennis is one of the longest serving employees of DBEDT and maybe even the State. Creative Industries. Georgia Skinner.

Aloha all. Thank you for having us today.

The foreign trade zone is David Sinking. Hawaii Tourism Authority Caroline Anderson. Hawaii State Energy Office Mark Lick, Research Economic Analyst Division Jen Chan, Hawaii Green Infrastructure Gwen Lau Yamamoto.

Military and Community Relations office is Lori Moore. But representing Lori Moore this morning is John Green. Hawaii Technology Development Corporation is Trung Lam.

Office of Planning and Sustainable Development, Mary Alice Evans.

Natural Energy Laboratory of Hawaii Authority is Lawrence Sambaradir.

Hawaii Community Foundation. Hawaii Community Development Authority is Craig Nakamoto. Hawaii Housing Finance and Development Corporation is Dean Minakami.

Agro Business Development Corporation is Wendy Gady.

Wendy always has a lot of energy. Stadium authority is Mike Yadao and Mike Yadao is newly appointed. I think he's been there like a month. So we thought that was important because there are so many attached agencies and divisions of DBEDT.

So now I'd like to turn it over to Deputy Director Wicker for the presentation of where we've been, where we are and where we're going with DBEDT. So Deputy Director

Good morning Chair, Vice Chair Members of the Committee, happy 2026. If you can indulge me, I do have a lengthy presentation. I'll try to do this in 20 minutes but we feel it gives goodc ontext as we're entering our fourth year of this term, where we've been, how we got here and what the plan is moving forward.

So throughout the slide deck it'll include our strategic plan but as well as the additions found in our budget as well as the CIP found in our budget both for the current FY27 supplemental request plus what has been appropriated last year ahead of the supplements here through Act 250. We'll also cover some of those legislative.

Proposals that's under consideration Admin package as those policy bills do have a fiscal request or a fiscal nexus. As Director mentioned, DBEDT includes 17 programs. 10 of those are attached agencies, 7 are core divisions.

Those attached agencies are structured to operate like business where they fill voids in either manufacturing, energy, tourism and other areas we're looking at in diversifying our economy. When we joined DBEDT back in 2023 we received two other agencies, the Stadium Authority as well as the Agribusiness Development Corporation.

What's not on this org chart just yet is the Military and Community Relations office. To give you some context as we're now in beginning year four the first two years were spent on identifying what those sectors are we need to focus on for economic diversification that included low hanging fruit with some of our anchor.

Industries such as tourism, agriculture. We also explored other ways aspirationally to. Hawaii strengths where we can focus on such as aerospace. Year three Last year we received a lot of support from the Legislature through CIP as well as through the General Fund and we've begun implementation and as.

We go into year four it's continuing to leverage what we've started as well as to continue on adding in projects. Where we see our businesses are asking for the most support. So workforce alignment workforce gaps are systemic and skill-specific. They're not marginal. The talent availability is a binding constraint on growth.

Current economic structure is not producing sufficient wages and workforce alignment is a legislative mandate. So we pulled this from prior reports to UHERO, the Small Business Administration as well as our own Reed economic forecasts and through studies and reports that the Legislature has asked us to do, such as HCR184. When it comes to infrastructure and facilities.

We recognize that the economy cannot scale without the supporting small businesses and getting them to become medium enterprises. What we found is that the manufacturing base exists, but it's fragmented and under capitalized. So the cost of the business in Hawaii is preventing our small cottage industries and our small businesses from scaling up.

There are critical infrastructure gaps that constrain this scaling and we are missing a pilot to scale infrastructure. Export is a key driver for diversifying our economy. We've got to look at our value-added product producers that includes our creative industries, fashion design. Our digital media and film, as well as our value-added food businesses.

We will depend on that small business capacity. So if you think back in your communities, we do have a lot of cottage industry, a lot of small business value added producers. The growth must come from exports, not just relying on population, either local or visitor.

And we have to invest in our export infrastructure as there's a needs response that we see both from surveying the industry as well as through legislative report west. And lastly legislative direction and policy alignment, our economy cannot scale without again our small businesses.

We have to invest in our infrastructure gaps and we have to understand that pilot to scale ecosystem. And so there's also alignment with DBEDT's Strategic framework with both Senate and House as both your packages or your themes came out earlier this week. And we do have alignment workforce development which we'll cover in the coming slides.

Manufacturing, including advanced manufacturing and then exports and how these do drive high wage jobs so consistently. Our problems are also the nation's problems in three areas. According to national polls, we rank the worst in business costs, mediocre in workforce development and very low.

When it comes to infrastructure to lower business costs, we're finding that it is infrastructure and facilities. The capital costs, the upfront costs our small to medium businesses cannot afford it or sustain it individually on their own. We're concentrated in tourism, construction and other. That includes export services. Other also includes real estate.

And we know the price, the cost of living is high here as well as the real estate media. But we can look at further diversifying in areas in tech, innovation and agriculture and how do we move the needle in these areas. So there are four pillars that we focus on in government it's curriculum to career.

So working with our Department of Education and our P20, understanding what CTE programs are in place and when those students graduate, can they go straight into the workforce? 40% of our students do not continue secondary education within the first year. So how do we capture them and pathways to entrepreneurship immediately after graduation and.

Vice versa with our industries is the CT align there? So we're working with people like the Chamber of Commerce and their sector partnerships. We have workforce development embedded within some of our programs that are working with the trades in the industries to bring in that skill set for employment. We also work with Healthcare Association Hawaii.

They just recently graduated 20 or 50 students on their glide path, which was a contract issued through Business Development Support Division. And that graduating class is going to fill 25% of the current industry vacancies. We'll talk about infrastructure, facilities and CIP. Requests as well as CIP we received policy changes to help make us more diversified.

And then I'll show you examples of how we're laying current incentives established within DBEDT. So I won't go into this in depth, but we did a lot of research on prior studies and reports going all the way back to 2010. There were a lot of common themes but what was lacking is the what and the how.

So one driver out of two that. We'Re focused on is achieving mandates. So these three pillars of agriculture, energy and housing all fall under DBEDT either. Through Agribusiness Development Corporation, Hawaii State Energy. Office as well as Hawaii Housing Finance. Development Corp and Hawaii Community Development Authority. Mandates on the agriculture include Act 151.

Which is doubling the state's Food Production Act 175, which is Department of Education's. Increase of farm to school purchasing as well as Act 176, which tasks other state institutions, your state hospitals, your jails, your prisons to also increase local purchasing. Energy Office is on the Mandate Act 997 2015 to achieve 100% renewable by 2045.

And we have housing studies that show. We need 26,000, sorry, 13,000 units by 2026 just to start catching up with a shortfall statewide by 2027, our data shows that we're going to need about. 70,000 units statewide, 40% of that. The challenge here is when you look at when they start to map out.

How they're going to achieve these mandates, it's land use. So we have established integrated Land Use Working Group within DBEDT to start aligning land use policies. The second driver is exports. If we want to increase our Tax base we have to rely on exports, not the population here locally. So we have to figure out ways.

To bring in new state dollars and. Prevent them or reduce the leakage of going out. So exports we're exploring are in the Non food products, that's fashion, design, jewelry, cosmetology. We have your value-added products, that's your food products, intellectual property. This includes the creative industries from designs.

Musicians, also through your technology sector and then the gig economy which are your service providers in working with the industry, working backwards from export to go. The goal to get them to export. They need to be able to commercial and scale up. In order to do that, the market needs to demand a product for them to anchor.

And then they either are already a small to medium business and looking to grow, or they have an idea and we have to help them innovate that idea. The concept, the biggest challenge though here is that valley of death going from growth to commercial. So in speaking with the industries as well as following surveys and studies that.

Were issued by the Legislature and asked of us to do these are the common areas why businesses cannot scale up. And why we haven't seen manufacturing or diversification as aggressive. They lack access to specialized equipment, whether it's capital investment, they can't afford the equipment. They don't have centralized locations for facilities or warehouses.

It's not necessarily they need to have their own brick and mortar facility, but a shared facility or open access facilities would help them anchor and expand. They need access to new markets, need. To understand those challenges of what it. Takes to get into those new markets and then increasing their scale.

And this is a chicken and egg we're finding out is that even when you develop a product and now you need to scale up, you have to go facilities to further change or revise your recipe. It's not just the same, you just don't double it to go from 500 to 1,000 units.

So this is addressed and broken down in three areas. You have your R&D and innovation. So we do have innovation facilities. We do need more. This is also the Kuleana of the community colleges. We're working with community colleges as they build out their innovation spaces.

This includes education curriculum for the non traditional, non accredited pathway market and scale up. That middle pillar is where DBEDT comes into place through our attached agencies. This is where we help them commercial and scale up. And this is through the manufacturing facilities. So there is a difference between innovation and manufacturing.

Although that facilities may look virtually the. Same, the missions are different and we. Saw across the board we did site. Visits to other countries and other states. And there's a clear delineation between the innovation and manufacturing facility and then expand and export. And this is where we leverage our. Business development support division and the ecosystem within DBEDT.

So our research economic analysis division, they release an emerging sectors report every year. We narrowed down these three sectors based off of what was already happening. Boots on the ground and in speaking with industry as well as tapping the boarding commissions and the expertise who sit on them. Where Hawaii needs to go for diversification.

So tech innovation, creative industries and product development. So as I mentioned earlier, we're going into year four. We've begun implementation. So when you look at several of our programs and what they can do across the state, here's where we can. Make those investments and start to focus on diversification. You have this slide deck.

I'll leave that for you. You have the Committee acronym as well as the notes that can explain how we can do that. As we go into tech and innovation, some of that low hanging fruit was healthcare tech and energy. We're also looking at how do we expand advanced manufacturing which will help support the aerospace community.

So just this past year Honolulu Community College and Department of Defense partnered up and they have the first innovation advanced manufacturing facility at Honolulu Community College. This brings in 3D printers, robotic which really ties stem to the trade service. Where this supports now is our maritime industry. Think of our shipyards as well as.

Aerospace and I'll explain how that happens. It's not just about satellites and telescopes. It's about making components that will support new industries coming. So our aerospace coordinator under the Hawaii. Technology Development Corporation is already engaged in conversation. We're in discussion with the Department of Transportation. Airports.

There is interest to have companies locate here specifically at hangar airport utilizing existing infrastructure. What we are working with is the price for a hangar facility. This is for horizontal launch. If you're pretty familiar with companies like SpaceX, Blue Origin, very costly, a long wait period.

What makes Hawaii attractive is one, our location to the equator to no population. For launches as you're launching over the ocean. This ties in STEM jobs as well. As advanced manufacturing for components that can be manufactured here and assembled here. Healthcare technology. So we're working with the University of Hawaii Cancer Research Center.

Three areas we're exploring when it comes to new industries. Translational drug development, early phase clinical trials. You may be familiar with MD Anderson and their institutions. This would be similar here where we could bring in patients here long term for their treatment and their trials which.

Helps not only the hotel Industry, but also as we move towards more of a healthy, that blue zone economy, health and wellness. And then with AI and how fast that's rapidly moving, we're looking at exploring. How data and AI R&D can be embedded into, uh, research center. We do have a request.

This is going to be through a Bill. The current SBR program is limited to certain types of activities. There are other federal programs and federal grants available. So we're asking to do a statutory change to allow the SBIR and SSTR. Grant funds we receive through the state to be leveraged for other federal grants which will help diversify.

Some of the industries are focused on their tech and development. So this is just a language change. In statute to leverage more of the. State dollars to go after new federal grant resources in media, fashion, design and music. So we're working on a pathway for export and distribution. There will be a lot of discussion.

About film this session. Other states have become very competitive in their rebate programs. You've seen California, they, I believe, went to 750 million with no cap. Texas went to 150 million no cap. That is a challenge. You know, if we're going to look at how do we compete at that level, it's going to be difficult.

You know, General Fund resources are limited. But we still have to make a play for major productions. They do employ a significant employment base. Here of over 2500 employees. When majors shoot here, the other side is artificial intelligence. Now, there are a lot of programs out there. You can create your own product from scratch.

You have open language models that can write your script, open language models that can create your soundtrack. So we're in discussion with a company for not only the curriculum, but also the programming to understand what type of equipment needs to go into our schools, what the curriculum is that the teachers have to provide.

And then through an MOA that DBEDT and Academy for Creative Media has executed. We're working with Chancellor Penalosa now. How do we utilize that facility for both the traditional and nontraditional staff? Again, this works with students coming out of, for example, like Sea Rider Productions, who can now go straight to the.

ACM facility, use the equipment there to create a production. We see that the large productions are not always attainable for new film producers. Through AI, we can see that they can create content with the skeleton crew. We also signed a MOA with the school for adults. They do career foundations on soft skills.

Build your bank, build your biz. They created a special program called build your farm. But when we talk to students and we See their skill sets and for those students who don't continue on to secondary right out of high school by getting their career foundation certificates in high school and those soft skills, it's teaching them entrepreneurship.

And through facilities such as the Value. Add Product Development center or the Academy for Creative Media they can continue straight into entrepreneurship. So we're working on alignment with that with both Department of Education as well as University of Hawaii Systems. This is a rendering so HCR184 which came out two years ago and the.

Report was released last year. What we found between the fashion and design, the jewelry, the cosmetology or cosmetic industry as well as the music industry. Honolulu Community College has fashion, tech and melee music programs. As the students graduate out, they're knocking back on the doors asking to reuse. Those facilities which HCC's mission is not commercial, it's educational.

So what we found in HCR184 is we do need a manufacturing facility for the Creative Industries Division. This was just placed on the sandlock box in Kakaako. We are looking at all other alternative sites. We do have some existing funds. We're looking at how we can repurpose that for proof of concept to start developing the design.

To answer the response for HCR 184. We do have several bills we put into consideration for Gov to consider this session. We are asking for one FTE. This is a trade off and transfer for a Taxation Compliance Coordinator. We do currently have a 10 position. We're asking to establish it permanently.

What we're asking here though it's currently under the Creative Industries Division we want to move it under our Administrative Service office so that it's not just serving the film tax credit. We also manage the R&D tax credit under HTDC.

So structurally, organizational wise it makes more sense to have a tax service office to manage the couple tax credits that DBIN oversees. And if we're ever potentially asking to others or make more so we're asking for one FTE on the salary, full 12 month salary of $116,265. This is competitive with the private sector on this position.

Another Bill we're asking for is currently the Diamond Hit Film Studio. Every time a production comes in we have to go in front of land board. Other agencies do have an exemption from the land board.

This allows us to respond quickly and nimble to the productions that do come on short term notice and ask to use the facility. So every time we have to do a permit we have to go in front of BLNR. So we're asking to be exempt from the BLNR process so we can respond quickly to the agency.

There is already established a Creative Industries Development Special Fund. All revenues from Diamondhead currently go straight. Into the General Fund. We're asking if revenues, all revenues or for consideration, a portion of be deposited Development Special Fund, as we did run a pilot program last year of a Grant to our small local.

Productions who don't qualify for the tax credit and that was the industry request is. How can we fund the local guys? Who are not able to put together a tax credit.

We did ask for a housekeeping measure as the Hawaii Tourism Authority has a Subcommittee on film production to help us with marketing and production to add film production to HTA statute.

And lastly we are coming in asking for consideration an increase in the film production tax credit, taking it from 50 million to 60 million as well as lifting the per production cap from 17 million to 20, 23 million. There are a couple ways we arrived on this number.

Number one, the last time the film production credit was increased was in 2017 from 2035, sorry, 2017, from 35 million to 50 million.

The CPI index, just to true up with that to keep the same dollar purchasing power as it is today, calculated a $10 million increase and so we replicated that to the film production credit to go from 17 to 23 million.

We also looked at the highest point of when we had the most productions and what those productions could have requested and the cap and the increase would have covered those productions as well. So 60 million and 23 million were asking to step up.

So the ecosystem I talked about is that phase one, phase two, phase three from innovation commercialization to export. We already have existing programs and we're breaking silos working with DOE as well as other agencies on when they can enter this framework and this pathway to leverage their services. So career foundations with exports.

Hawaii made is a key thing with branding. That's how we fetch a higher price for our products we make in Hawaii. We want to leverage grant programs and current loan programs as businesses anchor and expand and then leverage distribution outlines whether it's state or non profit. The last sector is the product development.

This includes your food, non food as well as intellectual property. This is Leeward's value added product development center. Also Maui Food Innovation center has been up and operating before Leeward. Leeward's been open for one year now and what they've done is they've established not only the career pathway, I'm sorry credited pathway but also a non credited.

They're working with non profits and such as Ainate Makeke. Just last week 19 companies went up to the fancy food fair show. That's the first time Hawaii's participated with companies in this fancy food fair show. It's targeted for value added products.

Eleven of those companies went through the Aina Tume Keke program here at the Leewards Value at a product development center. What this facility does, as you can see in the picture is it's not just your standard. What we know as commercial kitchens. They bring in specialized equipment, vacuum sealers, packaging machines, labeling Machines, bottling machines.

These machines cost a lot of money. No one business at a time can afford just the cost for the machine. They don't have the scale to justify the cost and they risk purchasing the wrong equipment. So. So this allows you to test and trial in the innovation facilities. I'll talk a little bit about the manufacturing facility shortly.

This is the ecosystem as it applies to value add. ADC has wrapped up with the University of Hawaii Community Design Center. The second phase, which is a manufacturing facility for our value added producers. This is for both the food and cosmetic side. What is also next to it is high pressure processing, which is key.

So for our value added producers, in order for them to be able to export their product, they have to be able to have shelf stable products. Currently, we don't have that technology at a commercial level here. We do have the high pressure processing in the bottom right corner at Leeward where they can do trials.

We are scaling up to have two machines that can run commercial scale for our value added producers. This facility includes everything that wraps around from your office space so you can package and ship out. It also has your dry storage and cold storage. So we're working on truing up the cost.

We may come work with legislators this session for plan and design money, but we're finalizing those numbers. So it's not including our budget right now. But this allows them to commercialize and schedule we're looking at doing. We did receive 350,000 last session to do a proof of concept planning for neighbor islands for the manufacturing facility.

So we are executing the MOA. We actually just voted on that yesterday, ADC's board. So we can plan for Kauai, Maui as well as Hawaii on the manufacturing facilities. Another position we got last session and we brought on this past November as a Commodity Coordinator.

So as we look at how do we double food production, how do we increase local purchasing for Department of Education, we have to reconcile land use. So we're working with the CTAHR at the University of Hawaii as well as Department of Ag and Biosecurity. We have commodity maps available for several of the local commodities we currently grow.

The Commodity Coordinator has identified additional commodities based off of what DOE has ordered the last two to three years to reconcile. Can we grow that here? What this does is now it starts to show an overlay.

What ag lands the state has or we need to acquire, what irrigation systems we have or we need to acquire if we're going to truly try to achieve doubling food production as well as scaling up local Purchasing.

What this also provides us is when we reconcile and you'll see in a couple slides later where housing goes as well as energy projects as there are conflicts with land use. We did data dumps with DOE to understand what we're importing as well as what we need to scale up.

What's key about this is because ADC is leasing land to DOE for their regional kitchens. So we visited several regional kitchens across the state. They aggregate in local produce, create scratch mills and then we'll ship it out to the schools.

What is interesting about what you see on the screen here is this model can be replicated across the state and repurposing existing plantation infrastructure. Each one of these buildings represent a solution to challenges brought forward to us by industry. They need access to processing facilities, manufacturing facilities, warehouse space, retail space, greenhouses, cold storage, dry storage.

That's the economic side. We always talked about resiliency and sustainability in the flip of a switch.

If a community is cut off from a tidal wave, a tsunami, a hurricane, we can lean on DOE to prepare those meals instead of relying on DOD for MREs, run it through HPP for shelf stable and put it into our cold storage. So through economic development we are actually developing our path to resiliency.

But it's the investment from this body to build out these infrastructure facilities. This last session we were able to do land acquisition. We're looking at purchasing another parcel which was industrial and it has existing infrastructure as well as existing facilities.

Other facilities we're learning that we may need for DOE includes egg breaking facility, slaughter facilities as well as aggregation facilities. That's the other money we got for the food processing facility. This is for the high pressure processing.

We're looking at doing investments and improvements on Kauai to two ditch systems, the Koke Ditch system as well as the Kaha irrigation system. In fact, I go back to this commodity, see Kauai Kekaha side. This is a suitability grid.

So what you see in red is no irrigation, but you can get to blue if you can irrigate those areas. And so that's why it's critical to invest in those irrigation systems, tourism, conventions and sports tourism.

We do have requests in the CIP budget of 60 million in GEO bonds and authorization of 20 million in our special funds for convention center improvements. We're asking for 3 million and I believe that's in a funds for investments in sports tourism as well as asking for a ceiling increase. We already have the funds.

We just need increase for the stadium development of 49.5 sports tourism is a huge shift we're seeing in several states. We've seen in Nevada, Arizona, Tennessee, even on the East Coast. It's not discretionary, it's intentional investments made into convention facilities as well as stadiums to attract not just sporting events, but other recreational events.

I won't go into too much detail about workforce development, but this just shows you our process on how we're reconciling either working with DOE towards industry or industry back towards DOE energy stabilization. So we in chasing our 2045 goals, it's not just going to be reliable on PV battery and wind.

This is a map of what it would take to get to 100% renewable on Oahu. And we're looking at this because we have to reconcile again with the commodity mapping. Some of these projects do land on conservation and agricultural. So we have to understand if those projects can coexist with the Ag nation.

The good thing about technology these days if the state makes investment into greenhouses is we don't have to rely on conventional farming. What greenhouses do provide are reduced usage of resources such as water and sunlight, as well as they can be resilient with standing up to category four hurricanes.

So during natural disasters we can still have some economic development and rely on a circular economy with the agriculture industry. This is just a table that kind of provides you what the land use intensity is when it comes to certain solar projects, sorry, energy projects.

And so for us in our internal working group, we have to reconcile where those acreage are available, what the state needs to acquire in the future and then weigh out is it really going to be one energy generation activity or the other if we don't have the land?

So that just reconciles Again, we do have a bill in for 6 million that's coming out of Hawaii State Energy office. The request is for characterization so we can do characterization activities on certain sites identified for geothermal. If we're serious about getting geothermal, the state has to reduce the risk of exploration and characterization.

If you look at any type of energy activity, private sector doesn't invest on risk. We have to do it. If we set the mandate, we have to figure out how we get to commercial viability. And reducing the risk is one way of doing that.

Once we identify the firm source, private sector will step in and make those investments on facilities and infrastructure to generate and transmit. So we do have a bill asking for 6 million for a characterization underground project. Lastly, housing. So we are working with our internal housing group.

We have mapped out where projects can go along TLD Working with the TLD Council as well as Neighbor Island. This is just more maps that just show you how we're interacting and breaking the silos between agencies as well as departments. As we do the commodity overlay, the energy overlay and the housing overlay.

We do have requests in the budget. We do thank the Legislature. Last session you provided 5 million for a site in Kakaako for Kupuna supportive housing. We do have a request and we ask them to keep that in need the full funding in order to bring that project to fruition.

HCDA is also asking for 1 million to begin an EIS study for the Kapolei area. This master plan includes up to 27,000 housing units. But we have to begin with the EIS process for that. For HHFDC we are asking for one FTE temporary. This is a non General funded position, an Assistant Controller.

Currently HHFDC is managing over 2 billion in assets and projects. So we do need capacity with the Chief Financial Officer and bring in an assistant controller to help manage that portfolio.

We're also asking to continue the support of the funding that was input last session for the fiscal year for dwelling unit revolving fund of 40 million that goes to infrastructure for projects. Our rental housing revolving fund of 50 million as well as 50 million for tier 2 housing projects. That's it in a nutshell.

There are requests for naja and I can speak for that too. Either now or after. Might as well just go for it. So. So we are asking for. It's not to. It's just a housekeeping request. We're asking to provide the funding for an administrative assistant.

The system will help with a bunch of administrative tasks from managing the host park as well as to the Board Meetings. We're asking for one new position, a cultural practitioner. This person will be tasked for cultural stewardship and community engagement.

Will help implement our deferred stewardship actions as it relates to archaeological and cultural studies for a master plan. So we're working and pushing forward with the host park master plan. And the cultural practitioner will be key in helping us move forward with community engagement.

We're also asking for CIP funding 10 million to remove an abandoned seawater pipe that was left by a prior company that goes back 3040 years. There is already existing infrastructure with seawater pipes. This will not impact the existing. This is just to remove an abandoned pipe.

It's currently costing us already $750,000 and unbudgeted cost to mitigate that pipe. And then we're asking for monies for basic improvements of maintenance and repairs postpark. Great. Thank you. Thank you. And we're joined here by Chair Tam also Members. Do you have questions for the Department? Go ahead.

Thanks Meles for being here. Happy New Year. Just a couple of questions on your innovation and manufacturing and the expansion and upscaling as it relates to the neighbor islands. Really curious what the timeline for development proof of concept Absolutely understand the value of death there.

And what is incredibly more challenging for our neighbor islands is the recent PUC decision that tacked on the sorbet amount of costs for shipping between here click update. What's the timeline for that?

Regarding the shipping, I don't have a response for that right now. That's something we have to look into. In fact just visited a egg production facility earlier this week and shipping is one of the major barriers for shipping out off grades, liquefying it and bringing it back.

Proof of so planning for the facility's neighbor item once this contract is established with University Hawaii Community Design center they take about 18 months. So I would put 18 months out from this month to proof of concept for Kauai, Maui and Big Island Kauai. We have a site potentially for the manufacturing.

ADC is currently in the process of acquiring 1,000 acres in. What's good about this is that Department of Corrections and Rehabilitation is looking to put their jail facility on site as well as doe's would like to put their regional kitchen. So that will start to bring in a regional economic development.

That process to acquire the land will take I think we're looking at maybe October of this year to close out on that if everything goes to plan for Maui and Hawaii. DBIT ADC does not have land yet.

So it doesn't prevent us from doing the proof of concept because it doesn't have to be site specific right now as we do the planning and design. We can always address logistics on infrastructure at a later point in time. Potentially Hilo ADC does have two acres in shipment.

Could be an opportunity there, but it doesn't prevent us from doing the proof of concept which would take 18 months.

For a manufacturing facility which then walks me into the vertical launch in partnership with Horizontal.

Sorry, horizontal launch, which is airplane tow.

Yes, yes, a horizontal launch in partnership with Department of Transportation timeline on that. And is there another partnership that you guys can develop with that launch site that might actually lead into this innovation and manufacturing?

When you say another partnership, can you give a little bit more thoughts or.

Ideas on that with that site and site control that DOT has with that launch program? Is there Ways to look at that site expansion or this manufacturing.

Okay. There might be. I'm trying to get you guys there faster. Yeah. So David Sikink our foreign trade zone, they have a facility and manufacturing potentially could happen on that site. We were looking at Ag tech for tropical research there. So yes, we would. The opportunity would be there.

We would talk with Director Sniffin looking at existing cargo hangar space. If that could happen on site or nearby site. As far as with the companies and the build out of a hangar that discussions are happening right now. I think the estimate we got last week on the hangar space is about 15 mil.

It was as much as we try to align these discussions with our internal budget process at the it doesn't always happen. So we missed the submittal process on that. But does this stop us moving forward other ways to explore how we can do this, including working with Legislature on a special purpose block?

Yeah, and if not, I think the ag tech piece actually at shipment makes a lot more sense for a lot of the ag and flower industry that we have in PL and alba. And then I had. 1 more question on the. Textiles. The big island's big when it comes to fashion.

I'm just curious because I know a lot of that is being developed here. If there was any consideration for a hub or something a little smaller for our fashion industry.

Each county is going to need their own manufacturing facilities. And what's unique about certain facilities? Not so much probably with fashion because with garment industry and textiles, it's usually all the same equipment. With food, it's different. You have microclimates, you have different producers, different commodities on each. The plan is statewide.

Each gets their own infrastructure and facilities to get there faster. Working with the legislators of those districts and if they can support funding for dbed, we can get there faster. Hilo was definitely, I think one of the drivers of the conversation early on about the creative industry side.

How do we get more cig Zanes Especially when you think about other festivals and fairs that could be planned around. After Mary Monarch, we just looked at a study about how fairs and festivals are an economic driver for smaller rural communities.

And then designating like a field day space not just for a fair but for other festivals four times a year will drive in real economic new dollars to that small community.

Yeah. And which is why I appreciate the partnership with NALEO TV in that media industry. There was a great. Film she did called that's Sew Sew Hilo and it talked about that fashion industry prior to the tidal wave and how it really was kind of an economic opportunity kind of re establishing.

So yes, yes to all of it. And that partnership with NALEO2, we are.

Partnering with Naleo too on distribution, mapping out a distribution pathway for our film content producers. Yeah. Thank you. Great, great.

Thanks gentlemen.

I would add that we have had discussions with clothing designers about what they need to ramp it up.

So it all comes back down to, as deputy Director said, equipment and resources for them to ramp up because you know, like other things that we do, we don't want to see the production of these materials for shirts, dresses, everything else go someplace else other than Hawaii. But we need to find seamstress and.

We need to find equipment.

Yeah, great. I did have a question for HCDA, but I don't know if you want me to jump it up. I'm really Craig and we just wanted a update on Banning Drive and the spend down of that money, the million dollars for.

I will add more. Craig's coming up that you know, we, I, I thank Craig for his diligence and his hard work. I mean he's flying over there on Sundays to meet with the legislators and not only once but often. So he's been on it and yeah, no, he doesn't have notes. He can answer your questions.

Yeah, he's been great. And it's not for me. It's for other people who might be watching who are asking for an helping. I think this is a great opportunity. Thanks Craig.

Thanks, Ripley Lloyd. So I'll address it on two levels, actually three. So on the first level, with the $1 million that was appropriated to OPSD originally to do master planning for the Waika Peninsula, this was funds that were appropriated by the late Representative Nakashima. We had the funds transferred to HCD.

Helbert has started the master planning process for the Waiakea Peninsula. I realize it's a little bit in advance of a district being created, but we didn't want these funds to lap.

So Albert Hester Fee has been busy speaking with community stakeholders, getting interviews and I think the end goal is to develop a master plan, a community plan for the district for the Waika Peninsula.

Banyan Trail we're there's a lot of input we're getting and we hope to kind of have a visioning process with the community, larger visioning process. I think it's going to be sometime later this year. I have to check on them.

At the same time we are working on a, we are working on trying to establish the Waiakea Peninsula as a another HCA Community development. This is a carryover effort from last session. I guess you recall bill went to the House. It didn't get passed the Senate, but we have another bill.

I believe that that bill is going to be introduced to the Senate side. I think the plan is for a companion to be introduced on the House. And I think the bill, the current form of the bill takes out a lot of the objectionable parts of the bill that came out of last session.

And while I don't want to predict the outcome of that bill, I think. I think it stands a good chance of passing.

There's going to be some community input into I think the name of the district, you know, whether it's Canyon Drive Community Development District or Waiakea Punit Community Development District, there's going to be some input into that and we'll have to see. I'm. I'm in favor of using native Hawaiian names for districts.

I just want to make sure we vet those names thoroughly before we adopt it as a name.

I think the third effort and hope this is not too much details, but I think the third effort we're working on is as you know, the right now the Nanilo golf course and the hotel lease is with the held by the lender in possession. I think it's realto after they foreclosed on the previous lessee.

It's not an understatement to say that states reacquisition of the golf course. Free. And clear is an integral part of the planning for Wakea Peninsula Banyan Drive. I mean that 60 acres is critical to our plans. That said, we're still in this planning master planning process going to assume that we're going to get the golf course back.

So I think there was some discussions had between chair changing and the real told the lender. There's some discussion. Even an offer letter was. Was. Was submitted. I think that offer letter was rejected. It was based on an appraisal that land division at DLNR got. So I think we're at a crossroads on.

On acquisition of the golf course, state acquisition. So I believe that this upcoming legislative session there is some thought to introducing a bill to authorize a condemnation action for the golf course only, not the hotel, the golf course.

And while I say that that's not our first preference, I think our first preference is always to a friendly acquisition of property that's needed, but it's not always possible to do that. And even if that eminent domain authorization bill passes, it still has to.

I think the commencement of an eminent domain action has to rest with the DLNR. Second, even if that bill, that kind of condition bill passes, we can it's still possible to continue negotiations with the lender in possession. Rialto Like I said, I think friendly acquisition is.

Is far better than an eminent domain acquisition in terms of cost, time and other things. But that's the latest that I have.

Thank you and thank you for that update. When it comes to the visually sessions that you guys are going out on, you know, feel free to reach out to my office. We'd love to push that out through our social media, reach out to the community.

I know myself, Chair Todd and Rep. Kush have been kind of working coordinating kind of community input and stakeholder feedback that helps drive not only the vision but the master planning for the area.

Yeah, I appreciate that and we'll reach out to you. I think the HHF team Helbert Hasservi is trying to get some critical information, information on utilities for Wacky Up. And so we're kind of running into a little bit of a roadblock there. So I may ask for your assistance, Rep. In kind of what being a gold. Yes.

That's yet to be seen. But anyway, I bet I may need you help to kind of remove some of those roadblocks.

Sure, I will.

I will not hesitate to call on you. Thank you.

Thanks gentlemen. Happy New Year. Thanks, Chair.

Thank you, Chair. You got any questions to open us up?

I. I have some questions, but not tourism related. Okay. Stick around for a while.

Okay.

Hey, Director, you know, cost of living here in Hawaii is hard and our taxes always seem to to be always higher than, you know, more states. Can your Department bring in the 10% more? You talk about innovation, you talk about, you know, sports and businesses that you control in the state of Hawaii.

Can we bring in your company bring in or our state bring in more? Can it grow 10% more revenue?

I would answer that by saying every day we come to work, that's the goal. It's not a percentage, but every day is moving a needle.

Now, there are things that have happened around the world and in this country that have prevented us from doing some of the things that we have been successful doing, which is, you know what, the number one driver, the number one engine, which is tourism. If you look at the Canadian market, the Canadian market is way down.

And I think most of us know why. And they make it very clear, the Canadians in social media that we always thought that especially on Maui, that no matter what happened in continental United States, that they would continue to come to Maui but the numbers don't say that.

The numbers are way down on Maui in the Canadian market. In fact, the Canadian embassy is coming to meet with myself and the Governor in two weeks. Specifically talk about how. Because they know that Maui and Hawaii is a huge market for Canada.

So they want to try to see how we can assist them and some of the things that they want to message to the people in Canada that know, really. And it, it's true. Hawaii is kind of separate from that. The yen, you know, the yen is very weak. The Asian markets are very weak.

So we spent, we spent time in Japan talking to leaders there, to wholesalers there, to airlines there. They're this generation, the younger generation. They're just not traveling. And when they are traveling, they're traveling to Korea, they're traveling to Thailand, they're staying within their Asian market. And it, you can see the numbers clearly that that's what they're doing.

But when we talk to them about, you know, if they want to travel someplace other than where they're going and money is no question, where do they want to go? They choose Hawaii. They don't choose France, they don't choose other markets around the world. They choose Hawaii.

So we know that we need to continue to connect with them, that we're still, we're here. When your finances are available, we want you to come to Hawaii. And Dennis Ling and the team from bdsd, we were just in Japan over the summer and we visited a mall. It's a high end mall.

What was the name of the mall?

Ankyu.

Ankyu. They have Hawaii weekend. Dennis's office has worked with them every year. And this mall is high end and it's big. So one floor is dedicated to Hawaii. Most people probably didn't even know that. I honestly didn't know that till we went there to see how big it is. So what they do is the whole.

Well, most of the floor is dedicated to Hawaii products, also cuisine. They block off a section and they have chefs from Hawaii cooking in a Japanese store down below where the, the train stations are. And it's the busiest train station in that area. Hundreds of thousands of people walk through there every day.

A wall twice the height as this wall with Hawaii promotional material on this wall. And the wall is big. So, you know, we're trying to do as much as we can to continue to connect. But some of those things that we talked about we can't control again.

But every day we're working on getting more film productions into Hawaii. And we are right now in A way better place than we were. Over the past two years there are 4342 on the ground, two on the ground and two coming in, which is very hopeful for us.

But throughout this whole process we've been working with all of the producers, Netflix, Apple, that we just met with Netflix two days ago to talk about the tax credit.

And for any one of us who don't think the tax credits are important to the productions, I looked at the guy's card from Netflix and the first thing that struck me is his title is Director of Government Relations. And tax credits must be important if it's on your card.

So we can't stress enough the importance of the tax credit. And you know, we are very, very fortunate.

Over the last year and a half, I believe Georgia found David Kelly Molokai to take over the tax credit office for film and put implement the types of things that we were getting criticized by the Legislature and the tax office and the auditor before. So kudos to David and Georgia for restructuring it.

And as we were meeting with the people from Netflix, they were very impressed on the types of things that we're trying to do. Deputy Director has spent a lot of time talking about Hawaii first with the film industry.

We have also talked to the film industry to come together and come with one message because in the past and you guys know there's all these different people saying all these different things.

So it's hard to, it's hard to figure out which direction you're going to go when different parts of the industry are trying to move in different directions. So yes we can. Yes, some of the things Deputy Director talked about as far as infrastructure are going to help.

But please know that every day we're trying to move the needle.

Yeah, appreciate that. And I have another question but hopefully that that percentage the needle goes up and then some of our tax credits can come down. So expensive for the people here in Hawaii. Another thing I wanted to talk about was a little bit you mentioned about sports.

You don't want to try bringing some quality sports stuff out here. And I kind of like see that personally Hawaii is a unique place. It's always have the best. A lot of people want to come out here. I think we have the best training area, 360 days, you know, and in the mainland sometimes you get cold.

Different places people want to travel here. What is your take of Hawaii becoming a sports specific Pacific and bringing in tourism and capturing businesses here in utilizing in some of that area. Have you guys ever thought about developing in.

In that the answer to that question is absolutely. I feel fortunate that the Governor is a big sports fan. So as deputy Director mentioned, he put an additional $3 million into the budget specifically to address sports related tourism and activity. I can tell you that DBED through HTA and DBED with Deputy Director myself.

We're looking at all of these different things. Milton La Fataga at hta, you folks approved the position, a sports coordinator position at hta and he's been doing an excellent job. He coordinated the Rams contract program.

And I will be very, very honest, I had a lot of concerns as a Member of the board when I was there on the contract because I wasn't. The details weren't clear. But at the end of the day, we went up there last weekend and two weekends ago, sorry.

And we had the Hotel Alliance, Hawaii Hotel alliance and many of their Members go up there and bring their wholesalers in and we, we use the ramps experience as positive for bringing people to Hawaii. Inside of the stadium on the big screen. Senate President Kochi did the ball exchange with Brandon Finn from chief of war.

But there were 70,000 people in that stadium that got the message, Hawaii is here and Hawaii stays with you. And that's the new slogan for the Hawaii Visitors Bureau. This weekend is the Trans Pacific Volleyball Tournament. It started small. There are I think 400 teams that come and participate. It's huge.

And it's all over the, it's all over the islands, not only here on Oahu, but the championship game will be held at the convention center, I believe, Monday, I think. But the connection to that with how many people come, because these are kids 18 years and younger. So you're talking about 10,000.

And they've measured it, they've qualified it. 10,000 people come because of this tournament. And so we're looking at that. And we have a few other tournaments that are connected to volleyball at the convention center and elsewhere. And we were fortunate that the Legislature gave additional money for the courts. I think we have 43 courts, 44.

Volleyball. We have.

Right now, 35 points.

35. Sorry. So the other thing that we're focusing on now is soccer. I mean, everybody talks about soccer parents, and, you know, it's true. So now if we have.

If we have soccer tournaments in Hawaii, the parents are going to bring their kids, and the statistics show that the kids who play soccer, their families can afford to travel, and they do. They travel all over the country playing soccer. So that's the type of visitor that we're trying to attract.

And we're right now in discussions with the Seattle Rain. They're a professional soccer team from Seattle. Next year, they won't be able to play their preseason games at home because the World Cup will be played in the United States on the West Coast. So because of that, they're taking up all of the fields.

So the Seattle Rain have come. They've talked to Coach Bud at the University of Hawaii, the soccer coach, and they want to put in infrastructure to the Waipio Stadium on the ground and in the stands, and they want to be partners with us and bring these types of tournaments and bring opportunities for our soccer kids to learn from these professional soccer players.

So I can go on and on and on. I have a whole list of these things, but you and I can. We can talk about it later and any other Member that wants to know. But, yeah, many, many, many sports activities.

Hope our stadium can hold the amount of people in there. That's one of them. Thank you.

We're trying. We're trying to understand you.

Since we're in the topic. It's kind of tourism adjacent. You want to speak to anything, ask questions.

I want to talk about film. Film for a bit. You know, the Governor is asking for a 60 million increase in film budget. Right. I want to know what is the.

What does the landscape look like for the nation and just possibly the world in terms of what they're doing to attract film? How do we remain competitive on that?

We'll call Georja, but. Well, she's coming up. I will say that it's a very, very, very competitive industry. And if some of these productions don't get the types of credits that they're looking for, they go where they can get it. And that's why I mentioned Brandon.

I forget his last name, his business card, because totally focused on that. But it's, you know, if we don't. If we cannot compete, and I know it's hard to compete with a country or, you know, a city like New York, I think we can compete with Georgia, but Georgia spends a lot of money on their tax credits.

What the picture looks like. I'll give leave it to Georja to talk about some of the details, but whenever we can do upticks because you the Legislature made it very clear you want to make sure that whatever we give tax credit to, it goes to local people. So that's totally understood.

We had some constitutional issues with some of the bills that tried to get passed which was, you know, understandable. But that doesn't mean we're going to stop trying to figure out how we can make sure that it goes to local productions.

And I think in all of the discussions I've had with Daniel Dae Kim, Jason Momoa and Apple Paramount, they they are well aware in every jurisdiction that they go that it's important to hire local. And so in the past we didn't have as much of the expertise here in the state, but we do now.

And you guys saw from last year how many people showed up from the industry and how hungry they are for work and selling up. Some of them have moved to California until the productions pick up here. Brandon Finn is one of them. But as far as the competition and where those monies are, let Georgia address that Chair.

Thank you for the question. You know, the landscape of the industry has changed dramatically and the consolidation of studios has netted for us due to the strikes, due to the COVID area, a very condensed amount of product that comes out and only certain product can be produced for Hawaii. Right.

People come here for our beauty, not necessarily only inside our studio spaces, which are limited. But I think the competitive question that you're asking, representative TAM is 30% or 35 or 40% is what the majority of US states have. They have upticks or they have baseline of that amount and their per production caps.

They don't have them pretty much so we do. It's very self limiting, especially if you're trying to attract series for streaming or series for broadcast. So that is the competitive landscape in order to keep our workers here working. We're very happy right now that we have seen productions coming.

They are all also watching to see what happens and what can passes this session. The productions on the ground now a major feature film with Jason Maloa and Adam Sandberg at our existing rates doesn't mean that they still don't need it going beyond that.

So if that answers your question, we can give you specifics if you'd like on all the major states, but we're very limited in our capacity to attract because we're at 22 and 27% not 30 and 40%

Going off of that. You have a Bill in the governor's package that would allow for HTA to promote and market film and product produce film. Right. What does that look like for HTA? How would they go about that?

So we implemented a film tourism Committee and a sports tourism Committee at HTA because we wanted to make sure that the industry knew and as far as the film industry and people who have been very supportive and vocal about sports tourism that we've heard their concerns and we will put it through.

We will add on two committees at HTA because of the changes of SP 1571. We the chair, the vice chair of is putting together the bylaws of those committees. So they're not done yet.

But he's trying to figure out based on HRS and based on the changes that happen with the policy board versus Advisory board where those things would line up. So I know he's working on it.

He said by the end of the the next or the next two committees from now he'll have a structure that he wants to float through the Attorney General's office and get board approval. So I can't answer that question now. But mainly I mean the bottom the main emphasis is to promote and support film industry and sports tourism.

Thank you. No further questions for now.

Okay. Sorry Rep. Gedeon followed by Rep. Templo.

Great presentation. My question is actually going to be. About the programs that are that DBEDT has created and offered. Been a small business owner for 20 years, mostly working with small and medium sized businesses and the programs you guys put together. Very interesting. Does DBEDT currently coordinate with DCCA at all? A new business register staking, opt in or automatically get information on the resources?

We haven't had in depth discussions as we're looking at some of the way we're trying to gather data into some of your questions. How we can track maybe 10% we have to circle back with DCCA on what they ask for those inputs are it's starting to come up on our radar with our research economic analysis division.

We have to show the reason why we're diving in is if we're going to ask for these fundings for these facilities we have to figure out how to track the ROI of the businesses coming out. And so it's hard to know exactly precisely what activity they do currently.

So the question there we will need to have some in depth discussions with DCCA on that process whether it's business registering or the type of activity.

But I think hard to answer part of that Question is, we had a AI conference at the convention center in summer, and Google was the host. The year before, it was AWS. So what our concern was as a Department is there's so much information in DBEDT.

I mean, you can go on that and I go on it, and it's not easy to find information. So what we spoke to some of these AI creators, Google especially, is help us develop a Google site for deep.

You can go on Google and search stuff on DBEDT, but when you go to our website, I had read, start working on a potential dashboard that's connected to Google so it's easier to find stuff, because even in Google, if you went on the regular Google, they couldn't find some of the stuff that's available there.

So we are working on making that available because I think what you're asking is, how do people find this information? Now, if you knew that you could go to the dashboard and you could ask any question that has to do with DBEDT and, you know, the statistics.

And it's amazing to me, as now the DBEDT Director, when we send out reports, people recognize me and they ask me, you know, this report, they asked me specific questions about the report that we sent out.

And by helping them navigate the system, I think will be a big part of the answer to your question, how they get more information on what the state and diva does. So we are in the process of coordinating that with an AI dashboard provider.

Awesome. Yeah. Getting them on the path to success early on.

Yes.

Thank you.

Chair Templo.

Thank you, Chair. Thank you, Director, Deputy Director and team for being here and all the work that you've done. And I appreciate the thorough presentation. My question is kind of about both sports and film. What is Hawaii's relationship with Sony and how has the Sony open compared in years before and this year?

And then I know that Sony had negotiations with Nevada regarding a major film studio that they're trying to produce. So what is. How can we collaborate with them? Maybe like a West Compact or something to improve our film industry.

So, like, I guess tackle it from a Sony standpoint because you mentioned like Google and Netflix and all that. What is our standing with Sony?

Okay, our standing with Sony is great. They just had their gala last night. I was in attendance, and unbeknownst to me, they spent a lot of money just for the gala. Over $3 million just for the coordination of the gala.

But if when you walked into that convention center, you did not know that you were in the convention center, it was beautiful. Terry Orton, You could not tell that you were in a convention center. So I say that because if they were on their way out, they wouldn't spend that kind of money.

They had Billy Idol as the entertainment. I had to go sleep so I didn't stay that late. But they want to come back to Hawaii. The question is, is whether the PGA Tour, as some of you may have read, the PGA Tour is looking at reducing their schedule.

Right now there's only 44 tournaments a year and overall some of the tournaments don't make money. Like one of the tournaments is the Century. The Century loses in the millions every year. So the PGA is looking at they changed. They were a non profit and now they are for profit entity.

The leadership of the PGA has come from the NFL. So one of the things that they don't want to do is have the PGA compete for airspace with the NFL, the Sony and the Century. Where the Century was this week, which is now in the playoffs and last week would have been the Century.

So I met Mr. Totoki last night. The Governor was sitting at his table, he's the President of Sony and I asked him, you know, if you can please consider coming back. He said, we hope that the PGA will have us back, but they want to come.

It all depends on whether the PGA is going to shrink, which they are. But if they're going to shrink and Hawaii is out, because just if you only have one tournament in Hawaii, all of the equipment that has to come, the cameras, the scaffolding, all that, if you only have one tournament, it doesn't make economic sense.

So if we lose one, we're going to lose two is pretty much the message that we got. But we have had been all hands on deck. Tiger woods is the competition Committee chair. A childhood friend of mine is very close to Tiger.

So we had meetings set up with his people to talk to him about making sure that Hawaii, please consider Hawaii when you're making these new changes to the schedule. As far as Sony and the film part, we have not had that discussion with Sony, but we've had those discussions with Paramount.

Paramount has a big footprint in Hawaii now with the Ellison family on Lanai. And you know, the Governor and I made the offer to them that we have if you're interested in building a studio that we would coordinate with them and they're very interested in that. Have not had those conversations with Sony, but we will.

So as you know, to answer Rep. Alcos' question, every day there's something different and that's why I love DBEDT. That's why we love DBEDT because every day it's something different and every day is something fun. So I hope I answered your questions.

But are you guys working with Nevada and maybe like, California, maybe have, like, a West compact to deter money from the east side to the west side when it comes to film? Is that a talk or conversation we're having nationally?

Well, I would just answer by not sports. And I'll let.

Yeah, I think it's a concept that's interesting, Representative. And know that on a regular basis, we're always reaching out to studios. And one of the biggest challenges has been the credit, of course. But we're all moving forward to hopefully advance that this session.

We're currently in discussions and actually planning with Sony on a major feature film that will be coming to Hawaii. And they will be hiring a lot of local talent, which we know the other compact or to bring that together. The association of Film Commissioners is a great place to start with that.

And that is something that we could take up and take a look at. So we're happy to get back to you on that. Okay, thank you.

Thank you. Thank you, Director. Thank you, Chair.

I'm gonna turn things over to Rep. Kitagawa for a few questions. If there are additional questions beyond that, we will take some. But keep in mind, we are on a relatively tight schedule and we still have the Department of Transportation. Okay go ahead.

Thanks, Chair. Thank you for being here. To all of you, I have a couple of questions. My first one is quick and just a clarifying question for ADC. And I was interested in the Grove Farm Lands. Last year, we gave 39 million for that land acquisition.

And I think we had heard, or I had heard, that DCR is supposed to go on a spot with the new Kauai Correctional Facility. But was that 39 million purchase for the entire Grove Farm area or is that only for part of it and DCR still needs to cover their portion?

Good morning, Chair, Vice chair, Members of the Committee, I'm Wendy Gady with the ADC. And that is an excellent question. And the appropriated amount in our budget was for $39 million. And it specified 1,000 acres. And the additional 40 acres that DCR needs to have, they actually have funding for.

So they will be transferring the funding over to us to cover that additional. The benefit to the state. And this really was. The speaker's idea is with ADC, we have a bundled purchase. It's in bulk. We're buying a thousand acres. In the case of DCR, they're only buying 40 acres. So your price is different.

But if you put them together, that means the state benefits because DCR is going to get the discounted rate. Does that make sense?

Okay, so DCR is not going to be needing to come in for additional funds for the land purchase? Okay, so that's all set? Okay, great. Thank you. That was my question for you. Okay, my next questions are for HTA and about the convention center.

So I have a couple of questions about this and I did meet with Caroline and Terry. So thank you for the presentation previously and I had a couple of questions.

One is, after all of the funding that the Legislature has given for the convention center improvements and all of the concerns that are being brought up about the leaking and being needing to close ballrooms and not being able to open spaces, will all of the leaking be completely fixed in the building or will there still be leaking?

Because I have heard that there will still be possible leaking in the convention center even after all of this funding, including what you're now requesting.

Thank you for the question. This is a major facility and you know, we can't guarantee, you know, what will happen after. But our goal is to fix everything with the funding that is appropriated by the Legislature. And if I can call up Teri Orton, our General manager.

Aloha. Good morning. Thank you for the question. So. The major leak source that we have is our rooftop terrace deck which will be completed in the next two years. But we do have other projects that are leak related that we do have funds for and intend to get those fixed within the next two years as well.

There is one leak project, it's roughly about $22 million that we are seeking additional funds for in the upcoming fiscal 27 year through HTA's budget request for another leak project, which is the foyer rooftop between the rooftop terrace deck and our ballroom. So that leak, that entire roof deck is leaking, or rooftop, so to speak, is leaking.

So to answer your question, if we do get the funding in this upcoming fiscal 27 budget, that will be included in our to do list during this two year time period. So at the end of the 27, as we get into 28, we're hoping that all the leaks that we know of will be addressed.

Okay, so you're asking for a total of 81 million additional this year. That's with the 60 million in C and 21 million in B funds. So you're saying that that's not correct. So it went down to 55? Yes, 55 total, yes.

Okay, 21 million of that is funds that HTR already has and special enterprise fund. So the balance of that is what we're asking for. Okay. The 21 million is just a request to spend that money.

Okay, so you're saying that with this 55 million the convention center will be all done, no more money, no more ask for the Legislature to give money.

I would. No, that's not true. Because every year we have projects that we intent on doing. So we do have projects in 28 and 29 and 30 as part of our six year plan.

What we did was we prioritized those projects that were front of house, client facing and leak related that we needed to, that we would wanted to get done during this two year time period to take advantage of the fact that we've displaced business to focus on repairs and maintenance and not have to navigate through events.

But there are other projects that we have on a broader calendar that we still will come back and ask for funding for. Whether it's, you know, the annual infusion that we get every year, which is typically 4 to 5 million for capital improvement projects.

And in some cases some of them might be larger projects that we either are going to have to phase into, but we do have a 25 year capex plan like every other building should have. But the ones that we prioritize to get done during this down period is what the $55 million will accomplish.

Okay, so I guess, and then we've had this conversation, right. I have serious concerns about the fact that the money that was appropriated last year, the 36 million, which we received a list from Talon and from Isaac that identified projects, did not include the rooftop at all to be fixed.

Correct.

And the concern is that without communicating with the Legislature, that money was moved to the rooftop project. So now the projects that were under our understanding were going to get fixed are no longer getting fixed with that 36 million.

So that is the concern when I look at how much the Legislature has invested in into the convention center since 2022. And I recognize that you had the lapse which was discussed in Wham, which also has concerns with. I'm a little concerned of why it lapsed.

But the total with the ask from this year is $170 million that the Legislature has or will potentially give to the convention center for fixes in the last four years. Three, four years, which is a huge amount of money.

And, and that the rooftop project, you know, which DAGS talked about, I did ask, includes now the canopy and the extra beautiful things that you discussed with me in your PowerPoint soundproofing walls and grills and different things for caterers and all of these extras, which is great.

But when you don't have a budget and you don't have the money, it's very difficult for us to, or for me to say, hey, let's continue to give you more funding because you're not working within the budget and agreed upon expenses.

So I think that's the difficult part with this because, you know, even with going back with that $15 million lapse that WHAM had talked to you about, when I listened to the explanation and what you said, I look back at the description, the description for the 15 million in 2022, and the description for the 64 million in 2024 is exactly the same in the budget description.

So the fact that you couldn't change it and utilize it for that same project is really concerning because what that meant, right, is that that 15 million was just lost. It didn't go to another important project that the state critically needed. So I think just these conversations are important.

I mean, what happened with just moving the funds is a breach of trust with the Legislature. I'm just going to put that out there publicly. And we really want to be partners in this. And so that's really concerning.

So I'm just concerned with if we do give you more additional funding, how can we trust that it's going to be utilized for what you say it's going to be utilized for, given the history of what has happened with this rooftop project that has been made aware to the Legislature since 2022.

First off, I apologize for not sharing it out with the Legislature. I take that responsibility regarding the Hawaii Convention center rooftop. So when we originally went out with RFP in April of this year, the. The estimate budget that we had was $51 million. When the bids came back in, the bids were over.

That, you know, we met as a evaluation RFP Committee. We did our due diligence. We made sure that is this the lowest that the construction bidders, you know, could get to? And it was. We have a solid team that reviewed it also.

And so with that knowing that, you know, the rooftop is in dire repair of repair, it's been years since anything has been done to it.

And we know that all the, basically all the problems with the convention center facility, when it downpours, when it rains, it's affecting the walls, which affects the meeting rooms, which affects, you know, how the convention center is utilized by the guests that we service. And so we knew that no matter what, the rooftop needs to be fixed.

And again, I apologize that we didn't communicate well with you. I know it's very important to earn the legislature's trust, so we'll do a better job at that. But please know it was not too. I don't know what word I'm looking. For, but you know, wasn't.

It was in all honesty, just to make sure that the rooftop was fixed and we. I should go back to when it was first issued, which was through an information invitation for bid. That procurement. It was for the same scope of work which included the canopy.

The only thing that changed was the time frame which went from a one year project to a two year project. So that amount, that estimate should have been increased, but it wasn't. And basically that's where we're at now. And we do have a contract in place with Swinnerton to do the construction. And again, I just want to apologize for that.

Sorry, one quick follow up. If the contract went from one year to two years, which I understand it's prolonged but are you, you know, like if you.

We had built a house like rebuilt our family's home and regardless of how long the contractor takes to complete the project, the amount is the same as far as you know, I mean that's what the contractor should be bidding on.

I don't understand how if the work is the same, I mean maybe you have to pay for manpower for the extra year, but that should not increase the cost by millions and millions of dollars from 51 million to 80 million or whatever the cost is now for the rooftop.

I could probably explain that in a little greater detail. So when the original invitation for bid went out, it was a one year project. We did seek advice through our architect for a budget estimate.

The construction document estimates that they went out with and used or HTA went out to use for the information for bid or invitation to bid was only at 75% completion. It wasn't at 100%. So the budget for construction was at 51 million at 75%. Construction documents that is what was used in the invitation for bid.

When the bidders came back, we had 42 dropped out, two submitted. Both of them came back and they're not required to put a dollar amount to it. All they do in information or invitation for bid is to give us a timeline and whether the project could be completed based on the specs that the architect submitted.

Both of them came back and said absolutely, this is not a one year project. It's a two year project. There's too much work to be done and too much damage to this rooftop for us to complete this in a one year time period.

So at that time we had already started to displace business for the upcoming two years, anticipating construction to start in January of 2016. So all of our citywide business that we had on the books for one year, which was six citywide, was already moved to either future years or self containing at hotels.

Because we already had started to move business off the books. HTA was under a time constraint to now turn this information for bid proposals, rescind it and go out with the RFP to allow us to baffle and extend it to the two year time period.

Because the two bidders that proposed said there's no way this can get done in one year. So that's what Isaac Choi, at the time that was in charge of this project at HTA, rescinded their invitation for bid and in two week time period turned it around to RFP, but used the same budget at same 75% construction documents.

In hindsight, what should have happened is he should have taken the construction documents to 100% so we have a better budget base. When he asked the architect to do that, the architect said, it's going to take me three to four months to bring this to 100% construction documents. We didn't have three months.

We had to get this in contract and get the construction started in January because we had already displaced business.

So what Isaac did was he used the 51 million base budget that he had for the one year project, knowing that that was not going to be enough because he could only proceed with a solicitation with 100% of the funds that he had per state procurement.

So he used the budget that I believe he knew was not going to be enough, because anyone would know that a project going from one year to two years, if the scope stays identical, the cost of materials, cost of labor, time on the project, it's going to be more than your original budget.

And I do believe that his intention was to use existing funds that we had within HTA, whether it's the special enterprise Fund that we have 21 million there, or additional funds from HTA or additional projects that we had that he would have put on hold just to keep the solicitation process moving along and shore up the difference with the funds that we had to keep this project on time to start in January because we did not have time on our side, we had already displaced business and we proceeded to displace another year's worth of business, which is another 12 citywide events.

And so that's where we are. And it wasn't done with any malice. It was done just to keep this project and solicitation moving forward so that we could start on time and not lose any more business on the back end. I apologize.

Had I have known it wasn't getting communicated to the right people, I would have communicated myself. I'm a contractor of HTA. I take their lead to communicate to all of you. We just want to get our building fixed. I mean, the conditions to which we are operating under are unbearable. Well, thank you. Thank you for the explanation.

Chair, if I may address Representative. Representative Kitagawa's comments about the lapse ones really quickly. So I went back and I looked at why the funds lapsed and it was a timing issue because initially the funds were the 15 million was appropriate for temporary repairs.

But then once we decided to pivot for the full repair, that automatically knocked off one year from our timing for the two year CIP funds. And then so in the next year we got the $64 million.

So the reason why it laps was more of a timing issue because at that time we only contracted the pmcm, the project management company and the design and engineering company. So we were able to utilize about a million dollars for this rooftop Terrastec project project.

And then so we decided we would try to use the remaining 13 million for other roof leak related projects such as the ballroom gutter, which is now on the $55 million list. But when we were working with BNF to release the $64 million, they, you know, they asked about a Update on the 15 mil.

We told them our plan but ultimately based off how the law was written, it said rooftop terrace deck. So they really focused on that language and ultimately they did instruct us to lapse the funds, which you know, we weren't happy about. But at the end of the day that's what we were instructed to do.

And so we respected that decision. But you know, we do apologize that the funds last. But I just wanted to say that we did try to pivot to utilize those funds because we understand we, we don't like funds to be unused and undep.

So thank you for that explanation.

Thank you. And then we are running a little long time. So unless there's something super pressing, this may be the last line of questioning. Chair.

Line of questioning? I want to stick with the convention center. Who's the architecture firm that gave the one year estimate and why did they do that and what are you going to do to hold them accountable for that? Because it looks like they cheated us.

So the architect is Alana Creek Bears Abb and in all fairness they did give us a fair estimate for a one year project. You know, part of the challenge with the construction bids that came in was the location to which this leak is. It's on a rooftop. We're in a residential area.

We can't put a crane there and pull all this concrete off the rooftop via crane. They have to take it through our freight elevators. So it's going to take longer for us to really demo that space before work can even be done.

You know, had they have taken the construction documents to 100% which we ended up doing during the RFP process, the construction documents at 100% came in at 92 million, I believe. 92 million, which was right in between Swinnerton who we awarded at 87 and Nan who came in at 120. So it kind of justified that.

You know, Swinnerton was pretty on point to what the hundred percent construction document estimates would have been at.

So what are we going to do to ensure that it's already going to be done? We've already started construction on it. So what are we doing to hold them accountable, to stick to the timeline? And what penalties would they incur should they go past the November 2027 deadline?

So there are liquidated damages, dollar amounts in their contract and I think it's 15,000 a day. 1515,000. Don't quote me on that. I will double check but I think it is 15,000 per day in liquidated damages.

You know, Swinnerton's pretty close, confident that they're going to finish on time just based on the work that they have seen in the last couple days during demo? I'm not going to lie, they are running into things that some unforeseen.

They thought there was, you know, foam under the first layer of concrete and the foam has just been saturated with water and it's sludge now, which is a little harder to remove off the rooftop than the foam was.

But it's because this leak has been ongoing for the last 25 years that it's a lot greater than we originally had intended it to be.

My next question is off the convention center but it's at HTA now. What is the status of the President and CEO search and when can we expect someone to be named?

So there is a timeline that has been developed after next board meeting which is at the last Thursday of this month, the CEO search. Sorry, CEO Permitted interaction. Group Search Committee will be meeting to further discuss next steps with the CEO search. And I'll be happy to share that timeline after that meeting.

Any month or day or year.

It's this year. Yes, this year. And I believe it's May. Right. I'm trying to describe it.

If they find someone within the group. If not, it's going to run a little bit longer. They open it up.

Okay, my next question is what has HTA done to address the audit regarding DMAPs?

So thank you for the question. So regarding the audit we have, there was, I believe, 17 recommendations. 17 or 18 recommendations. And we took everyone to heart. So I'll be glad to send you a report on how we're addressing each item.

But through the way we are developing our strategic plan as well as our next iteration of the Destination Management Action Plans, we made sure that the recommendations that they provided or suggested that we take that into account. And so yeah, I can share out with you a report to again share out how we are addressing that.

Because right now you guys have contracted out to Board Research for DEMA for an action plan, right?

Yes, we have a contract with World Research to help us with the writing of the Destination Management Action Plans for each island.

And when do you think those plans will be completed? Even past the public comment period.

So we're looking at the plans to be finished in March, April, basically by April to have the final document.

Okay. And the execution of these plans, how are you going to execute them? Does HTA have the resources to even do that?

So for this fiscal year, upcoming fiscal year 2027 budget, that's what part of our ask is to have funding to focus in on mitigating hotspot issues. And so yeah, our plans will go before the public in February.

And so we also want to share it with all of you so you can see the types of actions that are being developed currently. There are actions where we need to work in partnership with other state and county agencies.

So we will be meeting with them to share out some of the things that we think that we can do together to address those types of impacts. And I should also mention for this next iteration of DMAPs, we heard both the Legislature and we also saw what also the recommendations from the auditor.

And so this next round of DMAPs focuses in on hotspots and prioritizing two to three hotspots per island.

Okay, moving on to the issues from last year, what is the status of the late payments for Kilohana and Hawaiian Council. Have they been paid?

Yes.

When was that paid and is it fully paid off? When? Back in April. Directors. Directors. April, March. Ish. I'd say.

I don't know the exact date, but the issue that you talk about was an issue has been an issue for years and it has been resolved. I know everybody that's here from HDA and the previous VP of finance worked very hard to get it done, but it was years. That funding, you know, $11 million was HBCB's amount.

Can you imagine being a business and not getting paid $11 million? So anyway, Talon and his team have worked very, very hard to resolve it. And every meeting we have with HBCB and Kit Ohana, they're very appreciative that they're up to date on their payments with the deliverables that were given to hda.

Great. You answered my next question, which was whether HBCB was also paid their invoices. Yes. Correct. Okay, I have two final questions I want to ask about the state audit that led to questions from the Attorney General about former board chair Movie Hanneman receiving free food and free use of state facilities, whereas non profits.

It was HLTA, Hawaii Lodging and Tourism A?ssociation and Pacific Century Fellows. At a board meeting, his staff attributed it to a clerical error and has promised to pay it off. What is the unpaid. What is the status of those unpaid invoices?

Okay, so HLTA, I believe that meeting, the board meeting that happened, I don't remember the exact date. Sorry for that. I wasn't prepared for this question. But at that meeting, the assistant to the chair wrote a check and paid off the balance from H for htla, Correct? Correct.

Now, Pacific Century Fellows, I believe at the time they sent in a check for half the amount that they owed. And then after that they said that because other people got free food and room rental that they weren't going to pay the other half and that they wanted their check back because other people got free services.

Now, when we talk about the other people, it's like Japan Travel Bureau who were trying to entertain the Waikiki Resort association, which they float from one place to the other and we have hosted them.

But the concern from the audit was that the chair at the time was the chair of those two organizations or Executive Director of those two organizations as well. So we sent that specific. I sent that Pacific Century Fellow thing to the Attorney General's office and asking for what should we do as far as collection.

And we have not heard back from the Attorney general's office. But $2,000 is still the balance. How did you find out about these expenses? But prior to the audit, the VP of Finance walked into my office when I was at the convention center and told me, asked me what he should do because he thought.

He thought it was a problem. Yes. An employee at the convention center, HDA brought it to his attention and he brought it to my attention. And so I just told him, you know, you do what you're supposed to do, you see it. To the Attorney General's office to audit and ethics.

Regarding the LA Rams reception, it was my understanding that it was 80 to $100,000. Did we find out how much that was? The reception? The LA Rams reception last year. And.

I believe we're still waiting for the final invoice from them. And I will follow up with our staff Member.

They haven't sent an invoice yet?

No, there's. We've been going back and forth with them, but I'll be sure to let you know. If not today, then next week.

I think my bigger concern is that it was a verbal commitment that was given and nothing written regarding who would pay off this reception. Correct. That's my understanding. Again, is that common at HTA to have verbal agreements or is that just a one time thing?

Well, I'm going to answer since I've been involved in working with Caroline and now David, the answer is no. You know, it has to be in writing. And. That's why I had concerns with the contract in the beginning because I did not know what all of the deliverables were.

And that's on no part, no fault of the Rams. It's on our fault. It's the. Chair who made the verbal. Commitment, the chair at the time who was the chairman. That's all.

Okay. That was fun. Ever. Is there anything else? Very, very light, you know. That was good. That was good. Anything else before we close? Okay. If not, we're going to be recessing briefly and as quickly as they can figure this out while doing so safely, we'll have the Department of Transportation join us, recess.

Aloha. We are reconvening the House Committee on Finance for a budget briefing from the State Department of Transportation. Last but not least, your final one for this session. Please proceed when you're ready.

Thank you. Chair Todd and Vice Chair Takanouchi, Members, Ed Sniffin with the Hawaiian DOT really appreciate the opportunity to answer any questions you might have about our budget coming through the session because the second year of biennium, we don't have significant asks at this time.

Want to make sure that we we introduce the people that actually do all the work in our Department.

With me tonight, today, we have Drake Khalili, who runs our harbor program, Kurt Otuguro, that runs our airports program, Robin Shishiro, running the highways program, Tammy Lee, who runs all of our Administration, and Melissa Miranda Johnson, who's our legislative boss.