Category Archives: Economics

Is it wrong for local government to save money by using out-of-state vendors?

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I flagged this comment when it was posted on the “Next Door” website.

Just got our property tax bill from City /county of Honolulu and it went up again . That was upsetting , but I decided this year to put it on our credit card so I could get flight points. Our grandkids love to visit and flights are so expensive.! So I call the number on the back and a nice man informs me that it would cost me 76.00$ to put it on the credit card. Even more annoying was , he was working in Texas because the city outsources the payments. So we don’t have a bill paying service in our own state? They can’t give local people the job here? The county can’t set up a service here so more of our young people can stay here to work? So next time I hear how the state is concerned about losing our young workers, they should look at their own policies.

It seems like a fair point.

But one comment made a pretty good point in response.

it is not simply a matter of hiring people to do jobs. it takes special software and interfaces to deal with the credit card companies, all kinds of computer security updates and controls, and these are neither inexpensive to install for a big government process, nor cheap to maintain. There are service companies that specialize in providing that service and they are more cost effective than trying to do it “in house”. The processing fee is a pass through from the credit card processors, part of which gets rebated to people, like the original poster, who earn “flight miles” on their cards. Using an “echeck” is only a $2 or $3 fee or else, the check can be mailed by “snail mail” at no extra charge.

So it may be that setting up an operation of that kind in Hawaii, with its relatively small population coupled with high costs, just isn’t feasible, even if there were “buy local” preferences in place.

The Institute for Local Self-Reliance has a good discussion of local purchasing preferences that have been adopted by many state and local governments.

Here’s an excerpt:

Local governments spend a lot of money, and their procurement and contracting policies can be important mechanisms for advancing other public aims. Many cities, counties, and states give a preference to local businesses in their procurement decisions as a means of supporting and growing their local economies.

At least 45 states, plus the District of Columbia, have procurement policies designed to give a preference to businesses that meet certain characteristics, such as those that are owned by veterans, pay certain wages, use environmentally sustainable practices, or manufacture within the state. Of these, about half have adopted an explicit preference for businesses that are small and/or local. In addition, more than thirty states have policies aimed at steering purchasing to minority- and women-owned businesses.

Looking beyond state governments, large numbers of counties, cities, and towns have procurement policies of their own.

These policies vary considerably. Some apply broadly, while others focus on construction contracts, others on goods and services, and others only in certain narrow situations. Some are absolute preferences, or more commonly, percentage preferences. These say that if a company meets certain qualifications, it doesn’t have to have the lowest bid in order to win a contract, just be within a certain percentage—usually 5 percent, but as high as 15 percent—of the lowest bid.

I couldn’t find a concise description of preferences used by state and counties in Hawaii.

State law does have preferences for certain kinds of “made in Hawaii” products.

A Hawaii product requires over fifty per cent Hawaii input towards the total cost of the product for:

(1) Class I products mined, excavated, produced, manufactured, in the State; or

(2) Class II products are agricultural, aquacultural, horticultural, silvicultural, floricultural, or livestock product raised, grown, or harvested in the State.

Are there others? And are there legal limits? When does the idea of competitive bidding to create a level playing field give way to specific preferences?

Interesting issues.

Inside one of those large gated properties on Kahala Avenue

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On Friday afternoon, Meda and I drove over to the other end of Kahala to inspect the contents of one of those walled and gated Kahala Avenue homes. The home recently changed hands, and the new owenrs are getting rid of its contents in an online auction by McClain Auctions Hawaii. The auction bidding started on Thursday, and the final round of bidding starts at noon Sunday, where the items come up for last minute bids, a minute or so at a time.

Photos of the 350 items are available online. Just go to the McClain Auctions website, then click the link “View Auction” link.

This property is loaded with marble statues, inside and out. Clearly, our lack of life size, or larger than life size statues is terribly out of sync with the taste of those who designed this property.

We came away from our initial look at the items with the sense that we perhaps suffer from a little known malady, “Statuary Deficit Disorder.”

Note: This is not one of those former Kawamoto properties.

Real estate records show the property was purchased in 1986 by William Weinberg, who owned what was then known as the Kahala Hilton Hotel. It was purchased by a Japanese businessman in 1996 and immediately transferred to a Bahamanian corporation. It next sold in 2004 to a San Francisco-area real estate investor, who paid $4 million more than the previous sale.

And then in 2006, it sold to another Japanese company for $29 million (no, that’s not a typo), which then reportedly invested additional millions into the home.

It sold quietly last month for $15 million, based on the reported Hawaii conveyance tax of $187,500, to a California entity. That was $14 million less than the previous purchase price, and doesn’t include any additional investments between the sales in 2006 and 2023.

The new owner is reportedly eager to get rid of all the contents, renovate, redecorate, and flip!

The property consists of 1.5 oceanfront acres with a 9,896 sf home with a vast 4,500 sf lanai. The lanai alone is nearly three times the size of our house!

The auction listing describes the decor as Baroque/Rococo style. I don’t know if that’s an accurate assessment.

Whatever the label, it’s a breathtaking example of crazy excess, conspicuous consumption gone wild.

Imagine what it costs to light, air condition, and clean this monster! Add in the cost of landscaping and landscape irrigation, insurance, maintenance, and other normal expenses, not the mention the opportunity costs of tying up so much capital, that the monthly expenses must be truly staggering.

Here are a few photos I took as we walked through the property.

The large engine in one photo is the backup generator for the home’s air conditioning system.

Glimpsing the excesses of the 1980s and 1990s

It’s time to treat immigration as the solution rather than the problem

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Isn’t the answer here pretty obvious?

One the one hand, the economy is being hit by shortages of people needing or wanting work, which drives up labor costs, adds to inflation, and generates labor strife.

Worker shortages are fueling America’s biggest labor crises, Washington Post, Sept 16.

U.S. Construction Industry Lags Due To Global Labor Shortage, BusinessWest.com, Sept 16.

America’s small businesses are running out of workers, CNN Business, Aug 19, 2022

And on the other hand…

Immigrant farming key to solving labor shortage, News5, Cleveland.

Retiring baby boomers are creating a labor shortage—immigration could be the solution, Fast Company, Sept 17.

Immigrants are key to addressing America’s labor shortage, lowering inflation, and growing our economy, The Hill, August 29.

There’s a solution to the labor shortage — and it’s the undocumented workers who are already here

We need to stop insisting that immigration is a problem to be used for political stunts, and begin treating a rational immigration policy as a solution.

ALICE in paradise: Struggling to stay afloat

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An interview broadcast on Hawaii Public Radio’s “The Conversation” on Wednesday put some facts and figures behind what we all know, that its hard to survive in Hawaii’s economy.

As a result of economic woes during the Covid pandemic, three out of five families in Hawaii (59%) are now either living in poverty, or fall in a category of “asset limited, income constrained, employed,” referred to as ALICE, a term for working households that are just barely able to make ends meet. That figure is up from 42% in 2018.

Michelle Kauhane, senior vice president of community grants and initiatives for the Hawaii Community Foundation, “we’re talking about households who have very little savings because they are living paycheck to paycheck. So there’s not a lot of reserves.”

And the number could easily grow, since there are additional families with incomes just above the ALICE threshhold, and could easily fall as a result of any kind of economic shock.

Hawaiian and hispanic families have the highest proportion living in below the ALICE upper limit, which was $148,771 in 2018. And the overall rates were highest in Hawaii and Maui counties, according to data Kauhane cited.

Aloha United Way and the Hawaii Community Foundation are partnering with a group of nonprofit agencies is focusing on promoting family financial stability and affordable housing.

There’s a lot more information available in a report, “ALICE in Hawaii: A financial Hardship Study,” published in 2020.

This puts our situation in pretty stark terms. But we’re not alone. Communities across the country are reflecting the pronounced growth in income inequality that began in the 1970s and has worsened progressively since.