 live. This is Think Tech. I'm Jay Fidel. That's Tom Yamachika, president of the Tax Foundation of Hawaii. And today we're talking about we're taking a look at Honolulu City Council, Bill 80, which is really remarkable. Hi, Tom. All right, Jay. Thanks for having me on the show. Absolutely. So, you know, the city council, you know, has a certain cloud. Sometimes it goes veers off course a little bit. Bill 80 is probably a good example of that. It has to do with, gee whiz, what, hotels, I suppose, and tourism. Can you talk about the provisions in Bill 80, which is pending in the city council right now? Sure. As you know, here in the city and county of Honolulu people are out of work for the most part, especially in the hospitality industry. But what Bill 80 says is really kind of remarkable. One of its first provisions says, and I quote, a hotel employee shall recall to active employment the same number of employees in substantially the same classifications as the hotel employer's active workforce on March 1, 2020, adjusted by the ratio of the occupancy that the hotel bears to 100%. So if 50% occupancy, you got to bring back 50% of your workers, at least a hotel employer must clean and sanitize every occupied guest room every day and must employ a number of housekeeping employees to ensure that this standard is met. So whether or not you're bringing on 50% of your people because of 50% of occupancy, you need to have enough employees to clean every occupied guest room every day. Well, that's pretty interesting. Where exactly do they get off? Well, and that's I think the $100,000 question here, does government have power to in fact do this? What the Bill says, obviously assuming they do have enough power and that the way that it would be enforced is by private individuals who haven't been recalled, can sue. And if they win, they get to have the hotel pay the returning. So it's encouraging litigation, kind of putting a blunt instrument over the head of the hotel employer. And it's being pushed very, very hard by the hotel employee's union on Local 5. So that's where it's coming from. But you know, this goes to the whole question of legislators, not only the city council, but the state legislature, introducing bills that are absolutely useless and badly drafted and not likely to do anything for anybody. Well, we can cover that in substance, but let's assume for a moment this bill has no redeeming qualities. How in the world did it get to be pending in the city council? Who introduced it? What kind of process have we got that this kind of thing could waste our time? Well, apparently the union folks came to the people in the relevant council district, which is which is Tommy Waters district. He introduced the bill by request, which is what people do if constituents come to you and say, I want this introduced. He's not saying he agrees with it. He just did it because he a constituent requested that he do it. That's absolutely right. You know, that happens in our state legislature as well. Happens all the time. Matter of fact, all of the government introduced bills are introduced by request. They come at the governor's request and the speaker of the House and the president of the Senate introduced those bills by request. So it doesn't mean they agree with them, but they have been requested to do so by, in this case, the governor. Other kinds of groups, profit, non-profit, government and so forth, they come to the legislature or the city council as the case may be and they request that introduced that bills be introduced and that happens all the time. It's deeply ingrained. Is it deeply ingrained in other states as well, other cities, or do we have a special vulnerability to this kind of request? No, I don't think that part is atypical at all. But I think the thing that is atypical is we have a bargaining table. There's labor, there's management, and they're supposed to bargain over the terms of working conditions. Okay. It seems like this is a case where the labor side is taking another crack at this instead of, or perhaps in addition to trying to negotiate with management, and they're going to government and saying, government, please get involved, mandate this. Yeah, I understand completely. And, you know, Local Five has been on ThinkTech several times in COVID in these difficult times, and the message pretty much has been the same each time that they go to the hotel seeking some kind of relief, some kind of cooperation, collaborations, joint addressing these problems that come out of COVID, and the hotels turn their backs on them. And it's been consistent throughout COVID, and they can't get the first base. And they're very frustrated because their members are in deep financial trouble. And they, you know, don't have a bottomless bit of money, I'm not sure they have anything left to help their members out. So they're in duress. So I can understand their frustration, and if not desperation, about going to the legislature for, or rather the city council for some kind of sort. What bothers me though is this bill, you know, as you say, maybe a negotiating tactic, you know, to get the attention of the hotels, so to speak. But gee whiz, I mean, I don't think the legislature is an appropriate place for that, do you? If you were, if you were Tommy Waters, and somebody came to you with a bill like this, it's really special. When we'll go into that. But would you, would you introduce that bill on request? I tell you, I wouldn't. I would say you'll have to find someone else. I'm not going to introduce that bill. Sorry. What would you say? You know, if the bill looks like it has at least a little bit of merit, I would probably grit my teeth and introduce it. But but I tell them, look, you know, I'm not promising to support it. But, you know, you're my constituent. Well, on that point, would you go back to him and say, look, look, guys, I understand your your frustration. And I want to help you, but this bill isn't going to help you. And again, we'll talk about that. So let me make some suggestions for you about how you could make this bill work. Wouldn't it be a better approach? Yeah, I think so, except that I'd lose the next election. Well, yeah, but so what, you know, we have too many career politicians who run for office their whole lives. And they, you know, sorry, they do not learn from term to term. Okay, anyway, so let's let's talk about the, you know, the efficacy of the bill itself. This bill sounds like it's aspirational, it's like wishful thinking. It's like asking God to come down from heaven, and make and make my adversary, you know, do whatever I dream and hope of. These things are undoable and unenforceable, aren't they? Well, that's that's, I think, a very good question. Now, and let me let me kind of tell you the status of where this bill is. Because that is, I think, very much in line with the question that you just asked. And that is, as of I think a couple of days ago, it was reported that the, the acting council chair had some misgivings about the bill because the city attorneys had come to her and said, you know, we've got concerns. Okay, so, although the bill was scheduled to be heard by the full council, and the normal date will be today. Okay, it was taken off today's calendar and set in the council chair said, okay, well, we're going to be holding this for a little while, until we look at the legalities. And in the meantime, let's look at this resolution that, you know, may help with the same, the same exact problem. And they're going to be talking about the resolution. Okay, but the bill isn't dead. Okay, and, and in a Star Advertiser article a couple of days ago, one of the council members made it very clear that that if negotiations broke down, he would do his utmost to introduce or to get the bill back on track later on this month. If it passes as a resolution, I mean, that'll take the steam out of the bill on it. I mean, whether there's lobbying or political pressure behind it or not, that it'll sort of diffuse the situation. Yeah, yeah. So that's, that's kind of, I think that the path that, you know, people are going down the hotel industry is very, very, is very much against the bill. And they welcomed the chance to have it kind of sidetracked into a resolution. The union is very unhappy. But you know, who knows what they're going to do, but they came up with some very strong rhetoric, saying, you guys are with the hotel bosses, are you with us? You know, take your, take your choice. Gee, there's so many things flow out of this, but a digressionary point. And this does have to do with tax. For several years, Bill has been batting around the legislature that would impose state income tax on, on REIT income in Hawaii. And I, what was the disposition of that most recently? Did it pass? Did it ever pass? Or it was, it was an attempt for years, and it never passed. But did it ever pass? Well, it passed, I think, a couple of years ago, and it got vetoed. Okay. A lot of politics involved. Yeah. It was reintroduced this in the 2020 session. But, but then COVID hit and pretty much nothing passed. Yeah, yeah. And the REIT bill was one of those. Well, it goes to the question of this time. I mean, the union and others in this community feel that the hotels, especially the international hotels, which although maybe they're not functioning so well here, are still functioning in other places and are bottomless pits of investor money. They, they may not have bellied up to an obligate sort of a moral obligation they have to Hawaii. What happens is they offer these what we call union jobs, which are in large part your service jobs in the hotels. And, and that's what they're contributing and they pay the TAT and real property tax, which I think they argue about a lot. Bottom line is people question, I think legitimately, whether they're paying their freight to the community, they resist the REIT, the REIT tax. And although they, you know, they do some things through the Hotel Tourism Lodging Association. I, there are people who question whether they do enough to pay back, if you will, to the community so that you have a lot of people in this community don't like them much, because they think they spirit away all the profit and are not invested in Hawaii. What do you think? Well, I mean, that's why you have, that's why you have unions. Unions are supposed to be a more organized large employers. Unions are there to bargain and to kind of, you know, equalize the bargaining power of, you know, hotel on the one hand and the workers on the other. Now, and that, that I think is at least one of the key reasons why I think that this legislation is questionable. And the reason is we have federal labor laws in place that are supposed to be kind of the exclusive means that labor management are supposed to deal with it, with each other. It's called the National Labor Relations Act. And one thing that the Act does is it basically displaces any state, local, or any other laws that would get in the way of the balance that the National Labor Relations Act is trying to construct. That's called preemption. Preemption is a legal term, but the effect is that state laws or local laws that get in the way are basically involved. Okay, do we have this kind of situation quite possibly? Because really, what we've got going on is issues which I think should be bargained between the union management. And I don't think either side is entitled to go to government and get a third bite at the apple, or a second bite at the apple. But that's what that's what happens. That's what appears to be happening. Yeah, where legislators are vulnerable to unions knocking on their door and asking them for extraordinary relief. I mean, we we have very powerful unions in the state. And that's been the case a long time. But my question is, gee whiz, if it sounds very, sounds very workable, very appropriate to have this resolved as a as a labor bargaining issue under the National Labor Relations Act or otherwise. And if the hotels turn their backs on the union, so won't talk to them, won't give me even the time of day, won't, you know, sympathize with them in the slightest way? What can the union do? There's the National Labor Relations Act force negotiation, this force them to negotiate with the union? Or is this COVID time so special that the National Labor Relations Act doesn't help? Well, what's supposed to happen in the in the labor management situation is that a labor management is supposed to bargain in good faith. There is a duty under the law for both sides to bargain in good faith. And if they can't get to a resolution, then management can lock out for the union can strike. And that's pretty much how things are traditionally resolved. Yeah, except that you got you got to start there's a duty of good faith bargaining, you have to open the door and sit at the table, and at least have a conversation. I don't think that's happened here. Okay, well, that's, that's I think something that the, you know, the NLRB or, you know, whichever federal agency or even even the state Labor Relations Agency can help with. The state also has labor laws in addition to the federal labor laws. And those can be called upon to help, you know, at least have the two sides listen to each other. Well, okay, so I put you at the table, Tom. I mean, isn't this a very difficult situation because we have COVID. And these hotels are losing at least arguably, who knows for sure, but they're losing tons of money. And the international ones arguably are also losing tons of money, they can make an argument to that effect because tourism is down worldwide. And whether they have money in the bank or not, it's not the question. But, you know, currently, they're losing money. The union guys are in dire straits. How do you resolve this problem? And of course, Congress is ineffectual. There's you know, there's no cares to, although McConnell say yesterday, every one in Kentucky became magnanimous and said he felt there was going to be a cares to coming soon. But you know, who's to say, we're going to be tied up in the post election process for a while that that's what the big distraction is going to be. And it's not going to be cares to. So assuming all of that, you have arguably dire straits on both sides of the equation. What kind of bill what kind of negotiation? What kind of result can possibly solve the problems that are raised in this bill 80? Well, you know, what what bill 80 doesn't do and what labor management negotiations can't do is create money out of nowhere. There you go. You know, if there are going to be funds to support unionized labor, they got to come from somewhere. And, you know, the the employers can certainly, you know, lay bare their books and their bank accounts and say, look, guys, there's nothing here. You know, tourism in Hawaii has taken a hit by over 90%. What do you expect? And then the answer will probably come back is, you know, we expect you to, you know, take care of our people because because our people have taken care of you. And then, you know, the discussion will go back and forth. That's like, it's a moral question. But as you said, and I think it's really the takeaway from all of this, you can't create the money. And to solve this problem, money has to come from somewhere. And I would I would add that you're talking about a principle that exists starkly here in Hawaii, but to some degree, everywhere in the country, maybe you could say everywhere in the world, that there are dire things happening because of COVID. The economies of so many places are folding up, getting worse all the time, unemployment and what have you. Yeah, now, one very interesting thing about Bill 80, one very interesting thing about Bill 80, if you look at it, is the enforcement doesn't fall upon government. And we talked about that the government, government's kind of going to sit aside and let the private parties go file lawsuits and enforce this by themselves. So not even Bill 80 is saying that, you know, government has resources to put into this thing, which would which would ordinarily happen, right? I mean, you enact laws, somebody violates laws and somebody from from government law enforcement taps you on the shoulder and says, we got to comply with this law. That's that's not how this ordinance or potential ordinance is constructed. It's very strange. But I think it's, you know, part of the recognition that there's no money anywhere. Yeah, a point on that, by the way, is so you have this vague, if not unenforceably vague law, if this ever passed. Okay, and then you have the bar, the plaintiff's bar would go after the hotels and say, you didn't you didn't perform under the law. And, and then of course, the, the, the, the somebody in that case would ask for a jury trial on whether anybody performed. The judge would have a terrible time with instructions because the law is so vague. But assuming it got to the jury, then, then a local jury would probably favor the union and go after the hotels. That's terrifying. That you could put this in front of a jury on whether damages or my God, in chunk of relief. No, the in chunk of relief would be the judge only. But what I'm saying is this would be a mess in court. And I think a lot of lawyers would take these cases because they may not have other work. And they may want to ride in on the wave of antipathy to the hotel industry. And so you have, it's an enforcement technique that's kind of clever. But it's it does violence. What do you think? You know, it's very scary. And I think you're correct. And that's that's how the bill was designed. So that you would have, you know, private lawyers, going in front of, you know, local juries who may be, you know, sympathetic to the to the local people who are getting, getting decimated. Yeah, even though the hotel is getting decimated, too. Yeah, so just to go back to the global point here, your, your your basic rule there, your black letter rule is you can't create money. I think, you know, the problem is that our economy is deflating. It's, it's, it's dissolving. COVID is going to go on for a long time, probably a year. The spikes are extraordinary. There was a chart in this morning's time showing how many people catch it in a given day, 109,000 people get the disease every day in this country, 109,000 people every day. It's really going crazy. And ultimately, you know, thousands are dying and will continue to die. And by the end of the year, we'll have some extraordinary figures. And even if you want to, you know, ignore it for a while, it's going to, it's going to come to you or somebody close to you very soon. And so, you know, the, the, the terror aspect of that is, is going to be huge, even if it's not now. And the economy is going to be affected. And the economy is, is, is going to take a big hit for a long time. And we're not going to have as good an economy. Our quality of life, all of us will be affected. This country is on the decline right now. Aside from all the other issues that Trump has, has generated, you know, the economy is huge. And what does that mean? It's, it's that, you know, the, the, in this case, the local five suffering, there'll be a lot of other suffering going on, economic suffering going on. And we're all going to have to get used to the fact that we, we don't have the economy we had, and we can't get back to it. This is going to affect everything, don't you think? Yeah, no, I think in, in addition to the fundamental truth that, you know, we're not creating money. The other fundamental truth is that there's plenty of pain to go around. I think we'll have to realize that in the world. Here is special. Yeah. You know, in the hospitality industry, it's been particularly cute. Yeah. So what's going to happen? I mean, it seems to me that this is only one, one shot across the bow sort of thing. So we have this Bill 80. But there'll be other things too. I mean, when people are desperate, they do other things too. Can we expect this in the legislature in January? Well, I think what we have here is I think more symptomatic of the problem that we're a one, we're a one horse economy, we've got tourism, and that's pretty much it. And that's why we're that that's why we have, I think, so much more pain in the hotel industry, that it affects, you know, many, many more people than it would anywhere else. So I hope that when our new legislature gets back in session, gets back to work, they really take some serious steps to help diversify our economy. So it would at least blunt the pain that, you know, that happens when tourism gets hit hard. Well, you know, lately, we've been having a fair amount of interest on think tech about an issue that was in, you know, regular and hot discussion back in the early years of the century about the persification of the economy. And there were a lot of people, you know, the young people in tech and entrepreneurship, a growing body, composed of people who had been in Silicon Valley in the nineties and maybe made some money or at least got excited about things and came back and tried to make a go of it here. Didn't work. An act 221 was bashed by little lingual and that went away and we don't have, we only have radio activity about that. We don't have a significant fund. We don't have significant incentives. Even the Minoa Innovation Center has been turned turned over from the Hawaii Development Corporation, High Tech Development Corporation to the university where it is now a sort of a mixed bag. There's not a lot of focus on diversification and diversification to technology. And furthermore, and if you have ideas about this, the world is waiting for you Tom, how do you do incentivization without spending any money? If we have no money to spend, how are we going to incentivize diversification and thus alleviate the pain of having a mono economy and tourism that doesn't work? Well, I think we can ask ourselves how much interference that our government is currently exerting in the industry, like with employee mandates, payroll taxes, things like that. Maybe lessening those burdens would be a means of giving incentives to work. But incentives always cost money. If you say we'll give you a tax holiday, we're going to give you tax credit. Those are, you know, customary incentives in a lot of states and communities have built tech industries by doing that. And movie industries I should add. But if this still costs money, it comes out of the till. Is the legislature going to be willing to do that? They have not been for 20 years. And furthermore, you know, the only way to do it is to have a champion in there who will advocate for tech and the arts, I guess. If I were in the legislature or you, I might be, you know, supportive of that. But I'm not sure there's anybody that comes to mind who is. Right. I mean, you know, having no money is a pervasive problem. And there's really isn't a whole lot can be done. Yes. So from a fiscal policy point of view, assuming, you know, there are a lot of people talking the talk about how we have to reconsider diversification, which John Burns talked about and every governor has talked about, but it has never worked. The closest came, it was Act 221 under Ben Kaitano. But since then, you know, it's been clear that this is not what Hawaii wants to do. And there are people like me, like others at ThinkTech, you know, who have been calling for diversification. The natural object of that is technology without success for years and years. So the question is, this is my ghost of Christmas future question. We aren't, we do not have the political will even in crisis to diversify. And at the same time, we're not going to be able to reopen the economy. It's going to get worse. There was a thing in, where was it, the civil beat this morning? Or maybe, no, the advertiser this morning about how we're not, we're probably not going to get to phase three reopening. Because of the increases in cases. So with all of that, the economy is going to be in worse and worse shape. What can the legislature do? Very good question. We're going to be, I think, seeing a lot of the discussions that take place once the legislature starts up. And then we can, you know, once that happens, we can have some more discussion and see what is actually happening. What about a tax increase? What about a rock'em sock'em real property tax increase? What about a tax increase on the, on the gross exercise? What about an income tax increase? Those things in, in the wings, assuming the government simply doesn't have enough money to operate and it must operate, and the federal government isn't doing anything. Isn't that in the wings? I'm sure all of those proposals will be in play. So there'll be discussions. We just have to keep vigilant and keep everybody in front but what's going on and if, if you don't think that's the right direction to go in, you need to make your voice heard, talk to your legislator, make sure that the people that are in the, in the seats of power have your interest. Okay, it's time to have smart policy here. We can do it with smart policy. And you and I will have to cover it going forward because it won't, it will have to be nuanced and it'll have to look around the corner, look into the future. Yeah, thank you, Tom. Tom Yamachika, Tax Foundation of Hawaii. It's not an easy question, but Tom can always answer. Thank you so much, Tom. Thanks for your confidence, Jane. Thank you for letting me in this show.