Archive for January, 2009

Setting the record straight on President McClain

January 17th, 2009
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mcclain.jpgIn his January 15th letter to the Advertiser, David McClain responded to my ThinkTech column on the Board of Regents.

I said he had moved out of the president’s house. He denied that. In fact, he told people he was moving out in December, canceled his receptions there and announced that the house was no longer available for functions because it was being renovated.

McClain also misquoted me to say that the board of regents “will not meet in January”. I didn’t say that. I said the meeting had been canceled, as confirmed to me by the regents office. In fact, the notice for the new meeting was not posted until after my column had been written.

He should have mentioned these things. His letter is misleading and an attempt to distract us from much more important issues, like whether he's been a good president.

In my column I questioned not only his politics but his leadership. On that, his record speaks for itself. Note that his letter was silent on a major issue, the lack of progress at Kakaako. His letter, as his leadership, is lackluster.

For my earlier exchange with President McClain, see my blog on the subject.

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We need more project philanthropists at UH

January 9th, 2009
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shidlerschool.jpgThe Shidler College of Business has begun installing a 4.5-kilowatt PV panel system. It will generate 24 kilowatts, enough to operate the courtyard lights overnight.

It has a web-based monitoring system that will allow students, faculty and the public to monitor the solar power and reduce emissions. It will prevent 9,000 pounds of greenhouse gas from entering the atmosphere every year, which amounts to driving your car for 11,000 miles.

Dean Vance Roley says that it's not only about being a good corporate citizen – it also makes business sense. It will reduce energy costs and waste and save the school money. The $50,000 system was donated by Hawaii real estate investor and entrepreneur Jay Shidler, who also gave the school $25 million a couple of years ago.

The story here is more than just the installation of a PV system. It's that Shidler Business College is way ahead of the rest of the University. It’s undergone a visible and enviable transformation.

It would be nice if every school had a $25 million grant like the one from Jay Shidler, but that's a long shot. Other schools have been trying to achieve that level of support but have not been able to do so.

With that gift, and the ones that have followed it, the business school is a great model for the other schools at UH. Hopefully, in the years to come, other generous individuals will step forward and provide similar grants and funding to do what has happened at business school.

But it doesn't take $25 million to put PV on the roof. Other donors can make lesser gifts and can also do notable things at UH. The campus is actually in shambles. Lots of those buildings need a paint job, landscaping and/or major maintenance. A lot less, even a few hundred thousand, would go a long way to bring a deteriorated building back to life.

These schools should look for philanthropists who can fund specific projects like paint jobs or landscaping or PV systems. We know they’re out there - are you one of them? You may not be able to have the school named after you, but you will get lots of gratitude for the gift, and the creativity. It’s a great way to build the image of the University and for that matter Hawaii's image. Every little bit helps, and it's a great way to get around the bureaucratic bungling on maintenance at Manoa.

Thanks to Jay Shidler for putting the PV on the business school and letting us see that it can in fact be done. The concept shouldn't stop with the business school – this should happen with every school on that campus. So if you went to a given school, or you just like a given school, why don't you contact the dean there and see what the deal would be and do what Jay Shidler has done. While it may take a lot to fix all of Manoa, it won’t take that much to fix a single school.

I'm sure you'll get enough credit, along with the gratification of leaving your mark on the place, to make it worth while. Maybe you can even get some classes out of the deal.

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The truth will set you free

January 7th, 2009
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manoa.jpgI covered Hanabusa v. Lingle and the history of Act 56 in my ThinkTech column on December 14, 2008.

UH President David McClain responded to the column with a letter published in the Advertiser on December 17th, arguing that the Association of Governing Boards (the AGB) opposed the constitutional amendment.

He didn’t mention that while the AGB has recommended advisory committees appointed by governors rather than committees appointed by constituencies, it favors either of those models over direct appointment by governors, the power which Linda Lingle was trying to retain.

Neither did he mention that, given Lingle's position in that regard, the AGB testified before the legislature in 2004 in FAVOR of an earlier version of Act 56.

In my column, I also said that McClain “had testified against Act 56.” In his letter, he said my statement “mischaracterized” his testimony. What’s to mischaracterize? It’s simple – David McClain testified against Act 56. He testified in favor of a competing bill that would have allowed Linda Lingle to appoint all of the Candidate Advisory Council members and to directly reappoint EXISTING regents.  That bill failed.  Act 56 passed.

McClain’s comments are misleading at least. He would have us believe he was taking some lofty position on these issues, but the fact is he was providing political assistance to Linda Lingle over a period of years in support of her efforts to retain the power of direct appointment.

As a university president serving under and reporting to the board of regents, it was inappropriate and unbecoming for him to take public sides in this debate. His letter to the editor is another manifestation of that advocacy.

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News Flash - Act 221 Tax Credits Require Investments

January 4th, 2009
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outrageous.jpgOn Sunday, January 4, 2009, the headline story in the Advertiser reported “Rich Claim 95% of Tech Credits”. It went on to say that “Hawaii’s wealthiest residents are among the biggest beneficiaries of the state’s tax credits for technology investors.”

The “rich” getting lots of tax credits? That suggests that Act 221 is just an angle for the rich. The article goes on to quote Lowell Kalapa of the Tax Foundation, who has steadfastly opposed 221, for the proposition that allowing the rich to claim the credits is “unfair” because then the rest of us get to pay more toward the costs of government.

Wait, just one minute. It’s not a giveaway - it’s a two way street. You don’t get the credit unless you make an investment. If you invest say $100,000, you get a tax credit in the full amount only if the business remains a Qualified High Tech Business over the full five years. If the company fails before then, you don’t get all your credits, even though you’ve lost your investment. The credit you got may only be of minimal consolation.

This was not explained in the article. And as you can imagine, a fair number of people only read the headlines. The message they would take away would be that 221 benefits only those don’t need any benefits, and effectively penalizes the rest of us, and by implication that 221 should therefore be maimed or killed or left to expire at the earliest opportunity.

Lest we forget, 221 is a tax incentive. The idea was, and should certainly still be, that our economy is one dimensional, mostly tourism, and that it is increasingly urgent that we diversify it. There are not enough high paying jobs here to interest our young, and in fact our best and brightest have been leaving town to find them on the mainland for years. The clear answer – build a tech sector to diversify this limited and vulnerable economy and get into the global mainstream. If you don’t have a significant tech sector, you have to incentivize investors and entrepreneurs to start companies, take risks and forego other opportunities.

The Cayetano administration, and the legislature at the time, in a moment of inspiration, adopted 221 for that specific purpose - to build a tech sector. It was a revolutionary step for Hawaii, and caught the attention of a number of entrepreneurs and investors. Get this too – you don’t integrate a new sector into an existing economy overnight. It takes lots of committed and creative entrepreneurs and investors to do that. They have to be willing and able to put in the time and money, and to take big risks and sometimes big losses, on the way to building successful tech companies. It’s not easy or for the faint of heart.

And to build a successful tech company takes years – to build a successful tech sector takes decades, even in San Diego. You have to nurture, encourage and incentivize them continuously. When the authors of 221 fell out of power, those who followed have not been so inspired. They have not initiated any other incentive to encourage people to build tech companies or a tech sector. Even now, 221 is the only incentive we have.

But the progress envisioned by Ben Cayetano and his friends has not been what they had hoped. Why? Lots of reasons, but clearly including the fact that 221 has been attacked every year since then. Despite her campaign promises to let 221 “run its course”, Linda Lingle has been at war with 221 from the beginning. The tech and business community has given up hope that she will do anything to diversify or encourage development of a tech sector. Many who supported her election in 2002 now express total disappointment.

Perhaps it is just a lack of understanding by Linda Lingle and the article on Sunday’s front page. Economic incentives are not just to give breaks to taxpayers. They are to incentivize desirable economic activities that might not otherwise take place. The credit incentivizes investors to invest. Pursuant to the Tax Office report of last September, for every dollar claimed in 221 tax credits, at least three dollars have been invested. Those investments go to the tech companies and their contractors and employees and into the state's economy. It’s a focused stimulus package, calculated to improve the quality and quantity of our economy going forward.

If you go to war against 221 and have that war on the front page year after year, you have another kind of effect on would-be investors. Why exactly would you want to frighten away or punish investors who would invest in our economy? Everyone knows that local businesses have trouble raising capital from both local and mainland sources. If you beat up on investors, guess what, you lose them – they move on. Indeed, many investors have moved on – they do not and will not invest in Hawaii because of all the controversy this administration has created over 221. We have collectively shot ourselves in the foot.

For myself, I’m getting ready for a Tech Requiem in Hawaii. Perhaps some people think that you can build a tech company or sector with controversy but no capital, or that you can raise capital for Hawaii’s companies in today’s economy without an incentive. Lots of luck. If Linda Lingle, Kyle Yamashita, Pono Chong and Isaac Choy have their way, I think we can kiss our tech assets goodbye. That would be the sad end of the Cayetano vision, the end of an era in which we had hoped to catch up in the global economy, and the end of a gallant effort at diversifying and keeping our young people in Hawaii.

The reason more “rich” people get 221 tax credits is because more “rich” people actually invest in tech in Hawaii. Look not to them in derision, but to yourself – when’s the last time you made an investment in tech in Hawaii. If you did, you’d get 221 tax credits too, assuming, of course, that 221 is still on the books by the time you write your check.

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