UHERO: ‘Construction downswing near its trough’

LIHU‘E — The construction slowdown “has been more severe” than anticipated a year ago by the University of Hawai‘i Economic Research Organization.

Editor’s note: This is the third in a series of articles regarding the state’s economic recovery as forecast by the University of Hawai‘i Economic Research Organization. Today’s focus is on the construction industry.

LIHU‘E — The construction slowdown “has been more severe” than anticipated a year ago  by the University of Hawai‘i Economic Research Organization.

“All four counties absorbed double-digit construction job losses last year, exceeding 20 percent in every county except Honolulu,” according to UHERO’s latest economic report, “Counties Begin Recovery After Record Downturn.”

In 2006, there were almost 500 single-family dwelling permits issued on Kaua‘i, valued at a total of some $169 million, according to county documents. Nearly 400 permits were issued in 2007 worth approximately $190 million, and in 2008 and 2009 the number dropped to around 200 each year, valued at more than $85 million annually.

Multi-family dwellings, however, grew slightly from 2006, from 17 permits approved for 277 units valued at some $8 million, to 21 permits issued in 2009 with 293 units valued at almost $140 million.

“Building permits are cyclical in nature and usually mirror economic conditions of the island, state, nation and the world,” said county Finance Director Wallace Rezentes Jr.

“Building permits add to the county’s real property coffers once the structures are completed.”

When the number of building permits issued decreases, it creates an impact on “future real property tax growth,” he said.

And real property taxes affect a majority of the county’s income at about 79 percent of the general fund, said county spokesperson Mary Daubert.

“We hope that building permits that have been issued in the last couple of years on developments that have slowed or stopped will ultimately be completed,” Rezentes said.

And while there have been “only a few developers” who have notified the county Planning Department that “they have not moved forward with their projects or have recently requested an extension,” there is really “no way of getting an accurate summary of how many developers’ plans have been placed on hold since the economy took a turn,” said county Planning Department Director Ian Costa.

“However, there are likely a number of permits that were previously granted that have suspended starting construction,” he said.

One development, however, which is “committed” to carrying through to its completion is Kukui‘ula on the South Shore, according to Kukui‘ula Development Company Hawai‘i President Brent Harrington.

Construction plans are “well along” the way and “all 18 holes” of the golf course along with 20 homes, for example, will be completed by the end of the year, he said Thursday night at the Kaua‘i Chamber of Commerce second quarter membership meeting.

“We hung in there when other people threw in the towel,” Harrington said.

But it won’t be until 2011 that statewide private building permits “will turn positive” and, even so, “activity in coming years will fall short of the brisk levels experienced during much of the past decade,” UHERO’s report says.

“We have reduced somewhat our projection for new residential construction permitting this year, which results in lower construction activity in 2011,” the report says.

“We now expect the cost-adjusted contracting tax base to be unchanged in 2011, after one more year of sharp decline. Because the sector will remain weak, there will be little net hiring until 2012.”

The only “boost” in development this year will “come from public-sector construction, as we (finally) feel the effects of federal and state stimulus plans,” the report goes on to say.

However, the “deep construction downswing is near its trough,” according to UHERO.

• Coco Zickos, business and environmental writer, can be reached at 245-3681 (ext. 251) or czickos@kauaipubco.com.