A state senator recently supported a bill to take more than $40 million away from the Hawaii Tourism Authority, a state agency that had denied the private company where he works an estimated $3.5 million worth of contracts over the last year or so.
Senate Ways and Means Committee Chairman Sen. Donovan Dela Cruz (D-Wahiawa) is a vice president for communications and minority owner at DTL Hawaii, an offshoot of WCIT Architecture, which counts HTA among its many government clients.
Conflicts of interest allegations surfaced in March after Dela Cruz voted for Senate Bill 2224, which would cut HTA’s $108.5 million share of transient accommodations taxes by about 40 percent. That bill wasn’t scheduled for a hearing by the House Finance Committee, but at 10 a.m. Tuesday, Dela Cruz’s committee is slated to hear House Bill 2010, which the Senate Committee on Economic Development, Tourism and Technology gutted and replaced with the contents of SB 2224. The new language would cut HTA’s convention center fund to $6 million and HTA’s tourism fund to $60.3 million, roughly the amount the agency currently spends on marketing. It also appropriates $1 million to establish a Center for Hawaiian Music and Dance, a project that has ties to Dela Cruz’s outside work at WCIT and DTL.
The measure, and several others like it, have attracted support this session from lawmakers who question whether the rising number of visitors are returning enough to the state to offset the negative impacts that tourism can bring.
LOOPHOLE FOR LAWMAKERS
Common Cause Hawaii said it has supported several bills designed to amend Act 208, which in 2012, “gave legislators a broad exemption from the state’s Fair Treatment Code,” essentially allowing them “to use their official capacity for personal gain.” While the state ethics code advises state employees and legislators to avoid conflicts of interests and abide by fair treatment standards, it says, “Nothing herein shall be construed to prohibit a legislator from introducing bills and resolutions, or to prevent a person from serving on a task force or from serving on a task force committee, or from making statements or taking official action as a legislator, or a task force member or a task force member’s designee or representative.” This year House Bill 1740 and Senate Bill 2143 sought to address the issue, but neither Ethics Commission bill was scheduled for a hearing.
Record growth
Members of the state’s visitor industry say HTA’s marketing efforts have resulted in six consecutive years of growth.
Last year, 9.4 million visitors spent $16.8 billion, both records. Tourism was the single largest source of private capital for the state’s economy in 2017, responsible for 204,000 jobs and $2 billion in taxes.
The Ways and Means Committee has a role to play in settling the tourism authority funding debate, but Dela Cruz’s ties to WCIT and DTL could muddle the issues. Dela Cruz was working at WCIT, when the company and its subcontractor DTL, were awarded a roughly $850,000 contract in July 2014 for consulting work on the Center for Hawaiian Music and Dance.
The companies haven’t been as successful with procurement under current HTA President and CEO George Szigeti and HTA Board Chairman Rick Fried. According to contracts obtained by the Star-Advertiser, DTL served as subcontractor on an $80,000 contract secured by nonprofit Hawaii Maoli for the King Kamehameha Day celebration in May 2017.
However, from October 2016 to November 2017, DTL failed to obtain four contracts worth an estimated $3.5 million.
“We felt the other bidders in our view met our requirements in a better way than DTL,” Fried said. “I hope, because you know more and more we are subjected to intense scrutiny, that the fact that DTL did not get those contracts is not reflected in the legislation that has been coming out.”
Dela Cruz said he voted for SB 2224 because he felt it was warranted.
“Visitor arrivals are basically at 10 million and we aren’t being proactive enough to deal with the visitor impacts,” he said. “In addition to that, when you read the audit, there are a lot of concerns about how HTA is spending its money.”
MEASURING THE CUTSProposed Hawaii Tourism Authority cuts:
>> SB 2504: This bill as introduced by Sen. Donovan Dela Cruz originally prohibited HTA from using administrative expenses to market Hawaii. The House Tourism Committee gutted and replaced it with language to cancel the debt owed to the state by the Hawaii Tourism Authority for Convention Center construction costs and related interest. It also establishes several convention center funds. The House Finance Committee passed the bill Wednesday.
>> SB 3038: This bill cuts $2 million from HTA’s tourism special fund and gives it to a special land development fund supporting DLNR. It crossed over from the Senate to the House, where it was referred March 8 to the House’s Committee on Tourism and Committee on Finance.
>> SB 2224: The original bill focused on water safety, but it was gutted and replaced with language that would redistribute more than $40 million of HTA’s funding to other state agencies. It crossed over from the Senate to the House, where it was referred March 8 to the House’s Committee on Tourism and Committee on Finance.
>> SB 2446: This bill was amended to give 15 percent of HTA’s funding to DLNR if visitor arrivals exceed 10 million arrivals statewide. The Senate Ways and Means committee did not hear it.
>> HB 2010: The contents of this bill, which originally forgave HTA’s bond debt obligation, was gutted and replaced to redistribute more than $40 million of HTA’s funding to other state agencies. It was referred to the Senate Ways and Means Committee, which is slated to vote on the bill at 10 a.m. Tuesday in conference room 211.
>> SB 2961: This bill sought to repeal HTA’s responsibilities to inform the public about tourism, interact with native Hawaiian groups, and support tourism educational and career programs. It was deferred Feb. 2.
Fines issued
The state Ethics Commission fined HTA executives in December for taking travel upgrades, and there was a finding last month by the Office of the State Auditor that the agency suffers from “lax oversight” and “deficient internal controls.”
Dela Cruz said he obtained an opinion from the state Ethics Commission earlier this year that his outside work does not prohibit him from legislative voting. The measure also had to go through another Senate committee before it got to Ways and Means and was supported by 24 other senators before it was transmitted to the House, he said.
“As long as I’m a member of the Legislature, people will keep bringing up those issues. It’s politics. They are trying to preserve what they have,” Dela Cruz said. “The reality is that if you look at the audit, HTA has been misspending (its) money. HTA is the one that got ethical fines. Several members of (its) staff used their positions to go and leverage upgrades.”
Dela Cruz said he’s been transparent about his outside work.
He began working as WCIT communications director in 2011 and transitioned from WCIT to DTL in 2015. He described his duties at DTL as part time and said he isn’t involved in day-to-day operations. Dela Cruz is paid between $25,000 and $50,000 annually as DTL’s vice president for communications, according to his 2018 financial disclosure to the state Ethics Commission. He also earns between $10,000 and $25,000 for his 10 percent ownership stake in DTL.
Two proposals DTL made to HTA in 2016, one for public relations, communications and outreach services, and another to handle the 2017 Tourism Conference, included Dela Cruz’s resume, which lists him as a member of the Hawaii state Senate and details his various political committees.
“You wonder why his (resume) would be attached if he wasn’t going to have any involvement whatsoever in those two contracts,” Fried said.
Dela Cruz said he wasn’t serving as Ways and Means chairman when DTL applied for the contracts and his role would have “depended on what kind of help DTL needed at the time.”
Fried said he understands the need for Hawaii legislators to have outside work, but said “they need to stay out of rule-making or issues that would affect state agencies and their businesses.”
Power position
The power that Dela Cruz holds over HTA was evident during the Way and Means Comiittee’s opening hearing on Jan. 10 when he questioned HTA’s decision to spend $180,000 on a public information campaign.
When Charlene Chan, HTA director of commu-nications, told Dela Cruz that the program was mandated by law, Dela Cruz said, “Maybe we can change the statute.”
During another point in the hearing, Dela Cruz also ordered HTA to provide lawmakers with “policies and procedures in regards to how you procure contracts.”
Ewa Beach resident Kurt Fevella said Dela Cruz is “using his office for personal gain.”
Fevella filed a complaint with the state Ethics Commission against Dela Cruz on Jan. 4 after the Star-Advertiser reported that the state Department of Land and Natural Resources had awarded DTL a $99,885 contract for public relations services related to the redevelopment of the state-owned Ala Wai Small Boat Harbor.
Fevella said Dela Cruz should abstain from deciding HTA budget cuts. “It’s just not right, and it doesn’t make any sense. Why cut tourism funding when that’s what’s making money for the state?” he said.
Dela Cruz said he hasn’t been contacted about the complaint.
No comment
Confidentiality rules preclude the state Ethics Commission from commenting on complaints or investigations, said Dan Gluck, the commission’s executive director and general counsel.
Corie Tanida, executive director of Common Cause Hawaii, said the perceived conflicts of interests regarding Dela Cruz are “concerning” regardless of whether ethics laws were violated.
“Currently the state ethics code doesn’t apply to legislators in the way that it applies to other state employees,” Tanida said. “We need to rectify that. It’s only fair that we hold our government officials to the highest ethical standards.”
The state Ethics Commission introduced bills last year and this year to address exemptions for state lawmakers. “The Ethics Commission would like to … make clear that the fair treatment law applies equally to legislators as to all other state employees and officials,” Gluck said.
Tanida said lawmakers should be just as concerned about the appearance of impropriety as they are about actual conflicts.
“We need to use our common sense, not just what’s written in the law,” she said.
