Construction lifts Big Isle economy

The Big Island economy is finally breaking out of the doldrums, led by a construction sector that is outperforming the rest of the state, according to an analysis by local economist Leroy Laney.

In addition to the pickup in construction, visitor arrivals have broken back into positive territory, and home sales are up over year-ago levels, said Laney, a professor of economics and finance at Hawaii Pacific University.

"An economic recovery is now under way or at least imminent for the Big Island economy," Laney said. "Don’t expect a rapid snapback, but at least the direction is right."

Laney delivered his remarks at forums in Kona and Hilo sponsored by First Hawaiian Bank.

The economic recession hit Hawaii County harder than the rest of the state, with the Big Island suffering from larger declines in visitor spending and higher unemployment rates than other islands.

Laney’s current assessment of the Big Island economy is markedly more positive than the one he made a year ago when he characterized it as "pretty bleak."

The Big Island entered the construction decline earlier than the rest of the state, and is now recovering at a faster rate. Construction spending on the Big Island rose by 36 percent in the second quarter, accounting for much of the growth statewide.

"The construction picture still has a while to go, although construction is one sector where the Big Island is now looking better than the overall state," Laney said.

Among the larger projects under way are a planned retail center in Hilo with a Target and a Safeway. Pacific BioDiesel also broke ground this year on a plant in Keaau that will produce an estimated 2.64 million gallons of biodiesel a year. The plant, which will be able to process locally grown jatropha beans and other feedstocks, is on track to be completed next summer.

On the Kona side the county is building a 3-mile, $35 million stretch of roadway called the Ane Keohokalole Highway. The highway, which will include 5-foot bike lanes, sidewalks, two bus stops and a multipurpose path, is expected to be completed by early 2012.

Although visitor arrivals and spending are up, Laney said it will be a while before the sector makes a full recovery because the declines were so large in recent years.

"Some hotel properties are doing better than others, but occupancy rates for most Kohala Coast properties are still running below historical levels."

Visitor arrivals are up 2.1 percent for the first six months of this year, compared with a 7.4 percent decline for all of 2009. The rebound in spending was even more pronounced, rising 11.3 percent through June, compared with an 11.6 percent decline in 2009.

Sales of single-family homes are up sharply for the first six months of this year, and price declines have decelerated, Laney said.

Declining real estate values have "serious implications" for property tax revenues, which account for about 60 percent of county tax collections, Laney said.