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Monday, March 27, 2023
Ban on short-term rentals won't help Hawaii County produce more homes
By Grassroot Institute @ 12:00 PM :: 2182 Views :: Hawaii County , Small Business, Tourism

Ban on short-term rentals won't help Hawaii County produce more homes

from Grassroot Institute, March 2023

Joe Kent visits with Realtors in Kailua-Kona to discuss the many opportunities Hawaii County has to expand its housing supply

Hawaii County already has some of the most restrictive housing regulations in the U.S., and now it is looking at some harsh restrictions on short-term rentals.

Joe Kent, executive vice president of the Grassroot Institute of Hawaii, addressed that issue and other housing-related topics recently during a visit in late February with the West Hawaii Association of REALTORS.

He said some county officials have drafted a bill, yet to be introduced, that among other things would restrict stays at short-term rentals in Hawaii County to no less than 180 days — similar to a bill that Mayor Rick Blangiardi on Oahu signed last year.

Kent noted, however, that a federal judge suspended that Honolulu ordinance back in October, ruling that the counties are barred by state law from amending their zoning codes to ban a use that was previously allowed — such as renting out your home for only 30 days.

“That’s a good lesson for the Big Island,” Kent said, “because if the framers of this bill want to do 180 days, they need to look at that law very closely and decide: Do they want to have a big court battle?”

Kent said proponents of restrictions say they want to bring down the price of housing. But “this might actually do the opposite.” He said there are no studies showing that short-term rental bans reduce the price of housing. 

Furthermore, he said, the bill would only add to red tape in the county, which already “has by far the most regulations of any county in the nation.” He said if lawmakers really wanted to reduce the price of housing in Hawaii County, they would reduce regulations. 

“There’s so much they could do. There’s so many opportunities here,” he said.

Regarding cesspools, which are blamed for polluting the ocean, Kent said it is infeasible for most Hawaii County residents to afford what it would cost to replace their cesspools by 2034, as mandated by state law. 

He suggested the county, which is awash in money, could pay for the infrastructure, or work with a private company to provide wastewater treatment plants that homeowners could access.

  *   *   *   *   *

TRANSCRIPT

2-28-23 Joe Kent presents to the West Hawaii Association of REALTORS

Kristin Moreland: I’m Kristin Moreland, president for West Hawaii Association, and today we’d like to welcome Joe Kent. He grew up on the Big Island and attended the University of Hawaii at Hilo and Minnesota State Universities where he obtained his degree in education. 

Kent was a public school teacher for eight years at King Kamehameha III School in Lahaina, Maui, and Sleepy Eye Public School in Minnesota. 

He’s also a former student fellow at the Foundation for Economic Education. He’s here today representing Grassroot Institute and we welcome him with all our aloha. Thank you for [inaudible].

Joe Kent: Well, thanks so much for inviting me here today. Yes, I am from the Big Island. I grew up in Honolulu and my dad was a minister at United Church of Christ in the Hamakua Coast. His name is Ron and he still lives here. He lives on Paradise Park. 

But I’m really glad to be here because I’m just passionate about understanding more about the Big Island issues. 

The Grassroot Institute, if you haven’t heard of us, we’re a 501(c)(3) nonprofit think tank that focuses on individual liberty, economic freedom and accountable government.

And those three things are in short supply here in Hawaii, we know that, but it’s a different point of view and we have a motto that we like to say, “E hana kākou,” which means “Let’s work together.”

So we try to work together with all groups. It doesn’t matter which stripes or economic stripes you are. We want to learn from you and learn where we’re wrong and let’s talk and discuss “E hana kākou.”

Could you move to the next slide?

Moreland: Yes.

Kent: Oh, yeah, there it is. So who are we? This is our staff. Keli’i Akina, he is the president and CEO of the Grassroot Institute. He’s also a trustee for the Office of Hawaiian Affairs. 

And this is our wonderful lovely staff here. We’ve got a government affairs team that goes to the Legislature and county councils. We have a policy team, communications staff. We’re on TikTok. We’re on YouTube. We’ve got an email list of 30,000 people that read our stuff every week and so if you’re not on our email, please consider joining or signing up for free at grassrootInstitute.org. 

And a special aloha to all those online. I hope you can see me. It looks like I’m talking to Hal from “2001: A Space Odyssey.”

[laughter]

Anyways, hello. Today, I want to talk a little bit … if you go back to the first slide, about short-term rentals and about the real cause of Hawaii’s housing crisis. I also want to talk a little bit about the cesspool issue as well. 

So let’s start with short-term rentals. So let’s go to the next one. Yes, there you go and the next slide. So these are the short-term rentals on Hawaii island. When we look at it look like that, it looks kind of alarming, but actually, if you go to the next slide, you can see … 

Oh, actually one more. You can see that these short-term rentals only make up about 8% of the housing supply, the housing units on the Big Island. And so it’s actually just a fraction of the supply that we’re talking about, I want to put it all in context. Uh-oh. 

Female Speaker 2: It’s –

Moreland: I don’t know what’s happening.

Female Speaker 2: [inaudible].

[laughter]

Kent: OK, can you go back again? So, the short-term rentals that we’re talking about includes luxury– Well, let’s see here.

Female Speaker 3: That’s where it was the last [unintelligible].

Kent: OK. Ooh. Well, I can just continue here. The short-term rentals include luxury estates and we’ve got … Ooh, I would like to figure this out [unintelligible 00:04:44]. distracted.

— Technical difficulties — 

Moreland: So those short-term rentals were both hosted and not hosted, or was that non-hosted, mainly?

Kent: OK, so those were both hosted and non-hosted, [unintelligible] a distinction.

Moreland: All of it? OK.

Kent: Yes. So, we’re talking about, what, 7,800 short-term rentals? Oh, here we go. OK, so let’s rewind.

Male Speaker 1: [unintelligible]. 

Kent: Yeah, that’s hard to find out, actually. I’ll talk about that. OK, back one more. 

So on the west side you’ve got … some short-term rentals includes timeshares that we see on Airbnb. Some include luxury estates … oh.

[laughter]

Female Speaker 2: [inaudible].

Kent: Yeah. Some of them have got cute little abodes on the east side and you’ve got bed and breakfasts, and volcano and so on. So there’s a lot of different types of short-term rentals. You can go to the next slide.

Moreland: Joe, are you counting special-use permitted B&Bs in that count?

Kent: Yes, including those.

Moreland: OK.

Kent: And one more. Good. So this chart shows, according to AirDNA, which tracks all of the Airbnb and Vrbo and short-term rental purchases, how much revenues were brought into Hawaii island last year, which was about [$353] million to the Big Island economy. It’s a huge chunk of change. 

Keep in mind, this isn’t tax revenues. This is private revenue, and that’s a big jump from before during the pandemic. 

I tried to find the number of tax revenues that the Big Island gets, but it’s very difficult to find. I always call Hawaii island the least transparent county. We do transparency requests across the state and it’s really difficult to get info on the Big Island.

Not like on Maui, which is, I think, the most transparent county. They’ve got a whole chart and report of every tax and where it comes from, and the sectors and industries that it comes from. 

The Big Island has one line item in the budget that just [unintelligible] property taxes or something, and so it’s really difficult to find, But I would peg it at around $100 million that the county government gets, just based on comparing it against other counties. You can move to the next slide there.

Moreland: Can you get it from TAT [hotel room tax] numbers?

Kent: Somewhat, somewhat, but even that is difficult to find at county level.

Moreland: But I mean, if you’re thinking GET [general excise tax] plus TAT, that’s almost 18%, and then there’s the property tax differential for people who have the home exemption, but lose part of it because of this. So I would imagine somewhere around 25% of that, maybe, is roughly where you are.

Female Speaker 3: And the county tax as well.

Moreland: Right, so the GET and the TAT, including the county surcharge, yeah, it’s around 18[%], well, a little more than that now.

Kent: Again, you kind of just have to estimate, right? So I would peg it definitely at north of [$50 million], especially when you include the spending that the guests for short-term rentals do. They spent $200 million last year — excuse me, in 2019 — on restaurants, and, you know, almost $100 million on entertainment, you’ve got transportation and shopping, so this is a market that spends a lot on the Big Island and brings huge revenues to the private sector and public sector here.

Moreland: Where does this data come from? Sorry, I don’t want to [inaudible].

Kent: No, there was a report by Kloninger & Sims in 2020, I think. I can send that to you if you like. 

OK, so let’s go to the next slide. 

OK, so Hawaii County, as you know, took action to restrict short-term rentals in 2018 [unintelligible]. By the way, Hawaii County calls them TAR, transient accommodation rentals. “TAR” — it sounds like something that you step in.

Moreland: November 23rd.

Male Speaker 1: You didn’t get the memo.

Kent: The other counties call it short-term rentals or something else. We call it TAR here. Anyways, Bill 108 restricts short-term rentals if you don’t live there. So if it’s an unhosted rental, you can’t do it unless you’re in certain zones, like the resort zones or commercial zones. If you live there, you can do it. 

So that’s basically, they’re dealing with this right now. They’re trying to change the law, or they’re trying to change it and update it with a tome of regulations that are coming down the line that don’t have a bill number yet. 

It’s just, you know, a plan to introduce this. And you can go to the next one. This is what they want to do, which is … oh yeah, I’m sorry. These are the zones that you can operate unhosted short-term rentals in.

And let’s go to the next slide. 

OK, so when we talk about the zones, this is of course Kailua-Kona, and these pink, purple and brown zones are basically the areas that you can operate unhosted short-term rentals in. 

Go to the next slide. 

And this is where the short-term rentals are. So you might think, OK, well, these are all illegal, right? The mauka side. But actually, a lot of those are hosted rentals. People live in their homes. 

So it’s important to keep that in our minds because I think a lot, especially in public or the media, we hear so much about, “Oh, look at all these illegals,” and they show a map like this and they say, “Look. Look at all these illegal short-term rentals.” 

Well, actually, probably most of these aren’t illegal. They’re probably operating under current law. So that’s that.

Now go to the next slide. 

We could talk about what they want to do. So again, the bill doesn’t have a number yet. It has not yet been introduced. They wanted to introduce it by now, but I think because they’ve gotten so much community pushback, they haven’t. So that might be a good thing. 

The bill wants no rentals for less than 180 days, and that reminds me a lot of what they tried to do in Honolulu, the same thing. They tried to make a bill that allowed no rentals for less than 180 days. 

And they did that by changing the definition of short-term rental to less than 180 days. Well, if I rent for 180 days, that’s not a short term, that’s a long-term stint, right? 

And so it was actually thrown out in the courts, temporarily. There was an injunction in the First District on that Hawaii, or Honolulu, law and basically what they did is, they said that the state has a law called the Zoning Enabling Act, which bestows upon the counties the power to zone. But that law says that you can’t change the zoning too much so that it would prevent a use that was previously allowed.

So, if you do that, it constitutes a taking, and that’s what they argued in court. The judge said that argument has merit and he issued an injunction, and so that law in Honolulu is stopped, that portion law is stopped, and you can rent for a minimum of 30 days in Honolulu. 

So just a sec here, please.

So that’s a good lesson for the Big Island, by the way, because if the framers of this bill want to do 180 days, they need to look at that law very closely and, you know, decide do they want to have a big court battle? Do they want to limit that to, what, 90 days? That still doesn’t do an end run around the law. It has to go down to 30, the court says for now, and so that’s a big issue.

Another one, all hosted short-term rentals must register annually. Actually all short-term rentals would have to register, unhosted and hosted, annually, and there might be requirements for onsite parking. You might have to show that you have proper permits. Plumbing or, you know, building permits, or electrical. 

And, you know, on the Big Island, I know there’s a lot of old houses that don’t have permits or they might have a small structure in the backyard or something that’s not permitted, and now you need to force all of these folks to go, what, to the Department of Public Works to try and get a permit? Along with everyone else, by the way, which we already have a backlog on the Big Island for permits. A huge backlog. 

And so this would make that even worse. You have to notify your neighbors, you got registration fees, you got a $10,000 fine. 

I don’t know whether or not that fine would be, like, on a daily basis, by the way. That’s how they do it on the other counties. 

Can you imagine a $10,000 fine per day? And we’ve seen some short-term rental owners that rack up like $2 million dollars in fines and things like that, so people on Maui County or Honolulu. 

If that happens, then of course the state may be able to take your property, where they set a lien against it and then take it, so, and you’ve got laws at the state level now to make it easier for the state to take your property in those cases.

So this is a lot of red tape and government regulation that’s not being vetted. I think, “Well. You got an apartment for no more than two adults per bedroom, no more than four adults per rental. No commercial weddings or events and the owner has to live on-site, so there’s a lot of problems with this.” 

Let’s go to the next slide.

Male Speaker 2: So the whole idea is to get rid of short-term [unintelligible].

Kent: Kind of. Yes, I mean the first one there tells you what they want to do really, which is the 180 days, which would basically be a blanket ban on all short-term rentals. That’s what they seem to really want to do. … 

Male Speaker 3: I had an understanding that that’s one of the reasons they got rid of the S on TAR because they’re no longer short-term and you’re saying all of the transient rentals, so part of this thing or part of the name change would define what’s happening in Honolulu.

Kent: Yes, they’re trying to. Anyways, I don’t want to say pretty much what they’re trying to do, but it’s too much red tape. And you know, the founder of the Grassroot Institute would often say that the bigger the government gets, the smaller you get. And this definitely tends to be the case, even if it’s in incremental stages. 

You know, we already have a department that manages short-term rentals, and so this is too much. Like I said, there’s going to be huge problems with backlogs in the planning department.

You got folks on the Big Island that don’t have proper permits, so that’s a big problem. This gives more power to the county. The county could deny lots of permits. There’s no guarantee that you’ll keep your permit even if you do it. 

Let’s say you do it properly the first year. Well, there’s no guarantee that the second year that they’re not going to deny it. 

And it’s kind of unnecessary, too. We think this really won’t bring down the price of homes. You know, in theory, that’s what the proponents of the bill say: “We want to bring down the price of housing on the Big Island by somehow banning short-term rentals as well.” 

This might actually do the opposite. 

If you think about it, the bill would require long … like, it would create all these long lines at the permitting departments, and that makes it harder to build housing. We already have people who are trying to build good housing and get through the system as it is, that can’t. Yes?

Moreland: Has Grassroot done any studies other than Hawaii about short-term rentals taking up everybody else’s housing? Like, do you have any kind of data like that that you could share?

Kent: We have data on Maui. We’ve looked at the studies. We looked at the studies that ascertain whether short-term rentals increase the price of housing. And there’s a mix: There’s some studies saying it does; some studies say that it doesn’t. More studies say that it does increase somewhat the price of housing in a small way. 

But there’s no studies that show that banning short-term rentals reduces the price of housing, especially in this case.

 Most of those studies, by the way, are talking about unhosted rentals, but on the Big Island we have a bunch of hosted rentals. So if you were to ban short-term rentals for hosted rentals, it’s not like those houses would actually now start renting long-term.

A lot of those homeowners may not wish to deal with long-term tenants and keep their homes empty or have their own solutions for these units.

So it’s not clear, and if people already live there; it’s not like they’re going to rent to someone else automatically. So that’s another point.

 But yes, I can share those studies. 

So, OK. So let’s move to the next slide there.

So, and again, we’re only talking about this sliver. If, you know, let’s say, we were to ban the short-term rentals, keep in mind we’re not banning luxury rentals. We’re banning the affordable sort of rentals on the mauka side. We just don’t think it would dent the market that much. 

Next slide.

So if the county really did want to bring down the price of housing, there’s so much that county lawmakers can do. Especially in Hawaii County, we probably have, you know, more leeway to affect the price of housing than any other county in the nation, actually, because we have the most restrictive housing regulations in the nation here at this county.

Female Speaker 3: [inaudible].

Kent: Oh yes, I’ll show you that. And so, if you look on as a percentage at the state level zoning, at the state level, only 2% of Hawaii island is zoned for urban housing. Urban housing is that kind of housing that allows neighborhoods or single-family homes or something, that’s urban housing. We’re not talking about Honolulu. We’re talking about [unintelligible]. That’s urban housing. 

And now that 2% figure, though, is that you cut that in half because half of that is industrial zones like airports and harbors and stuff, and the other half might be housing. So actually it’s around 1% of the whole island is housing. OK, let’s look at that 1%. 

You can move to the next slide forward. 

Kent: … So like I said, if you were to catalog all of the regulations and compare it by state by state, Hawaii is almost off the charts. We have way, way more regulations for housing than any other state. 

You can go to the next slide. 

This is the county-level comparison and Hawaii County has by far the most regulations of any county in the nation and so, again, if lawmakers really wanted to reduce the price of housing, there’s so much they could do. There’s so many opportunities here.

OK, let’s keep going. So we’ve studied this. We looked at the regulations by state and put it on a chart and looked at the price, and what we find is, the higher the regulations, then the higher the price, and the lower the regulations, the lower the price. 

So this is sort of a clear trend that we see here. So the answer is clear: Reduce the regulations to allow for more housing. 

But there’s a few other zoning reforms that we can talk about.

First is the Tokyo model. … So, Tokyo had restricted housing regulations and it reduced those and for the last 20 years, the price of a home in Tokyo has been exactly the same. It hasn’t gone up at all and it’s been very affordable to find housing there. You could also allow more multi-family housing. 

And, but yeah, let’s go to the next one. 

Remember I was talking about zonings. Well, this is Hilo. On the — is that left here? — you’ve got all these blue areas are where … that’s urban housing and that’s where single-family homes are. So we’re talking about one house on a 7,500 square feet of land. 

Over here, this is where multi-family homes are allowed. You can see it’s just a sliver, you barely even see it here. That’s where the multi-family homes are allowed, so we’re talking about duplexes, fourplexes, triplexes.

Now, I’m not necessarily talking about rezoning all of Hilo to allow for multi-family housing, because that will be a significant change.

But there are certain neighborhoods where maybe the homeowner wants to add a house in their backyard, or add a kitchen or something, and really we’re talking about kitchens here, if you think about it. A lot of the zoning regulations have to do with how many kitchens you have, actually.

And so, adding a part to your home with a kitchen that someone can stay in, maybe that would be an attractive thing for a homeowner to do. If they don’t want to, they don’t have to. But allowing for that would allow for more homes, and it might increase the value of them as well. 

So, OK, you can keep going. 

Other solutions that we’re talking about are — you can keep going — smaller lots. If you want to have a lot that’s not 7,500 square feet, but smaller than that, you should be able to do that; mixed-use developments, so businesses or … There’s a lot of old businesses that might be empty that you could put housing in, actually, like an old mall or something. You could put housing there except for the zoning codes, so that’s a really easy one to do. 

Cut parking minimums. Not everyone wants or needs a parking space, so that’s something that we could do. Adaptive reuse, that’s what I talked about before with mixed-use development, and by-right.

By-right is the most significant thing, I think, that county lawmakers could do, is adding more by-right housing. That means that instead of needing to go to the public hearing process for every house development, certain developments like affordable housing developments, for example, could just be approved by right and you don’t have to have all of the NIMBYs come out — the people who say, “Not in my backyard,” right? This has been shown to work in other areas.

OK, so that’s housing. And I can answer more questions about that. 

And now I want to talk a little bit about cesspools. 

I told you that cesspools, you know, are a big issue here. I don’t want to get too much into the environmental aspect of that. Let’s just say that it is a big problem and assume that the cesspools are polluting the oceans and all of that. That’s a big problem. 

But, so, what’s the solution to that? Well, in economics, there really are no such things as solutions. And at Grassroot Institute, we don’t really even say the word “solution” when we’re talking to lawmakers about things like that. Because there are no solutions; there’s only trade-offs. And we have to think about who it affects and what are other factors related to them. 

Is it really worth displacing all the people who can’t afford to upgrade their cesspool so that to achieve this goal, or is there some sort of middle-ground approach that might work? These are questions that need to be asked.

So you can move to the next one. 

Now, replacing a cesspool isn’t cheap. These are the cesspools, and of course, most of them are on the Big Island, as I showed before. These are the priority areas for cesspools, and you can see that in yellow, these are the least priority for replacement. The red and orange are sort of the priority areas for replacement.

And the thing that I notice about this chart is that, you know, we’ve got a few areas here that seem to have a big need for cesspool replacements or some other solution. Now, what else could we do? 

Well, there’s, like I said, trade-offs. You could … 

Yeah go back. Go back a slide here.

You could install a wastewater treatment plant, for example, and allow the houses to hook up to that plant, which would significantly reduce the cost of every single person replacing their cesspool. 

And of course, that would be a cost the county would bear, or the state might bear. But the county and state say they don’t have money.

Now the secret is, they do have money. They have lots and lots of money, especially now. The county, Hawaii County, has $160 million windfall this year that just came out of the blue. Every county is experiencing these huge windfalls. So they have a bunch of bonus cash to play with. They’re trying to use that cash to hire more bureaucrats right now.

But a lot of the money could be used for infrastructure upgrades, like a wastewater treatment plant or something like that.

The state: $2.6 billion this year, the biggest surplus in the history of the state, and they’re even projecting that it’s going to go to $10 billion in just four years. That’s if there’s a recession, like they’ve projected that there might be a recession, and they still are seeing these huge booming surpluses. 

So what are they spending the money on? Well, a lot of that money is going towards pet projects. We’ve got the Aloha Stadium, which is getting, you know, some untold hundreds of millions of dollars. 

You got just a lot of different projects like that, and what we’re not addressing are the boring issues that are supposedly the core functions of government, which are things like infrastructure. 

Instead, we’re putting that cost onto homeowners to say, “Hey, you have to upgrade your cesspool.”

Well, the problem is it costs, what? between $10,000 to $40,000 to upgrade your cesspool and that cost is just unfeasible for most Hawaii County residents, most residents across the state. 

So we have to think about costs and benefits. Is it really worth upturning all of this housing in yellow for that goal, or is there a similar solution?

Now, another way to think about this too is that the county or state may not have to run it. It could be run by a private company too. I mean, we’ve got private water systems. 

The problem is there’s this law called the Konno decision, which makes it illegal to privatize. 

I think Hawaii is the only state that has that law. Basically, it says that if the government wants to privatize something that was typically done by that government, it’s illegal, and you have to go to the Legislature and ask for a specific law to privatize.

Let’s say you wanted to build, like, a private wastewater treatment plant or something, you would have to go to the state Legislature to ask them if you, the county, to privatize, and they might, at the state Legislature, would they really care about that issue? Probably not. So that is a Herculean task. 

Except there’s a loophole in that law that allows you to privatize if the function hasn’t been historically, typically done by the government.

And so Hawaii County wastewater treatment plants haven’t in a widespread way even been provided by the government. And so you could argue that this could go through that loophole and you could just hire private companies to do this. 

That’s what they did in Honolulu, by the way. They have a private water reclamation facility and they didn’t have to go through the Konno decision. They could do it that way because it was a service that was not typically provided.

Male Speaker 3: Is it something different that the hotels all have their own private sewage systems?

Kent: Oh, that’s a good point. That’s a good point. Either way they have their own private things. So that sets a precedent even that the county might not have to do that.

So, OK, why think about private systems? 

Well, private systems are more sustainable financially. So, in the public system, the incentive is to get as much money from the taxpayers as possible and to spend as little of it as possible on the system.

On the flip side, on a private system, the incentive is to get as little money as possible from the customers, unless you have a competitor do that and to spend as much of it on upgrades and long-term maintenance of the system. And so we find in several studies that private utility systems function much better than public ones.

And it’s not far out of field. I mean I’ve visited Sandy Springs, Georgia, which is a city of a hundred thousand people. They have a government that’s run entirely by a private company. The water, the sewers, the traffic, the parks, emergency services, all [were] run by a private company, an engineering firm called CH2M Hill. 

And there are nine city workers, which are the nine council members, and every year they vote whether or not to keep the company. And if the company does a bad job, they vote no and they get a different company who might be able to do it better, faster and cheaper. 

Even Hawaii County, you know, uses private contractors. So private contractors are solutions that are not too far out there, but it does take some creative thinking.

Now there’s a lot more that I could talk about here. I don’t want to walk out too much, but there are a lot of solutions to short-term rentals and housing and cesspools and many other issues. You can think out of the box a little and that’s what the Grassroot Institute is trying to do. 

We don’t care if an idea is, you know, not politically feasible or taboo to talk about. We look at all ideas and because we have to, like, start sharing these ideas with people who might disagree with us because you can get a lot done and work together with people who disagree with you, actually.

And that’s what we’re doing at the Legislature. We work with, like I said, all stripes on these types of issues. And we want to work with you, too. 

So if you’d like to fill out your comment card, I’d like to understand how I did and get your information and we can hopefully put you on our newsletter list, if you’re not on that already. 

So. OK. Thanks so much. That’s my talk.

Female Speaker 3: I just wanted to add that where I was born and raised, in a town in Northern California called Humboldt County, they built a place for water treatment that has been bought [unintelligible], and it’s right on the [unintelligible] … It’s right on one. They made a park out of it, you can walk. It sounds crazy, but it worked beautifully.

Kent: Great, great. Oh, I forgot. One more thing. Even Hawaii County thinks that it should privatize its wastewater, by the way. 

Go to the next slide. I totally forgot about this.

So this was the findings of the Hawaii County Cost of Government Commission just two months ago, and they said, “Our committee recommends that our County look to examples elsewhere in our state as Konno,” like I said, “has a loophole that allows leeway if the focus is not on customary and historic services.

“Honolulu did a 12 million gallons-per-day water recycling facility in Ewa as water recycling was not a historic service. The facility was built with no taxpayer dollars, stood apart from the nearby Honouliuli Wastewater Treatment Plant and impacted no union jobs.” 

So … and go to the next one.

Female Speaker 2: Is that just spin that you call it a water recycling facility as opposed to wastewater?

Kent: No, I think it is actually different.

Female Speaker 2: Oh, it is?

Kent: Yeah, it’s a different thing. But it’s just an example of that.

Female Speaker 2: These are all apart from all your ordinance standards?

Kent: Oh, I don’t know that, not sure about that, but that report might have that, by the way. “[Hawaii County] Mayor Roth has been approached by a couple of wastewater companies with very large portfolios willing to invest in solutions for Hawaii County. We should find a way to say yes while operating within the current confines of Konno.” 

So even Hawaii County, you know, at least their commission, said that. So we gave them a pat on the back when they did that. So, yeah. So there you go. There are solutions out there.

Female Speaker 2: So it that our waste county committee.

[laughter]

Moreland: Positive.

Male Speaker 2: Joe, when you say you work with them, even if they disagree with you or whatever, how do you do that? Because in my experience listening to the [unintelligible] for example, her strategy is just to throw the worst-case scenario out, you know, to kind of like — this is my words — to kind of freak you out about anything. Climate change to wastewater, to everything.

And so the [unintelligible] now, she has put the [unintelligible] and when you have– And so her goal is to throw whatever she can at the wall and freak everyone out. And just if she knows she’s not going to get all of that, so she goes all the way to one extreme, knowing that she’s going to have to settle for something that’s less.

And it’s hard to, in my opinion, work with someone that has that mindset because nobody, everyone, I think would say none of us want to pollute our waters. So the question is, are we polluting our waters? Which areas are? What are reasonable, like you were saying, what are the reasonable ways that would you say not solutions, but tradeoffs? How do you do that?

Kent: OK, our theory of change works like this. There was someone who came up with this concept called the Overton window, and the Overton window is the window of political possibilities.

Basically, whatever’s inside the Overton window is politically possible. So if a lawmaker introduces a bill or says something about it, that policy we view as inside the Overton window. 

There’s other issues that are outside the Overton window that are just having a long shot on board, seemingly never pass. But there’s a secret about this window is that you can move the window. You can shift it left or right or up or down, depending on how you pull on it.

So how do you pull on the window? Well, one way is to talk about things that are slightly inside and grow your influence and authority with those legislators. 

Another way is to talk about issues that are way, way, way outside, and the lawmaker says, “Well, we can’t do that, but we can do this,” and now you’ve shifted the window slightly.

Another way is to gather 30,000 or 40,000 or 100,000 people across the state to join our email list and tell that to lawmakers, which is exactly what we’re trying to do. So we have an email list of 35,000 now folks who read our stuff, there’s a very high open rate of around 40% every single week. 

And we talk about these issues. We even mine those lists for people who are highly aligned with our mission and vision and values, who can themselves talk to lawmakers, because we don’t always want it to just be us.

And so, we also have a “voter voice” program where we ask all of our members to testify on things, and this year we’ve actually submitted over 1,000 testimonials so far this year. And we’re going to keep on spamming them, basically, with our messages.

The lawmakers told us, “Hey, Grassroot, we used to be able to ignore you, but we can’t ignore you anymore,” because we’re showing up at their offices every day. 

We have a lobbying team with, you know, professional lobbyists and so on, and the lawmakers don’t really know what to think about us. They often ask, it’s like, “Well, who funds you? What special interest are you for?”

We’re not a special interest, actually. We’re just, we’re advocates for liberty.

And so our donors don’t really, you know … sometimes people try to donate to us and say, “Hey, I’ll donate to you if you support this bill,” and we, you know, don’t even want it, you know, that’s not our thing. 

So lawmakers sort of respect us for that, and it’s just all about it’s about “E hana kākou,” building relationships and working together.

Female Speaker 3: Has anyone studied the SCA funding model? [unintelligible] where STA did the loan for it and then it was funded over 30 years where the homeowners were [unintelligible] their sewer system?

Kent: Well, that’s an option. I mean, you could load a bond and do the same thing and, and give everyone sort of a special assessment fee in that area that’s charged with it. I mean, that’s absolutely an option that you could do, and it would probably be better than, you know, forcing every single homeowner to pay $40,000 or something. Instead, you pay a hundred bucks, you know, for a few years and that’s it.

Female Speaker 3: The thing about the conversion really  [unintelligible].

Kent: Well, and a lot of the homes are very old and you’re basically going to have to replace the home almost. You’d have to like replace the home, get under there. Yeah, any other comments?

Male Speaker 2: Are you guys doing anything with the– Joe and I talked a little about the school system before the meeting, but the average age of a school here is 72 years old. 20% are over a hundred years old [unintelligible] in the headlines recently, and we, I sent a nice email to [Rep.] Nicole Lowen and got a standard reply back and you can read my response in the newsletter that I sent to you.

He probably didn’t read the bill. He just read the news article. That was [unintelligible]. Which wasn’t true. I read the bill. Once. So I mean …

[laughter]

Male Speaker 2: I guess are you, do you go after those kinds of things too?

Kent: Yes.

Male Speaker 2: That’s a real problem. Staring in your face [unintelligible] where the cesspool that [unintelligible]. I understand the big picture of it, but it is … that seems like a much easier problem to solve for facilities and things like that, but it’s …

Kent: Oh, I know. I just saw an article recently about a school on the Big Island that had so much mold that it was, you know, making the kids sick.

Male Speaker 2: That’s the one.

Kent: That’s the one. OK. Thank you. Yes.

Male Speaker 2: That’s just up here.

Kent: The state has a huge backlog for deferred maintenance. If you look at all the schools and the colleges and the airports and the harbors and all of the outdated — I saw a lot of buildings in the harbor, huge warehouses that somebody could use, but they’re just sitting empty because they can’t replace it. There’s no money for the deferred maintenance cost.

And we went and calculated all of the deferred maintenance across the state, at the county level and the state level. We tallied up the debt, the unfunded liabilities for public pensions, and health benefits for public workers. We looked at the bonds that are outstanding. We totaled it all up, and it’s about $100 billion when we look at the debt and unfunded liabilities and deferred maintenance.

Because deferred maintenance is an unfunded liability — it’s a liability that’s on the books — you have to pay for it sometime. And this is why we need to get our finances in order at the state level. You know, our state government is growing. The spending is growing faster than the economy. 

So if you look at the golden rule of government spending, don’t spend more than the private sector, right? Because the government gets the money from the private sector. 

But once the government spends more than the private sector, now you have a government that’s outsized for the money that it takes in, and that’s exactly what’s going on in Hawaii.

So, you know, I’m sorry to say this, but it really goes back to the principle of good budgeting. Keep spending low, keep your debts low, pay off unfunded liabilities, pay down deferred maintenance. Don’t spend on big boondoggle projects or shiny-new-ball projects. We just have to keep on hitting that message, but it’s a tough one. 

Um-hum.

Moreland: Can you share with us of the legislation that’s still alive? What bills are you following regarding transient accommodations and housing, and then what bills regarding wastewater?

Kent: Well, with the transient accommodations, those often are at the county level …[

Moreland: How about Bill 84?

Kent: Is that the state-level, short-term rental one?

Moreland: Yes.

Kent: Yeah, we’ve been looking at that one a little bit. I think that one would in a way ban short-term rentals at sort of a statewide regime.

Moreland: It gives the county the ability to eliminate.

Kent: Yeah, that’s right. So I believe we testified against that one. 

For housing, we’re trying to look at that. It’s difficult at the state level to talk about housing because it’s really a county issue in a sense, unless you’re talking about the Land Use Commission. 

And so we did, you know, testify on bills that would allow the Land Use Commission … to put a shot clock on the Land Use Commission process to make it quicker basically and allow, make it easier, to open up more land to urban zoning and things like that. So those bills are still alive right now.

And the other thing that we’re looking at is healthcare. You know, my dad said, “Joe, you’re studying stuff, why don’t you study why it’s so difficult to get a doctor on the Big Island?” And I went down that road and I looked, and it goes back to the government again.

We’re one of two states that taxes healthcare in the nation. We’re the only state that taxes Medicare and TRICARE. And you know our taxes are very high in Hawaii. Hawaii has among the lowest Medicaid ]and[ Medicare reimbursement rates in the nation, and so you add up all that together, then it pushes doctors in the red and they close their shops or they move away or they don’t open shops.

And that’s really the trend that has happened on the Big Island. 

We’ve got a bill that would exempt doctors from that tax and so they wouldn’t have to pay that. And it’s still moving forward, and so we’re cheerleading for it, so we’ll see. But yeah, there’s a few.

Moreland: Landlords and ]unintelligible[ is there anything that gets in the works on the ]unintelligible[? That’s been cited a lot of times as the reason why people don’t move on from rentals, because there’s so many protections for the tenants. Are you guys doing anything on that?

Kent: No, that’s a great point. I’d like to learn more about that, but that’s a really good point. 

If you’ve got tenants that are so difficult to get rid of, you know, if they’re a nuisance or something, then of course, why would you ever want to do that and that incentivizes more short-term rentals instead. So it’s a great point though.

Male Speaker 2: So besides donating money to your cause, I mean, like if there’s a group of parents who want to have an education system and some will learn to do it, just this David against the Goliath, then how do we even start, and how do we know who to team up with and are there other people around the state? And if there are … but I mean how do you know … if it’s the average person trying to figure out about one, whether it’s a cesspool over education and healthcare, or how do you even … other than maybe write to your Legislature and get a standard answer back. 

Kent: Yeah. Yeah.

Male Speaker 2: Do I just keep writing to them or do I show up at their offices? Do I picket outside their house? And like, what do I do to get attention to say what do we, how do we, who do we want to work with? It’s not an attack at them, but you want to start attacking because ]inaudible[

But you know what I mean? You want to kind of just, because they’re not listening and they’re not willing, think, “Oh, he’s just a crazy guy or whatever. And I’ve got other things I got to do that are shiny. $5 million Aloha Stadium sounds a lot better than ]unintelligible[ we’ll be putting that towards the school or a septic system?

Kent: Yes. Again, we’re not … Grassroot isn’t the solution of course. We are not the hero in this story. We view the individuals as the hero. We’re the guide in the story. 

Why is it called the Grassroot Institute and not the Grassroots Institute? It’s because Dick Rowland, the founder of the Grassroot Institute, was interested in the individual and the individual’s power to influence society.

And so he wanted Grassroot to be a guide for all individuals across the state on many different issues. 

So, we’re hoping that folks can read our materials and get involved.

We have really, like I said, our sort of the cream-of-the-crop individuals who really wanted to influence the lawmakers, we call the Grassroot ohana. And we put those folks in touch with those lawmakers, the key lawmakers who are the heads of the committees, so that folks aren’t wasting their time talking to someone who’s not really that influential or something. 

And we always find that lawmakers would much rather talk to folks like you rather than folks like me, because you are the constituents and you have much more power than we have actually, and so on.

Male Speaker 2: You know, I don’t know when you came over here, and if you’re aware that this group got $50,000 from a NAR ]National Association of REALTORS[ grant to go up against the TAR bill here.

Kent: Oh, I didn’t know that.

Male Speaker 2: So, this group that you’re talking to here is super, super educated and have been at battles amd we’ve looked at several of your articles; they’ve been very informative and good. So I don’t know if there’s a way for us to work together.

 If you guys got a loud voice, we’re with the Hawaii Association of Realtors, the largest trade organization in the state, … so we’ve been pretty effective. And locally, we’re the largest trade organization in Hawaii County with the two parts together … So we’re doing a lot with that. And I think with HAR’s help last year, the fact that we pulled the cesspool bill, and  we’re really deeply involved with everything that you talk about here and I just don’t know if there’s ways for us to work together more to have a stronger voice publicly.

Because this $50,000 that you guys got was to educate homeowners on … what was going to be taken away, property rights and things like that.

Kent: Yeah, just me coming here is huge. Now I can share the cesspool issue and the local short-term rental issue with our folks at our office. I had to study all this stuff to try to present today.

So, and I’d like to learn more from you about what I can bring back to our office. I mean, we’ve got a team of wonks with calculators and pens that are ready to nerd out on these things. All these different ideas just keep coming our way. 

We get slogged, though. I mean, there’s a million different issues in the state, and we’re trying to focus on those that can actually work for us, but if we don’t respond, just keep sending an email or something, we’ll get to it.

Female Speaker 3: Joe, ]unintelligible[ is out right now and we’re waiting on ]unintelligible[. It’s somewhat imminent that it will be introduced to the Council. Then at that point, it can be incredibly critical to the ]unintelligible[ to testify himself.

Kent: Yeah, that’s a good point. I’ll look for that. Let’s keep in touch on that. We have a few contacts on the Big Island. Not as many as we’d like, but yeah.

Female Speaker 3: We can help you with that.

Kent: OK, good. Yeah, just get our stuff out there. It’s free to sign up. And people, you know, write us back all the time with their opinions and we try to respond to every single one. So yeah, it’s about working together.

Moreland: There’s a few questions in the chat. One of them was really early on, so I’m not really sure where it was in the presentation, but it says: “Are you able to identify increase due to some aspect of better accounting or is it a real increase?”

Kent: Oh, she’s talking about inflation, perhaps? Well, we have high inflation right now. So why do we have these big surplus revenues, right? It’s partly because of inflation. When inflation goes up, who are the winners and the losers?

The winners are the governments because they get so much more money. You know, if inflation goes up by 8%, then revenues go up 8%. So they get the money first and then the people that lose are the citizens at the grocery store who have to pay more for everything. 

Moreland: The question, it was the dollars spent from STVR ]short-term vacation rental[ guests.

Kent: Oh that one? Whether that’s real?

Moreland: That’s the same one I think I asked whether the data came from.

Kent: Oh, yeah, OK, there you go. That came from that study, the Kloninger & Sims study, it’s the same study.

Moreland: OK, so if I can get a copy of that, that would be wonderful.

Kent: Yes, I’ll send that your way.

Moreland: And then the next question: Is the housing fund still available? And if so, can that possibly offer a partial subsidy to homeowners who are proactive measure to replace their cesspool before 2034? Or is it a possibility of a tax credit and as incentive to replace prior to the forced deadline?

Kent: Yeah, so a tax credit is a good idea, but I don’t know if it’s enough. The housing fund, I think someone just put in $5 million into that. $5 million, I mean, this is a $3 billion problem, so $5 million isn’t really going to go as far as lawmakers think they will, so we need bigger ideas, I think, than just money will solve it.

Male Speaker 2: What was that $5 million to …?

Kent: I think, they created a fund to help give money to folks who were proactively replacing their cesspools, and it’s first-come first-served so I ….

Male Speaker 2: Is that the end of that, just for your own information, so that money has to be encumbered by July of next year, and it started July of last year. They haven’t figured out how they can get this started yet.

Kent: That’s right.

Male Speaker 2: It’s not ]inaudible[ given out. It equates to 250 homes statewide, with 1.8 million ]inaudible[ earmarked for the Big Island which would be ]unintelligible[ to build 90 homes and they say the money has to be encumbered by July of next year while I think ]inaudible[ Pretty scary.

Female Speaker 2: Those were all the questions I had in the chat.

Kent: I don’t want to keep you too long. I don’t want to keep you here if …

Male Speaker 2: I appreciate you coming over and doing this and good.

Kent: Well, thank you. And thanks for inviting me.

Moreland: Thanks very much.

Male Speaker 2: I got data too for you, because I looked up all the data on the amount of homes that became available after Bill 108, and the pricing for what happened. And the pricing was up, it didn’t help, and it’s home availability was down, the number of homes for sale dropped after the Bill 108 was decided. So there is physical proof for you guys to ]inaudible[.

Kent: That’s good. Very good.

Male Speaker 2: ]inaudible[ the data. Bill 108, didn’t do it to the house ]inaudible[.

Kent: That’s right. That’s right. And they always say that, “Oh, this is the last bill.”

Moreland: Will we be able to get a copy of the presentation?

Kent: Yes, I can send that to you folks. Yes, sure, it’s no problem.

Male Speaker 2: Awesome. Thank you.

Kent: Thanks again.

Moreland: Thank you so much for coming.

]
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