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Banking on beauty

Kauai is nurturing its growing population and visitor sectors, but the idyllic island's economic outlook remains a mixed bag

By Timothy Hurley

LAST UPDATED: 3:03 a.m. HST, Dec 15, 2013

From the towering cliffs of the Na Pali Coast to the majesty of Waimea Canyon, from the emerald highlands of Waialeale all the way down to the 50-plus miles of white-sand beaches, Kauai is drop-dead gorgeous.

No Hawaiian island is more dependent on tourism than Kauai. And why not? Like an alluring woman, she can't help but draw plenty of suitors to court her natural beauty.

But that reliance on tourism -- as measured by the ratio of visitor arrivals to resident population -- only makes Kauai and its residents more vulnerable. Hurricane Iniki struck a direct and lasting blow to the island's economy 21 years ago and the Great Recession added a significant economic setback five years ago.

Today the Garden Island is slowly on the rise. Like the other neighbor islands, Kauai is feeling the effect of Hawaii's strong tourism recovery.

Among the neighbor island counties, Kauai's population is expected to grow at the slowest pace. But on a per-capita basis, Kauai's growth is projected to be twice what is predicted for Oahu.

According to the Kauai 2012 Transportation Data Book, the island's population of just under 70,000 is expected to climb to nearly 85,300 by 2035.

The area forecast to see the most growth is the Lihue District. By 2035, the population is projected to jump by 51 percent, or roughly 6,000. The South Shore region, stretching from Koloa to Poipu to Kalaheo, will follow with growth of 38 percent, or 4,500, by 2035.

In anticipation of the rising population, the county this year formally launched campaigns to update the community plans for those regions. Residents have been meeting to create "visions" upon which the new plans will be based.

Pat Griffin, president of the Lihue Business Association, said it's understandable that Lihue's population growth would lead the island. The Lihue District is home to the island's largest hospital, seaport and airport, as well as Kaua'i Community College and the seat of county government.

"There is a lot of pressure to provide affordable housing and growth in this area," she said.

Griffin, who has been active in Lihue community planning for years, said there has been a lot of discussion so far about "smart growth and workable, livable cities," including a vision for Lihue as a vibrant community with mixed uses where people don't necessarily have to hop in their cars to go to work or the store.

"I'm very optimistic about the future," she said.

One major Lihue-area project in the works is Wailani, described as a smart-growth development that will create a new "town center" with mixed-use dwellings, retail, banks, a senior citizen center and a hotel focused on the kamaaina market.

The 400-acre development by Grove Farm, the former sugar grower and now one of the island's largest landholders, would result in affordable housing and the addition of 1,500 residents.

"It's definitely needed," said Warren Haruki, Grove Farm's president and CEO. "It will allow residents to live and work within close proximity."

Construction should start in 2015, he said, and be phased in over many years, perhaps as long as the better part of two decades.

Over in the South Kauai region, Grove Farm is planning Waihohonu in the area formerly known as Koloa Camp along the Waihohonu Stream in Koloa town.

The project includes 46 "affordable" two- and three-bedroom single-family homes. House and lot packages will range from the low $300,000s to the low $400,000s, with sales expected to start in early 2014.

Meanwhile, business has finally picked up at another South Shore development: the 1,010-acre luxury community known as Kukui'ula, which broke ground in 2008 just as the recession struck home.

"Sales have very substantially improved over last year," said Brent Harrington, president of Kukui'ula Development Co. In fact, they've doubled to 22 sales, either closed or pending, equaling $31 million in contracts.

Members-only amenities include an 18-hole Tom Weiskopf-designed golf course and a clubhouse complex with a restaurant, pools and a spa, plus a 6-acre farm and a lake stocked with peacock bass.

Zoned for up to 1,500 housing units, Kukui'ula offers lots from a third of an acre to a full acre for just under $1 million to the mid-$4 million range. Lots with cottages are priced from $2 million to almost $4 million.

Success means that two new neighborhoods will be opening up soon, Harrington said.

Improved sales in the luxury real estate market reflect the steadily recovering U.S. economy, which has also helped bolster the island's top economic sector -- tourism.

More than 1.08 million visitors arrived on Kauai in 2012, up 7.2 percent from 2011. So far this year, visitor numbers are up 4 percent over last year, with tourists arriving on more direct flights from the mainland than ever.

Who is the typical Kauai visitor?

"People who enjoy nature," said Sue Kanoho, executive director of the Kauai Visitors Bureau. "We like to joke around that there aren't a lot of things here like nightclubs. You won't find Sephora. This is not Waikiki. This is not Maui."

Kanoho isn't bashful about volunteering that tourists' top two answers to the exit-survey question "What did you like least about your vacation?" were "Leaving" and "Not enough time."

"The people who come here usually fall in love with it," she said, noting that 70 percent of tourists are repeat visitors.

Kauai has parlayed its natural beauty to find steady income as a film location. More than 75 movies have been shot in Hollywood's tropical backlot, and the Kauai Film Commission says the island continues to attract a steady flow of TV documentaries and reality-type shows, including HGTV's "Hawaii Life."

In an effort to support the resort areas on the east side of the island, members of the visitor community joined forces this year to launch the Royal Coconut Coast Association. The nonprofit is dedicated to promoting the region from Wailua Golf Course to Kealia Beach and recently scored some national publicity when Kapaa earned the ninth spot in Forbes magazine's list of "America's prettiest towns."

Pretty, indeed, but for all its natural beauty, Kauai is far from Eden. According to the current Kauai Economic Development Plan:

» Incomes are low, with a third of households considered "economically needy."

» Kauai's top 10 occupations pay relatively low average wages.

» There is widespread underemployment.

Other blemishes include a severe shortage of affordable workforce housing and the fact that the median price of a single-family home is $586,000 -- out of reach for most residents.

And then there is the horrendous rush-hour traffic in the Lihue and Kapaa areas.

In an effort to address the road congestion, the county this year hired a planner assigned to transportation issues only and launched a feasibility study looking at a Lihue bypass route. The state Department of Transportation also is studying the north section of the Kapaa temporary bypass.

Jack Suyderhoud, University of Hawaii business economics professor, said Kauai's strength in tourism is spreading slowly to other economic sectors.

Job growth on the island has seen sluggish recovery from the recession, he said. More than 3,500 jobs were lost between early 2008 and early 2010. Since then, less than half of those positions have reappeared.

"The recession affected the Kauai labor market more so than the rest of the state as the unemployment rate soared to over 10 percent in 2009, well above the statewide peak," he said.

The slowly improving jobs picture has brought the Kauai unemployment rate down to less than 6 percent, but it remains about 1 percent above the statewide average, the economist said.

Construction also continues to disappoint. Suyderhoud said private building permits have shown only modest improvement since mid-2011 and construction jobs have still not recovered to pre-recession levels.

"On the other neighbor islands the boom in tourism has clearly spread to other parts of the economy, including construction. This has yet to occur convincingly on Kauai where construction continues to underperform," Suyderhoud said.

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