Senate probes
ways to keep
construction
money here

Legally, work on military
projects should go to residents,
but the law does not
define residency

By Gregg K. Kakesako
Star-Bulletin

Hawaii is earmarked to get $350 million in military construction projects this year, but key state Senate leaders are concerned the money may never flow into state coffers.

Sen. Cal Kawamoto (D, Waipahu) believes part of the problem is the state doesn't have a law that defines state residency when it comes to issuing military construction projects.

"We have defined residency as it pertains to going to UH (University of Hawaii), and we have residency requirements on who should pay state taxes or who can get a marriage license," said Kawamoto, chairman of the Senate Transportation and Intergovernmental Affairs Committee and the Senate's military liaison.

"But there is no federal public law or state law that defines state residency requirements for military contracts."

Jobless rate guides policy

At issue is a 1986 federal law authored by U.S. Sen. Daniel Inouye that requires Defense Department contractors to hire local contractors in Alaska and Hawaii -- which are not contiguous with other states -- when their state unemployment rates are higher than the national rate, Kawamoto said.

Kawamoto said that since 1995 the state's unemployment rate has been higher than the national rate.

Senate President Norman Mizuguchi believes the federal law, which was passed to ensure that local contractors are hired to do military construction projects, hasn't been enforced.

"Our local contractors and workers are not benefiting from millions of dollars of federal funds spent on military construction projects in Hawaii," he said.

He has asked construction industry leaders, union representatives and military officials to appear before a special Senate symposium at the state Capitol on Tuesday to discuss ways federal funds appropriated for military construction projects in Hawaii remain within the state.

Ambiguity in residency law

In discussing the problem with military officials here, Kawamoto said he has found out that the various services "define state residency in different ways."

In some cases the military defines residency simply on the basis of a company's intent to set up shop here.

"Others establish a forward operating base in Hawaii, while its corporate headquarters may be elsewhere," he said. "There is no definition."

That is why the Senate in a resolution earlier this year asked the state labor and taxation departments to see what laws are needed to enforce the federal statute, Kawamoto said.

"The bottom line," he added, "is to get the people on board to ensure that profits and wages made in Hawaii will remain in Hawaii."

Larry Hawthorne, spokesman for the Army Corps of Engineers, acknowledged that "there is a lot of ambiguity" in what constitutes a Hawaii resident.

But he noted that 81 percent of projects done by the Army corps last fiscal year went to local contractors.

Construction is suffering

The lack of a precise definition as to who is a Hawaii resident "makes this a very difficult problem," Hawthorne said.

Don Rochon, spokesman for Naval Facilities Engineering Command Pacific Division, said "the Navy is in full compliance with the federal law."

Since the law was enacted, the Navy has only received two complaints of a contractor not hiring Hawaii residents, Rochon said. "We thoroughly investigated and resolved both."

Earlier this year, Kawamoto's committee also delved into the problem facing local shipyards when the Navy drastically cut back on repair and maintenance it contracted with the private sector.

Last year, Navy contracts to private island yards totaled $22 million, and $30 million the year before then. That mounted to 60 to 70 percent of work at the state's two largest private shipyards.

However, this year the Navy cut funding to $9 million because of budget constraints.

The construction industry last year lost 12,000 jobs in Hawaii, and construction spending declined 8.8 percent, Kawamoto said.

"It's the worst industry in the state, and it needs our help now that the H-3 freeway is pau and work on the convention center is pau," Kawamoto said.

The Senate wants military contracting officials to provide information on:

Specific projects during the past four years.

Current and future projects.

How federal funding for projects has been or will be apportioned between businesses here and on the mainland.