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Off-cycle industries boost Kaua‘i economy

PMRF, agriculture ‘march to own drum’

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Posted: Saturday, August 29, 2009 12:00 am

Editor’s note: This is the third and final part in a periodic series about the economic recovery on Kaua‘i.

PO‘IPU — When the economy struggles as it has, activities not related to the economic cycle can provide much-needed stability, Hawai‘i economics experts say.

That is why the Pacific Missile Range Facility in Mana is a major influence for Kaua‘i, said Dr. Leroy Laney, the Economics Advisor for First Hawaiian Bank and Professor of Economics and Finance, Hawai‘i Pacific University, in presenting the Economic Forecast, Kaua‘i edition 2009-2010.

Laney and Dr. Jack Suyderhoud, a professor at the University of Hawai‘i, addressed an audience of more than 300 people at the 3rd Quarter General Membership Meeting that featured the 35th Annual Kaua‘i County Business Outlook forum, Tuesday night at the Grand Hyatt Kaua‘i Resort and Spa.

“When the economy tanks like it has over the past year, activities not related to the economic cycle are appreciated more than ever,” Laney said. “The land occupied by PMRF is only the tip of the iceberg. In addition to missile testing, the Range hosts submarine training on its 1,100 square mile underwater range, and there is more than 42,000 square miles of controlled airspace.”

Counting contractors as well as uniformed military and government civilians, jobs at PMRF total about 875 with most of them much higher-paying than one is likely to find elsewhere in Kaua‘i’s service-based economy, Laney said. Government and contractor payroll is about $130 million, annually.

“One might assume that with North Korea’s saber-rattling, now, activity at the range would be ramping up,” Laney said. “The range definitely can launch defensive missiles, but its mission is training and testing; it isn’t an operational command.”

While times like these should make people appreciate the testing that takes place at PMRF, Laney said the fact is that the range is doing less testing now than in past years.

Its two major programs, the Theater High Altitude Antimissile Defense and the Aegis ship-based missile program, are in their mature stages.

Laney said six to eight tests annually are now more common than previous highs of 11 or more. He estimates the total injection for this year to be about $18 million based on six tests at about $3 million per test.

“But the real value of the range to the Kaua‘i economy likes in the impetus it provides for high tech on the island which would be virtually nonexistent without the range and its contractors,” Laney said.

KEDB

The Kaua‘i Economic Development Board which emphasizes education and workforce development on Kaua‘i works closely with the range and is highly dependent on range contractors for financial support.

“The foothold of some contractors at the range is now more tentative,” Laney said. “Some of these contractors now have year-to-year leases at KEDB’s two tech centers in Waimea, not longer term ones. That parallels their contracts at the range.”

Laney noted that plans for a third tech center in Waimea, mentioned in previous reports, have now been abandoned.

He said the Economic Development Boards on all islands are now being tasked to revisit their Comprehensive Development Strategy that revolves around six industry clusters.

KEDB is focusing on three of these six: food and agriculture, renewable energy, and high technology.

A favorable recent development is that KEDB’s Aloha ‘Ike program that focuses on building a high tech workforce in the schools, now receives federal matching funds, not just private donations.

Agriculture

The farming industry is another field that does not rely heavily on economic cycles.

“The agricultural sector also marches to its own drum rather than following the fluctuations in tourism and construction,” Laney said. “Several developments are worth mentioning this year.”

An informal blessing for the long-dormant Tropical Fruit Disinfestation Facility was held in June, prior to USDA certification of the treatment chamber. The University of Hawai‘i has been conducting a class for new papaya farmers for several months.

The county-funded cattle handling facility at Kalepa has shipped 4,500 head out of the total 7,500 head exported to Mainland buyers over the past 18 months.

Most of the cattle shippers using this facility are smaller ones because larger operations have their own loading facilities. Laney added that the county will be working with the industry to develop a grass-fed beef product for local consumption.

The Kilauea Agricultural Park Master Plan for a 75-acre county-owned property has been completed and is under public and agency review.

The Kilauea Irrigation Study, tasked by the Kaua‘i County Council, for an agricultural subdivision where irrigation capacity was affected by Ka Loko dam failure, has been completed.

Finally, the Sunshine Markets, a local farmers market selling local produce, has shown marked increases in sales in all of its sites island-wide.

“Also in the area of agriculture, last year I mentioned an industry that has become a major stabilizing influence on the Westside — the seed corn research industry,” Laney said. “This industry hasn’t slowed as much as some others in the current environment.”

Four of the major seed corn research entities have been present on Kaua‘i for some time: Pioneer Hi-Bred, a DuPont subsidiary, Syngenta Seeds, BASF Plant Science, and Monsanto.

“Over the past year, Monsanto moved its nursery operation to Maui, but a fifth one is now relocating to Kaua‘i from Molokai — Mycogen Seeds, a subsidiary of Dow Agrosciences,” Laney said.

Mycogen plans to lease about half of Gay and Robinson’s ex-sugar land for seed corn research. G&R announced last year that it would harvest its last crop of commodity sugar in 2010.

It had planned to partner with Pacific West Energy of Seattle, Wash., to grow cane for ethanol production. That might still happen on some level, but the recession and lower oil prices over the past year caused the money to dry up for that effort, at least temporarily, Laney said.

“Mycogen will bring a new industry and a trained workforce to Kaua‘i, and it will likely save some ex-sugar jobs on the island as well,” Laney said. “It will also keep G&R acreage in agriculture, turning it into a rent collector rather than an operation that just loses money on sugar cultivation.”

An added planned benefit will be the generation of alternative energy.

“The G&R operation has long been blessed with abundant water, fed to the plantation from higher elevations without the need for as much pumping as other sugar operations,” Laney said. “Growing corn requires much less water than sugar, so the water left over is targeted for the generation of hydroelectric power.”

Energy

Laney noted that in developments on the energy front on Kaua‘i this year, a consultant has been retained to formulate an Energy Sustainability Plan for Kaua‘i.

A water maker than can produce potable water from humidity in the air has been purchased for the Ni‘ihau School.

The county and the Navy continue to move forward in a joint project to develop a methane resource at the Kekaha Landfill, generating power for the missile Range.

Finally, the county is exploring the possibility of issuing a Performance Contract for energy efficiency retrofits at county facilities.

“I think it’s fairly clear that the Kaua‘i economy has seen better times,” Laney said. “But you all know that. I think recovery will be gradual. That recovery will depend critically on the return of healthy tourism, especially for an economy like Kaua‘i’s. That, in turn, will depend on the return of better times to the Mainland economy, especially on the West Coast.”

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