Economist warns of economic fallout from TMT controversy

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A University of Hawaii economist offered a positive outlook for the Big Island’s economic future during a Thursday presentation, but cautioned that events on Mauna Kea could harm that forecast.

A University of Hawaii economist offered a positive outlook for the Big Island’s economic future during a Thursday presentation, but cautioned that events on Mauna Kea could harm that forecast.

“2016 could still be positive, but much less so,” economist and UH-Manoa professor Jack Suyderhoud said during the 41st annual First Hawaiian Bank Hawaii Island Economic Forum. Cuts within the medical sector also could dampen the economic outlook, he said.

Last year during his forum, Suyderhoud discussed the potential economic impact of the June 27 lava flow and Tropical Storm Iselle.

“Nature mostly spared us; people on the island came together,” he said at this year’s talk, which was held at the Hilo Hawaiian Hotel and attended by more than 200 people. “Hawaii Island has certainly proved its resilience.”

With the island seeing boosts in tourism on both the windward and leeward sides, along with a recovering real estate market and a worker-friendly labor market, the big question now is how the island will manage “uncertainties of the man-made variety,” he said.

Suyderhoud presented data detailing the financial impact that Mauna Kea astronomy has on the community, citing a 2012 UH study that found the $59 million spent annually by the observatories created $92 million in economic activity, $28 million in local income, and 806 local jobs.

He used this data as a base to determine what would happen if observatories were added, such as the Thirty Meter Telescope, or decommissioned.

“The absence of the TMT would likely mean $20 million per year less in local spending, $10 million per year less in local incomes, and the absence of 275 jobs that would otherwise be there,” Suyderhoud said.

During a question-and-answer session at the end of the presentation, he was asked how the TMT controversy could impact the state as a whole.

“The other part of the story is the reputational impact on the state,” Suyderhoud said, to murmurs of assent from attendees. “People made commitments based on their understanding of the rules and jumped through hoops.”

Ultimately, he said, “How it will play out (on the mountain) is unknown.”

The other economic unknown facing the island is in the medical sector. The good news, Suyderhoud said, was the expansion of Kaiser Permanente and the strong reputation of the Hilo Medical Center for quality and safety.

But with revenues not staying in line with costs at the medical center and within the Hawaii Health System Corporation, particularly as the state must increase funding for retirement benefits, the financial side of health care is struggling in the face of “draconian” cuts, as Suyderhoud described it.

“It has been clear for years that the business model for state hospital facilities has not been sustainable,” Suyderhoud said. “If further cuts are necessary, the damage to individuals, families, and the economy will be even greater.”

In many other respects, the Big Island’s economic forecast is a strong one.

Suyderhoud pointed to the fact that 2014 was the best year for visitor arrivals since the Great Recession, and that visitor days (the length of a stay per person) had reached a new record of 10.9 million.

As of July, the average spending per visitor had also increased, although it was not on par with spending on other islands. During the question and answer session, Suyderhoud estimated the Big Island’s average to be $160-$170. One way to help boost that number, he said, would be to increase value-added activities.

A 10 percent increase in the number of Canadian visitors to the island offset a 14 percent decrease in visitors from Japan, a trend that was partially due to the weak yen and lack of direct flights.

Though the leeward side continues to pull in the most revenue from tourism (it is more tourist-dependent than either Maui or Kauai), Suyderhoud said the east side would likely receive a boost thanks to Hilton Doubletree now managing the Naniloa Hotel.

As far as new construction was concerned, Suyderhoud said the economists had found a “confusing pattern.” Though permitting for single-family residential properties has more than doubled since 2010, this has not translated to an increase in construction jobs.

Instead, construction jobs had declined over the past year.

More puzzling, Suyderhoud said, was that in talking with those in the construction industry, he had heard that “times were good,” and that many large contractors had backlogs of work.

About half of the island’s job sectors continued to see growth, and the slowly recovering economy means that labor shortages were beginning to appear. Still, the Big Island’s unemployment rate of about 5 percent is slightly higher than the state average.

Real estate also continued a “slow climb out of the abyss of the Great Recession,” Suyderhoud said. Sales were on par with those of last year, with single-family home prices recovering faster than condominium prices. Rental rates also have started to rise.

Email Ivy Ashe at iashe@hawaiitribune-herald.com.