 Welcome back to Talking Tax with Tom. I'm Jay Fidel. This is Stink Tech, and we have Tom Yamachika joining us here on a given early morning. And we're gonna talk about the $600 million that went to DHHL, which is now gonna be led by Ekaika Anderson, which is very interesting. So welcome to the show, Tom. Thanks for having me, Jay. This week, we're gonna be talking about the $600 million that was appropriated to our department of Hawaiian homelands to reduce the monstrous waiting list of Hawaiians waiting for homestead lands. The catch, however, is that DHHL needs to spend the money or encumber it by June 30th of 2025. Otherwise, the money goes poof back to the general fund. We have provisions in our organic act and governing laws that talk about homesteads for the native Hawaiians, which the United States kind of took over. The idea is for the state government to establish programs to get native Hawaiians back on the land. And they do that by, among other things, developing things called Hawaiian homestead lands. They have some like in Waimanalo and many of the neighbor islands. And they lease these homestead lands to eligible beneficiaries, native Hawaiians with a certain blood quantum for a dollar a year, and effectively putting them on the land. Now, obviously this program has had lots of people wanting to do this, but it's been a problem getting the lands developed and ready for occupancy. So there is a waiting list of tens of thousands of people waiting to get on these homestead lands. And people have died on the waiting list because they wait three years, five years, ten years, more than ten years. Yes. OK, but we didn't give $600 million the year before, the year before that, all of a sudden in 2022, $600 million. What were the circumstances by which we allocated that much money in that year? Because there were issues about it. Hey, $600 million. Yeah, of course. Why now? Why that much? Why now? Because we have the money. We had a lot of money coming in from the federal government. We have a budget surplus. You've heard a lot, I think, in the campaigns this past November about the budget surplus and what to do with it. But this is one thing they did with it. OK. How political is this? Is this a big political issue? Or is this something that happens as a matter, of course? Well, I think there's a recognition that the native Hawaiians had been kind of repressed by legislators in the past. The DHHL's mission was shunted to the background. And this is a problem we see with state legislators around the nation that have Native Americans in there. They face similar issues. But we have our own set of unique circumstances around our native Hawaiians and how we deal with them in the United States of America. OK, well, what about management? My recollection is there have been issues around management over recent years. Can you talk about that? Yeah. In recent years, there's been issues with spending the money that was appropriated to the department. The department had control of special federal grants that had been, of course, appropriated in Congress. And they used to be around $9 or $10 million a year. But we couldn't spend the money fast enough. We didn't spend it. Yeah, we didn't spend the money fast enough. In 2016, the Trump administration had enough and they said, OK, fine, you don't want our money. We won't give any to you. So the allocation went down to zero. And our representatives in Congress went nuts. And we're successful at reinstating some of it to the tune of, I think, $3 million, $4 million a year. And that, I think, is something that's now ramping up. But still, we need to make sure that the agency is able to do something with the money that's been allocated. And that kind of lies, therein lies the problem. So how can an agency that's had trouble spending just $10 million a year in the past swallow $600 million in three years? That's kind of a tall order. So they had to come back with a strategic plan, which they did. They just published that earlier this month. And in that plan, they said, hey, in order for us to be able to do this, we have to have some law changes. And they listed some law changes, some that sound obvious, some that don't. But all of which give us an idea, I think, of why or how the supply of affordable housing is roadblocked here in the state of Hawaii. So let me kind of go through what they asked for. And we'll see if that's something that the literature can deliver to them, this legislative session. OK, so so far it's a wish list. Yeah. And they have draft bills going in. OK. Because they can't solve all of this administratively. OK, one of the things that they have asked for is, they want their developments of homestead lots or housings to be exempt from our general excise tax. They've asked for this before. It seems to dovetail into the existing exemptions we have for affordable housing. Because this is Hawaiian homestead housing is similar to affordable housing in a lot of ways. How does that work? What exactly, what cash flow would be exempt? The cash flow that goes to the developers or the contractors or the people who are building these affordable houses or DGTL homestead lots. They would be exempt on the services that they cushion to the project. OK, can you connect for me why an exemption from the gross excise tax would help them spend the $600 million that they are challenged to spend? Well, I mean, you're right. It goes the other way. But they want to make sure, the agency wants to make sure that the dollars that the legislature has appropriated go as far as they can. It's one thing if they get $600 million to spend and they can spend it. And it's another if 24 million of the 600 million has to go back to the general fund in general excise taxes. As Martin Pence in the federal court used to say when an argument was not entirely persuasive, he would say next. This one is probably more relevant to the line of thought that you're thinking of. So I'm going to ask for the ability to assume the review of any proposed project on historic properties or burial sites for lands under its jurisdiction. Currently, any property with, you know, the proposed development on a property with this kind of issues has to go back to the State of Hawaii Historic Preservation Division in DLNR. And they have a remarkable multi-year level of backup. So I think the DHHL sees this and somewhat rightly, I think, as an existential issue. And you need to solve the permitting delay problem or you can't get stuff done. That sounds pretty good, that one. But it also sounds reminiscent of the problems we've had in other areas for other projects. For most projects at the Department of Planning and Permitting, where I see recently that the average processing time for a new family, a single family home is 347 days. Yeah, one of the things that DHHL didn't ask for was the ability to take over regular permitting reviews for the counties. I guess they thought that it wasn't politic of them to take away the zoning and planning functions from the counties. Yeah, okay. What I'm saying is that we, the State, in many different areas and projects seem to have a problem with providing timely permits. And so the second point you mentioned sounds to me like it's a really good one. And it will save time and thus make it easier to actually spend the money. Right. The next bill is, to me, a little bit more questionable. It proposes that DHHL be given authority to issue temporary administrative rules having the force and effect of law for up to 18 months without complying with current requirements to give public notice, have a public hearing, and have the governor sign off on the rules, as long as DHHL consults with its beneficiaries, i.e. lessee applicants native Hawaiians. Now, certain agencies already do have temporary rulemaking authority. Department of Tax is one of them. Okay. Their statute allows for the Department of Tax to promulgate temporary administrative rules to be effective no longer than 18 months. But there are a lot of procedural requirements behind them and the governor shall have to sign off. This seems to me to be creating an exception from the administrative procedures in the state. Of course. And why exactly? I mean, you can have the exceptions to swallow up the rule after a while. The real problem here is not the exception so much as the way the administrative procedures act works. And again, may I say, this is bureaucracy at its very best if we are going to say that a DHHL needs an exception to a sluggish bureaucracy administrative procedures, then why don't we fix the administrative procedures for everyone? Sure. That's an excellent point. Right now, one of the things that delay a lot of the administrative rules is like when rules go to the governor's office for approval, it sounds like it could be a relatively easy process. But there are a number of sub-requirements that have been layered on over the years. One of them is that the rules have to be reviewed by the small business regulatory review board. And it's a group of volunteers that meets just once a month. And there are inherent delays in bringing stuff before a board that meets just once a month. It also needs to be reviewed by, I believe, budget and finance. And one more agency. I forget which one it is. But it's not, I mean, the way the governor's office has interpreted its approval requirement gets a lot of other agencies and other processes involved, which could be right for streamlining. Yeah. Well, could I say that it might be another statement? Could be? How about it should be? How about it should immediately be? It seems to me that we have layered on your term these additional bureaucratic requirements over years and we never take them off. And we have this organization which may be very non-expert, which meets once a month, just slows it down. So this is an example, in my view, of where the perfect overcomes the good. Even if the result is good, you have so many negatives with the delay that it ain't worth it. And I think somebody has to get in there. Maybe the Josh Green administration can do this and lead the charge on cleaning up this kind of bureaucratic delay that has slowed us down and slowed our economy down and slowed progress down over so many years. It has to be cleaned up. So the administrative rules that the DHHL, you know, would like to see administrative changes, they'd like to see adopted could be for everyone, whether the improvements could be for everyone. But the problem, just to take off on that, the problem is it's really hard to do reform. It's really hard to do the cleanup because you have to really figure it out. You have to look at every step that the individual applicant has to take and evaluate that and either change it or delete it. In a funny way, Tom, you know, the changes that DHHL might seek are actually a bellwether of changes that could be considered for all of these projects, not just DHHL. Absolutely. I mean, that's one reason I think why we're looking at these legislative proposals today. Not as, you know, is this best for DHHL? But as, look, these are the bottlenecks that our own state government has identified as inhibiting the process, you know, the progress of development. It has identified, you know, many of the sources of the inordinate delays in the current process. And really, it's, I think, helping to spoke out where the big problems are and where we really need the reforms. Yeah, good. I'm glad we're doing this. I'm glad we're covering this topic. Okay, anything more on the changes in the administrative rules? Just a speculation here. I had earlier remarked that DHHL did not ask for a blanket exemption from county zoning and permitting requirements as some Hawaiian groups are advocating. But I'm thinking, you know, perhaps this administrative rulemaking authority can be used to end run the, you know, the county zoning and permitting processes. All they have to do, you know, once, you know, if they get this temporary rulemaking authority, is promulgate an administrative rule that says, okay, for the next 18 months, we don't need no approval from no counties. Bye-bye. I'm less troubling in the sense that DHHL builds homes. So if you have exemption from rules for 18 months and in that period, you build a home, the effect of the exemption from the ordinary process lasts for the life of that home, which is way longer than 18 months. So you bake it in that way and it doesn't sound like this is good government to bake in the exemption, which would be not only unfair but wrong. Yeah, I mean, I think there are some guard rails that need to be built around this interim administrative rules proposal. Yeah, well, because it just seems to be a naked power grab at the moment. Yeah, yeah. It takes a lot of thought to do this sort of thing, but it reflects the larger problem. And somebody has to address the larger problem. Maybe this is the year where we do that. That would be a real step forward. Not necessarily to benefit DHHL but to benefit every state agency and everybody seeking approval and permitting. Yeah, no, I mean, it certainly I think gives us the opportunity to target certain areas for reform and it really exposes where a lot of the, you know, not the little delays but the big delays, the inordinate delays are coming from. Yeah, I think the media ought to cover this more this year and, you know, put some encouragement on it. Okay, what's next? No, I think we're at the end of our half hour. So that's pretty much all I wanted to cover for the DHHL. Well, let's talk about the people. Let's talk about Ekaika Anderson. He is Josh Green's selection for DHHL. He was in the city council for a while. I know him. He's a very decent man. And can he, you know, you described a timeline in which these initiatives, this plan, so to speak, strategic plan, has already been designed. And Ekaika Anderson is, you know, not yet in office, or if he is, it's just very, very recent, like within days. So he has not been, presumptively, he has not been involved in designing this strategic plan we've been talking about. That's right. I mean, it was all... It's a challenge for him, isn't it? Well, it's certainly true that it was all designed by the previous administration under DHHL director, Bill Isla. And there's obviously going to be some... What do I say? Some adjustment that may be required to accommodate Ekaika Anderson. Ekaika Anderson's, you know, style and thinking and values. But I think for the most part, the obstacles that the old plan has identified are very real, and they need to be dealt with somehow if DHHL is going to deliver some real reform in the Hawaiian-Hopestead backlog. Yeah, you know how DHHL, in my view, has not been successful over the years. It has not helped the Native Hawaiians. You talked about these lifelong waiting lists. And that's been the case as long as I can remember the lifelong waiting list of a program that was designed years ago, and that, you know, to the average service, you know, if they have the money, let's do it. Let's get it done. Let's get them off the waiting list and build the homes and have them occupy the homes and so forth. It doesn't sound all that complicated, and yet there have been glitches and scandals over the years. And we're having a conversation about spending money now that, you know, the state has had on and off for years and years and years. And so here we are with $600 million, and that's good. But it's not just spending the money. It's spending the money responsibly. It's getting those guys into these homes. And so I suggest that Ikeika Anderson has his work cut out for him. But it's more than that. He's got to get clear of all the money when I call it baggage that has been hanging on DHHL for all these years. But it's more than that. It's more than Ikeika Anderson. It's state government in general. It's certainly the legislature in dealing with this, you know, strategic plan you mentioned. And it's the governor leadership is what we need. Affirmative, thoughtful, powerful leadership. And so Ikeika can't really do it by himself. He's got to have the governor behind him, encouraging him and thinking with him about this. And together they can approach the legislature and be effective. Hopefully this is a time when leadership will play out properly for a problem that we have had for generations. Well, or lots of problems. Yes, thank you. Yes. I'm Yamachika. We hit the most interesting problems on this discussion and I know that a lot of people don't care about fiscal policy. They don't care about DHHL. They don't care about administrator rules. It sounds boring, but it's not. It defines our future time. So these discussions and the topics you pick are very important to everyone and I hope they listen. Well, thanks for having me on the show, Jay. Thanks for being on the show, Tom. I'm Yamachika, president of the Tax Foundation of Hawaii. Here on Talking Tax with Tom. Aloha. If you like what we do, please like us and click the subscribe button on YouTube and the follow button on Vimeo. You can also follow us on Facebook, Instagram and LinkedIn and donate to us at thinktecawaii.com. Mahalo.