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Hawaii’s Economy: Challenges and Opportunities Hawaii Economic Association October 3, 2014 Presented by Richard Lim, Director Hawaii State Department of.

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Presentation on theme: "Hawaii’s Economy: Challenges and Opportunities Hawaii Economic Association October 3, 2014 Presented by Richard Lim, Director Hawaii State Department of."— Presentation transcript:

1 Hawaii’s Economy: Challenges and Opportunities Hawaii Economic Association October 3, 2014 Presented by Richard Lim, Director Hawaii State Department of Business, Economic Development & Tourism

2 Overview  Long Term Economic Trends  Fiscal Headwinds  Growth Strategy Infrastructure Housing and Urban Revitalization Hi Growth Initiative – Supporting the Innovation Sector

3 Source: U.S. Bureau of Economic Analysis Economic Growth in Past 20 Years US annual growth = 2.5%, Hawaii annual growth = 1.2%

4 Overview  Long Term Economic Trends  Fiscal Headwinds  Growth Strategy Infrastructure Housing and Urban Revitalization Hi Growth Initiative – Supporting the Innovation Sector

5 Budget (2010)  Total Expenses$5,700 million Medicaid $ 800 ERS/EUTF $1,220 Education $1,800 HHS $ 700 Debt service $ 560 Everything else $ 620 million

6 Hawaii Government Non-Discretionary Spending, Visitor Spending and Economic Growth, Index: 1993 =100 Source: B&F and DBEDT

7 Government Spending on Education, Health, and Human Services Index: 1993 = 100 Economy =1.2% % are annual average growth rate

8 8 Hawaii Visitor Arrivals Annual growth: = 11%; 1990 – 2013 = 0.8%

9 Hotel Inventory Flat Annual growth rate: = 7.07%; = 0.16%

10 Source: Hawaii Tourism Authority Visitor spending on hotels as % of total spending

11 Active Duty Military Personnel in Hawaii

12 The Contribution of Tourism and Federal Government to Hawaii’s economy

13 Significant Losses In GET & Use Tax Revenue Are Expected Due To Electronic Commerce Annual national state and local sales taxes losses on e-commerce will grow to $11.4 billion in 2012 Donald Bruce, “State and Local Government Sales Tax Revenue Losses from Electronic Commerce”, The University of Tennessee (April 13, 2009) NOT INCLUDED Substantial increases over time in acceptance of electronic commerce Adverse impact upon local businesses Loss of “downstrea m revenue” due to removing money from local economy (e.g. wages) “Downstrea m revenue” associated with leasing/pur chases of office space/hom es, equipment, insurance, etc.

14 Implications Significant fiscal challenges Long term systemic headwinds Requires growth strategy 14

15 Overview  Long Term Economic Trends  Fiscal Headwinds  Growth Strategy Infrastructure Housing and Urban Revitalization Hi Growth Initiative - Innovation Sector

16 Growth Strategy: Infrastructure  Long Term Economic Trends  Fiscal Headwinds  Growth Strategy Infrastructure Housing and Urban Revitalization Hi Growth Initiative – Supporting the Innovation Sector

17 17 Alaska: 3,022 mi U.S. Mainland: 2,471 mi Mexico: 3,397 mi Costa Rica: 4,822 mi Colombia: 5,551 mi Chile: 6,698 mi Ecuador: 5,450 mi New Zealand: 4,613 mi Taiwan: 5,285 mi Fiji: 3,157 mi Australia: 5,205 mi Japan: 4,036 mi China: 5,251 mi Russia: 5,312 mi Canada: 3,550 mi Indonesia: 6,276 mi Papua New Guinea: 4,492 mi Hawaii 17 Infrastructure: Airlift, Broadband, Energy

18  Boosts economic activity  Creates jobs  Improves productivity and competitiveness  Benefits lower and middle income  Can you imagine doing business without it? 18 Infrastructure: Broadband

19  Renewable Energy Energy Security: Rising oil prices are a hidden tax that could derail the economy Import substitution: Money spent on renewables stays in Hawaii Test Bed: Catalyst for innovation sector  LNG Efficient generation: Allow more renewables Cost: 25-45% lower cost  Jobs Renewable energy development creates jobs Infrastructure: Energy 19

20 20 Role of LNG in Hawaii LNG is viewed as a transitional replacement for residual oil and other petroleum products in current fuel mix Goal Reduce electricity rates Improve grid resiliency and renewable penetration via flexible, quick start, fuel efficient, gas-fired generation A cleaner and lower-cost replacement fuel for ground fleet and marine transportation

21 Growth Strategy: Housing and Urban Revitalization  Long Term Economic Trends  Fiscal Headwinds  Growth Strategy Infrastructure Housing and Urban Revitalization Hi Growth Initiative – Supporting the Innovation Sector

22 Oahu housing development has trailed population growth Population and Housing Source: U.S. Census Bureau and Honolulu County Building Department 22

23 23 Average Annual Planned Units Source: State of Hawaii Data Book Statewide planned housing units now are only 49 percent of what they were during 2000’s

24 “Married Couple with own Children” Households Living Alone 24 Hawaii Household Demographic In 1960, 56% of Hawaii’s households were “traditional” households. But by 2010, the traditional households accounted for only 20% of total households.

25 Total estimated construction cost of 14 new projects in Kakaako is $2.3 billion Total output (sales) generated = $4.8 billion Total household income generated = $1.4 billion Total state tax revenues generated = $253 million Total jobs created/supported = 21,160 job years Kakaako: Economic Impact of Construction 25

26 Growth Strategy: HI Growth Initiative  Long Term Economic Trends  Fiscal Headwinds  Growth Strategy Infrastructure Housing and Urban Revitalization Hi Growth Initiative – Supporting the Innovation Sector

27 Innovation Sector Most Effective at Creating Jobs throughout Economy Traded/Export Sector# Jobs 1 Average Wages 3 Employment Multiplier 2 Innovation64,488$65,5005 Skilled Manufacturing17,600$38, Hospitality Service139,000$26, UHERO; 2 Moretti, 2010; 3 DBEDT GOAL IS TO DOUBLE INNOVATION SECTOR JOBS BY 2030

28 28 Educated Entrepreneurial Workforce is Key Competitive Advantage for Innovation Sector Hawaii’s high quality of life appeals to this workforce Top 10 State for in-migration of educated entrepreneurial workforce Top 15 State for educated workforce Hawaii is cultivating entrepreneurial talent No. 1 ranked State for growth in entrepreneurial activity Source: The 2014 State New Economy Index, Information Technology & Innovation Foundation Honolulu Startup WeekendMaui Startup Weekend

29 Innovation Sector Requires Similar Ecosystem Investment as Other Key Industries INFRASTRUCTURE WORKFORCECAPITAL  Airports  Beach Parks  Branding and Marketing  Tourism Training Programs  Gigabit Broadband  Innovation Hubs  Industry and Investor Networking Events  Accelerator Programs  Commerciali- zation Programs  Tradeshow Programs  Investment Capital  SBIR Grants Tourism Innovation  Grants to Support People, Place and Culture  Irrigation  Farmland  Seed Development  Agriculture Extension Programs  Agriculture Loan Programs Agriculture

30 30 Proves Comprehensive State Program Can Spark Innovation Sector Growth Proves Comprehensive State Program Can Spark Innovation Sector Growth Coordinating entity Dedicated funding stream Long-term commitment

31 Mahalo Hawaii State Department of Business, Economic Development & Tourism


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