​WMTA Shares these commentaries, without taking a position unless otherwise noted, to bring information to our readers
​To view the archives of the Tax Foundation of Hawaii's commentary click here. ​​​​​​​

​Once upon a time, there was a big bank called Bank of America.  It wanted to try doing business in Hawaii, since it was already in many of the other western states, so it reached a deal to buy Honolulu Federal (do you remember HonFed?) and took over all of their branches in Hawaii.  This was in 1992. 

In 1993-94, Bank of America tried to expand its presence in Hawaii by buying Liberty Bank.  At the time, Na Po‘e Kokua, supposedly an organization established to assist native Hawaiians with housing and related matters, formed the Hawaii Fair Lending Coalition (HFLC) and objected to the acquisition, saying that the bank was violating federal laws by failing to lend to Native Hawaiians on homestead land although the federal government had a program, under section 247 of the National Housing Act (12 U.S.C. section 1715z–12), under which such loans would be insured by the Federal Housing Administration.  Bank of America apparently pledged to make $150 million of FHA-247 loans available to the Native Hawaiian borrowers as a result.

A few years later, in 1997, Bank of America exited our state, making a deal with American Savings Bank, a subsidiary of HEI, to buy the Bank of America branches.

In 2004, Bank of America applied to buy FleetBoston in a $47 billion deal, and the HFLC sued to block the transaction, complaining that Bank of America had not delivered on the $150 million loan commitment.  The suit in U.S. District Court here, Haili v. Greenspan, Case No. 04-CV-00089, was ultimately dismissed for lack of jurisdiction; the court concluded it didn’t have the authority to order the federal government to disapprove the proposed bank merger.

Between 2003 and 2007, according to testimony offered to the Senate Committee on Hawaiian Affairs this year, extensive discussions took place between DHHL and the bank, resulting in what are claimed to be agreed changes to the commitment, a list of loans, grants, and investments totaling over $150 million leading Bank of America to argue that the commitment had been met.  A letter of October 3, 2007 from the Deputy Chair of the Hawaiian Homes Commission states, “The statement of BoA contributions toward fulfillment of its commitment appear to be in order.  The Department of Hawaiian Home Lands (DHHL) is therefore pleased to formally acknowledge that the $150,000,000 commitment has been met by Bank of America.”

In 2012, HFLC again raised its hand against a proposed merger by Bank of America.  That prompted the Office of the Comptroller of the Currency, in CRA Decision 154 (2012), to write that the record “was not entirely clear” as to whether the $150 million commitment was ordered by the Office of Thrift Supervision as a condition of the Liberty Bank merger, but that if there were indeed conditions they disappeared in 1995.  The OCC approved the merger anyway.

It is now 2019.  The HFLC (or perhaps the activists behind it) still hasn’t given up.  It pointed to a May 2012 letter from the then-chairman of the Hawaiian Homes Commission saying that the 2007 letter was unauthorized, and it persuaded Governor Ige to send a letter to Bank of America offering to host negotiations to “reach a fair and final settlement.”  In the meantime, the Hawaii Senate (SR 32) and the four County Councils have each passed resolutions, supposedly in support of the Governor’s efforts.

What we now have is a real mess.  A lot happened between 1993 and 2007.  DHHL says the bank lived up to what it agreed to, and both the courts and OCC are not willing to say that the commitment was legally enforceable.  DHHL reentered the fray in 2012 to call into question what happened in 2007, and the wounds are being reopened this year, 2019. 

We need this to stop.  Our government gave Bank of America an official communication in 2007 saying that the controversy was pau.  Anyone who received such a communication would have assumed that it was valid (in law, the concept is called “apparent authority”).  Which means we gave them our word.  Why are we talking about a “fair and final settlement” in 2019 if we gave one to the bank in 2007?  If we don’t want the rest of the world to treat us like lawless savages, we must respect the rule of law and stand by the promises we have made, and not toss both aside years or decades later. 
  

If Housing Costs in Honolulu Are Bad Now…
by Tom Yamachika

The cost of having four walls and a roof over your head in Honolulu has been staggeringly expensive relative to the rest of the nation for a while now.  The median price of a single-family home on Oahu in July reached $835,000, while the median price of a condominium rose to $460,000, according to a report from Honolulu real estate firm Locations Hawaii.  “This means that everyone is acknowledging that this is a very serious [housing] crisis that we are now in,” Councilmember Kymberly Pine is quoted as saying on September 21 in Hawaii News Now.

Yet, the Honolulu City Council is considering Bill 25, which would add numerous energy conservation requirements for any residential dwelling that is new or remodeled.  Among the new mandates being considered:

Water Heating from Renewable Energy Only.  This provision would effectively mandate solar water heating and outlaw gas heating.  Some testifiers on the measure stated that this mandate alone would add $7,000-10,000 to the cost of a home.  That could be the difference between qualifying for a mortgage or not, especially for residents making the area median income of $85,000.

Other testifiers pointed out that all solar water heating systems have an electric heating element as a backup.  This is because sometimes hot water is needed at night or in the early morning, or when the sun is behind cloud cover.  So, this requirement might result in higher electricity demand, which might not be an intended consequence.

Ceiling Fans and Air Conditioning.  Ceiling fans or whole-house fans would be mandatory for every bedroom and the largest room, presumably the living room.  A/C would be allowed in no more than half of the house.

The bill does not explicitly say that the requirements apply only to new houses.  Therefore, if you have an existing house and you need to apply for a building permit for some reason, you may have to retrofit to conform toPreview (opens in a new tab) these requirements, although the City’s Office of Climate Change says that no retrofitting is required.

Electric Vehicle Charging:  The current bill draft says that new residential multi-unit buildings with 8 or more parking stalls, and new commercial buildings that have 12 or more parking stalls, must be electric vehicle charger ready for at least 25% of the parking stalls.  Residential buildings must be AC Level 1 charger ready, and commercial buildings must be AC Level 2 charger ready.  (Level 1 is basically house current, and Level 2 must be fed by a 240-volt line.)

Some of the testifiers state that the requirement isn’t good enough, and that the ordinance should require 100% of the parking stalls to be Level 2 charger ready.  They point out that a Level 1 charger would need multiple days to charge a vehicle, and that there would be practical problems figuring out which stalls would get the chargers.

Others argue that such a capability would cost $11,300 per EV-ready stall.  They say that it’s a lot to ask given that 99% of us don’t drive electric vehicles.

So, what is the takeaway from all of this?  I’m reminded of one phrase drummed into my head when I was growing up: “If you aren’t going to use it, don’t buy it.”  There seem to be some provisions in Bill 25 that will require potential home buyers to pay for things they might not use.  If we as a people don’t care about that and want to force changes in social behavior to support The Environment and industries supporting The Environment, then this bill should pass.  If we care about protecting consumer choice and the efficiency of the marketplace, or if we are concerned about the housing crisis and the availability of affordable lodging, then this bill should be shelved.  Let’s see how the discussions on this bill play out.

A few months ago, we tried to remind folks about “It’s the Economy, Stupid.”  There we reported that we had been getting lots of news about our economy, and none of it was good.

This month, the University of Hawaii’s economics research organization, UHERO, released its third quarter economic outlook on Hawaii.  The title of the paper wasn’t exactly comforting: “Already Weak, Hawaii’s Prospects Look Increasingly Dicey.”  “All told,” the report stated, “the outlook is for Hawaii to tread water over the next few years, vulnerable to waves that could well pull us under.”


What has gotten us to this point?  One problem is our population, which fell in both 2017 and 2018.  This decline isn’t simply due to reassignment of active duty military.  As multiple news sources have been confirming, people have been, and are, leaving our fair shores.  “[L]ikely responding to better work opportunities and lower living costs on the US mainland,” the UHERO study says.


Policymakers take note!  We, among many others, have long warned that if government squeezes our population too hard with taxes, regulations, and other impediments, people will vote.  Not necessarily at the ballot box, but with their feet.  UHERO has looked at the hard numbers, and they see that people are in fact taking their business elsewhere.  Are you concerned about population decline?  Or about “brain drain”?  Then don’t deny the problem any longer.  We need to do something about our cost of living.  And by the way, what happens when the cost of government stays the same but the number of people contributing to that cost decreases?  More cost per person results, which adds pressure to lawmakers to increase taxes and jack up our cost of living even more.


Can the problem be solved by squeezing our tourism industry further instead of our general population?  UHERO observed that the number of visitors in Hawaii on a typical day is flatlining, and visitor spending is trending downward.  They are seeing “a sharp pullback in international markets, where the number of visitor days has declined across all major market segments.”  More visitors may be arriving, but they are spending less.  Translation:  Tourists are taking their business elsewhere as well.  Some of that may be due to federal action such as increased tariffs and strength of the dollar relative to other world currencies, but we probably are already at the point where further squeezing of the visitor market gives us economic trouble.


On that front, the recent political spats about transient vacation rentals and the resulting crackdowns in Honolulu, Maui, and other counties have already put a big dent in the supply of places where tourists can be housed.  UHERO says that the crackdown on Oahu alone caused a greater than 8% drop in Oahu’s overall number of units available for visitor accommodations.  Maybe some or many of those places were illegal in the first place, but the economic result is in any event further squeezing that industry sector.  Now isn’t the right time to attack it further.
​

As policymakers begin their annual debate on how to finance government, they should consider that most of our tax laws depend on business activity.  When the economic engine we call business makes money, they make money.  Are we going to put more brakes on the engine with more taxes, fees, and regulations?  Instead, we should be bending over backwards to find ways to help the engine spin faster.