While the Natural Energy Laboratory of Hawaii Authority for more than three decades has provided researchers and fledgling businesses the chance to get their feet on the ground, it’s never completed an economic impact assessment — until now.
An analysis of the area’s economic impact, which looks at how tenants’ expenditures reverberate through Hawaii’s economy and beyond, was recently completed showing that the state ocean science and technology park’s economic impact on Hawaii alone was $87.7 million in 2010.
That figure was determined by the University of Hawaii Economic Research Organization using the state’s economic input-output model, which captures the direct, indirect and induced impacts of spending in each sector of Hawaii’s economy. The $87.7 million figure is also based on Hawaii-only expenditures that totaled about $47.3 million.
“This validates the vision that these people had and it’s not bad,” said Greg Barbour, NELHA executive director. “The $120 million the state and federal have put toward (NELHA), they’re getting back $87 million a year in economic output.”
Prior to the May 18 UH report, an economic impact analysis had not been completed for the 870-acre ocean science and technology park, Barbour said. Annual reports were completed that looked at tenants’ revenues, but not their spending.
Without assessing what the tenants are spending to operate, the data does not provide a clear picture of the area’s actual economic impact, he explained.
“The numbers are higher than we’ve ever reported because of the method used,” Barbour explained. “Rather than looking at the (tenants’) revenues, it looked at their expenditures, and, in addition it looked at the direct impact, indirect impact and induced impact.”
The report was compiled based on tenants self-reporting via survey their expenditures in 2010. Of the 41 tenants at NELHA, 23 completed surveys. For the remaining 18 tenants, UH estimated expenditures for 10; used NELHA income statements to derive four others and did not include four tenants because their “income was deemed to be relatively too small.”
The report specifically assessed 11 spending categories: rent, equipment, finance and insurance, materials, utilities, information, transportation, repair and maintenance, professional services, government and labor.
With the data, researchers determined the tenants spent $81 million to operate in 2010 — $47.3 million of that, or 58.4 percent, stayed in-state. The remainder was spent nationally or internationally.
The report does not break down spending by county or country.
Researchers then took the Hawaii expenditures and extrapolated that the direct, indirect and induced economic impact was $87.7 million based on multipliers determined by the state Department of Business, Economic Development and Tourism.
For every dollar spent, the direct effect is the original dollar, the indirect effect is the additional spending by industries created by that dollar and the induced effect is the additional spending by households in the economy.
Based upon the multipliers, researches found the tenants’ expenditures generated $4.5 million in tax revenue for the state, according to the report.
The report also showed the $47.3 million spent by the tenants contributed to 583 jobs in Hawaii and earnings totalling $24.7 million.
Barbour said more than 300 of those jobs were at the NELHA site. The number doesn’t include 17 positions within the park’s administrative offices.
“These are the right kinds of jobs in the science, education, research and professional fields,” Barbour said. “It’s giving people a choice.”
UH researchers also calculated the return on every dollar the state has invested in NELHA during the past 10 years as part of the report. Including operating and capital improvement project funding, the state has appropriated annually an average $2 million to NELHA.
The area hasn’t received operating funding since 2010.
Therefore, according to the UH researchers, the state’s return on every dollar it has invested in the ocean science and technology park was $42.80.
“The investment they (state and federal) have made here has been worthwhile and it shows that if they do invest — the Legislature and administration — in us, that they’re getting a pretty handsome return,” Barbour said. “And, it’s only going to get better.”
The economic report’s release follows a state auditor’s report released May 30 putting NELHA on the hot seat outlining years of poor management and lack of transparency.
“Our findings reflect an agency which, after nearly 40 years, has yet to achieve its potential as an ocean-related research, education and commercial center. In the absence of clearly reported progress and while continuing to struggle with the basics of open government, it is no wonder the authority has had difficulty convincing legislators, taxpayers and potential tenants of its worth and successes,” wrote Hawaii State Auditor Marion Higa. “However, despite the myriad issues it faces, we found that the authority is making progress under new management.”
That progress, which has mainly taken place since Barbour took over the helm as executive director last year, includes addressing marketing and promotion of the site, improving tenant relations and pursuing alternative revenue streams, as well as reaching self-sufficiency on the operating level, according to the audit. NELHA already has completed a master plan and a financial plan is under way.
The Natural Energy Laboratory of Hawaii Authority, located at Keahole Point, manages the facility on 870 acres of leased state land.
The facility is home to 41 tenants consisting of 29 pre-commercial research and commercial tenants, four Gateway Center tenants, and eight research, educational and community service tenants, according to the audit.
The facility was established in 1974 with public and private grants in response to the 1973-74 oil embargo and concerns about Hawaii’s fossil fuel dependence. By 1984, it became apparent seawater could be used for research and other profitable ventures prompting the state to pass laws allowing NELHA to host commercial entities on state property as well as develop the Hawaii Ocean Science and Technology Park.
Natural Energy Laboratory Hawaii and the park officially merged in 1990 forming NELHA. NELHA also maintains Wawaloli Beach Park, including bathroom facilities.
While for years, the area has been known as NELHA, Barbour said he is working to change that because the term NELHA really doesn’t tell people what the area has to offer. He explained NELHA is the government agency that administers the area.
As part of a new marketing effort, Barbour hopes people will again identify the area as the Hawaii Ocean Science and Technology, or HOST, Park.
He hopes the new approach will help the park reach self-sufficiency so that the area will no longer need state funding for capital improvement projects.
“HOST Park is a better representation of the attributes that are down here,” he explained. “This is an Ocean Science and Technology Park — that describes what we really are.”