Hawaii Tourism Authority left out of state budget

It’s down to the wire.

State lawmakers approved $64 million for the state-owned Hawai‘i Convention Center to fix its leaky roof, but left operational funding for the center and for the Hawaii Tourism Authority out of the final version of the state budget measure House Bill 300 CD1, which was approved Tuesday by conferees, and will head to both chambers for a final vote before it is sent to Gov. Josh Green for consideration.

HB 1375, introduced by Rep. Sean Quinlan (D, Waialua-­Kahuku-Waiahole) along with other House members, now appears to be the most viable vehicle to fund operating budgets for the HTA and the center, whose annual budget of $4 million to $4.5 million comes from HTA’s annual appropriation. The catch is that Friday is the decking deadline so to keep moving, these bills must be scheduled for a Friday conference hearing by 10:30 a.m. today. Also, the bill in its current form would repeal HTA.

A similar bill, Senate Bill 1522, introduced by Sen. Donovan Dela Cruz (D, Wahiawa-Whitmore-­Mililani Mauka), who chairs the Senate Ways and Mean Committee, is technically still in play, but unlikely to move forward as of Wednesday evening because House conferees had not been assigned.

The House Conference Committee for HB 1375 will be chaired by lead chair Quinlan and co-chairs House Finance Committee Chair Rep. Kyle Yamashita (D, Spreckelsville-Upcountry Maui), Rep. Linda Ichiyama (D, Salt Lake-Moanalua Valley) and Rep. Daniel Holt (D-Kalihi-Chinatown-Sand Island-Honolulu). They will be joined by Rep. Lisa Kitagawa (D, Kahaluu- Ahuimanu-Kaneohe) and Rep. Kanani Souza (R- Kapolei, Makakilo).

The Senate on Monday appointed Sen. Lynn DeCoite (D, Lanai-Molokai-Paia-Hana), chair of the Senate Committee on Energy, Economic Development and Tourism, to head the Senate conferees. She will be joined by co-chairs Dela Cruz and Sen. Glenn Wakai (D, Kalihi-Salt Lake-Aliamanu), as well as Sen. Donna Mercado Kim (D-Kalihi Valley-Moanalua- Halawa) and Sen. Kurt Fevella (R, Ewa Beach-Iroquois Point). The appointed Senate conferees all have been critical of HTA’s ongoing procurement for its U.S. tourism contract.

The preamble to HB 1375 states, “Due to mismanagement by the Hawaii Tourism Authority, the award of a $34,000,000 contract for the marketing of Hawaii as a tourism destination to the United States major market area has been in a state of uncertainty since 2021. This situation has been widely publicized and has demonstrated the Hawaii tourism authority’s noncompliance with the Hawaii public procurement code. The legislature finds that it is necessary and appropriate to dissolve the Hawaii Tourism Authority.”

HTA originally selected longtime contractor the Hawaii Visitors and Convention Bureau for the multimillion-­dollar U.S. tourism award on Dec. 2, 2021. Former Department of Business Economic Development and Tourism Director Mike McCartney, acting as HTA’s head of purchasing agency, rescinded the contract award in 2021 following an unresolved protest from the Council for Native Hawaiian Advancement.

When HTA embarked in 2022 on a second round in the request-for-­proposals process, HVCB lost to CNHA and filed its own protest. McCartney rescinded CNHA’s award on his last day on the job, Dec. 5, citing the “best interest of the state” — the same reason he gave for HVCB’s earlier rescission.

In February, HTA kicked off a third procurement for a U.S. tourism contract by soliciting bids for a contractor to provide Hawaii tourism destination brand management and marketing services for the U.S. market. At the same time, it also issued a request for proposals to provide support services for destination stewardship across all markets.

The current version of HB 1375 repeals HTA in favor of establishing an Office of Tourism and Destination Management within the state Department of Business, Economic Development &Tourism. The change would take place July 1 and the new agency would be governed by a nine-member board and an executive director.

Lawmakers still have to address the bill’s funding designations. HTA needs funding if they decide to keep the status quo or postpone repealing the agency. If they create a new entity, it would need funding, too.

Conference committees can take on a life of their own so what happens next could include many scenarios, from lawmakers keeping HTA to a major shake-up that upends what has been the state’s key tourism agency for 25 years. To be sure, negotiations on the earlier HB 300 budget were fierce.

DeCoite said she was disappointed that HTA did not adequately prioritize fixing the Hawai‘i Convention Center’s leaky roof, and supported HB 300’s appropriation.

“If this is a priority market, then why do we have these conferences operating under a leaky roof while they have to put rubbish cans? It just doesn’t send out a good message,” she said. “You can’t market a basically defunct, inoperable facility.”

Furthermore, DeCoite said that she plans to introduce a conference draft for HB 1375 that would provide $60 million to HTA, and recommend lifting the spending cap on the $28.5 million Hawaii Convention Center fund to allow for further repairs.

Quinlan said that “negotiations are ongoing,” and that he has not yet reviewed DeCoite’s proposed conference draft.

Quinlan said Wednesday that several steps must happen for the bill to keep advancing, including meeting today’s deadline notice. He said if the bill goes to conference, lawmakers will only have hours to reach agreement due to Friday’s decking deadline.

HTA board vice-chairman Mike White said, “We are very passionate about what HTA is doing for the people of Hawaii. At this point, we are comfortable that the Legislature will do what’s best for the people of Hawaii. We are very hopeful that they will give us time to work on our governance and move forward in a really positive way.”

White said the HTA board meets today and will consider a proposal to conduct its own study to identify the best tourism governance model for Hawaii. He said in addition to seeking input from other destinations, HTA staff has recommended getting feedback from residents.

Hawai‘i Convention Center General Manager Teri Orton said she is grateful that HB 300 conferees approved money to fix the leaky roof at the center, where for years water has been penetrating the rooftop terrace deck, causing water leaks into other parts of the building, where there are now cracks, rust and calcium leaching from the concrete.

Orton said she hopes that lawmakers also reach consensus on HB 1375 so that HTA and the center will have operating budgets.

“If we weren’t able to get any funding, we might have to use capital improvement funds for operations, which would cause further deferral of critical projects, especially those related to leaks,” Orton said.

It’s deja vu. Last year, lawmakers left HTA out of the state budget bill and then couldn’t come to terms on the bill that contained HTA’s funding. State lawmakers attempted to fund HTA through capital improvements, but Gov. David Ige vetoed the bill due to so-called “gut and replace.”

The stakes seem even higher this year, and lawmakers are nearly out of time, said Colin Moore, associate professor at the University of Hawaii Economic Research Organization.

“I don’t think I’ve ever seen it this chaotic around tourism,” Moore said. “They’ve got to fund the convention center and if there is nothing to replace HTA then HTA would need to be funded.”

Moore said even if the proposals for change are solid, a major overhaul of public policy needs more time than is left in the session.

“You have both sides playing hardball and no one flinched, so here we are,” he said. “It’s a mad scramble.”