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September 9, 2020

Councilmember , Chair Councilmember , Vice Chair Councilmember Carol Fukunaga, Floor Leader Councilmember Ron Menor, Chair Emeritus Councilmember Brandon Elefante Councilmember Joey Manahan Councilmember Kymberly Pine Councilmember Heidi Tsuneyoshi Councilmember Tommy Waters City Council

Re: RESOLUTION 20-208 to Establish a Commercial Property Landlord-Tenant Real Property Tax Grant Program

Dear Councilmembers,

Thank you for the opportunity to submit testimony. WE/I STRONGLY SUPPORT the Commercial Property Landlord-Tenant Real Property Tax Grant Program. < introduce yourself >

< insert letter content>

SAMPLE CONTENT YOU CAN REVISE TO MAKE YOUR OWN. - We believe the Commercial Property Landlord-Tenant Real Property Tax Grant Pogam (he Pogam) ill ee a an eenial caal fo mall binee and landlords to work together as we migrate into the new normal. - Without help, the burden of old lease rents (based on previous market conditions) during a post-coronavirus economic recovery are unbearable for small businesses. - The Program is designed to pass rent relief forward. Using federal CARES money, the County would allow landowners to apply for grants on behalf of their eligible business tenants. Grants would be spread out to tenants proportionally in an amount not to exceed the value of the annual real property tax for the subject properties. While the Program cannot require landowners to renegotiate leases, we believe a bi-product of the goodwill developed from the landlord- tenant dialogue is that landowners will be more inclined to set new and reasonable expectations going forward and to start renegotiating or at least amending leases in a sustainable manner. - In many cases, businesses, especially restaurants and entertainment venues are facing ½ to 2/3 reduced capacity in the new normal with the same or an even higher rent caused by rent deferral. Even if business capacity is not a factor, the deteriorating economic climate due to job losses and reduced visitor arrivals is causing significant decline in business revenue. This unbearable burden of back rent piling up along with an unrealistic future rent obligation is why so many businesses are closing.

Thank you again for the opportunity to submit testimony and for all of your efforts to serve the people of as our elected leaders.

Thank you,

Signature Line Name Title Business Email Address Optional: Phone Number Optional: Address

Copy to Office of the Mayor: - , Mayor ([email protected]) - Gary Kurokawa, Chief of Staff ([email protected]) - Roy Amemiya, Managing Director ([email protected]) - Georgette Deemer, Deputy Managing Director ([email protected]) - Ed Hawkins, Office of Economic Development ([email protected]) - Amy Asselbaye, Office of Economic Revitalization ([email protected])

CITY COUNCIL 20-208 CITY AND COUNTY OF HONOLULU No. HONOLULU, HAWAII RESOLUTION

URGING THE CITY ADMINISTRATION TO ADOPT THE HONOLULU ECONOMIC RECOVERY AND EMPLOYMENT SUPPORT (H.E.R.E.S.) PACKAGE, INCLUDING THE FOLLOWING ELEMENTS: (1) SUPPORTING CITY PROJECTS TO PROMOTE JOB CREATION, ECONOMIC ACTIVITY, AND COMMUNITY SPENDING; (2) ESTABLISHING A COMMERCIAL LANDLORD-TENANT REAL PROPERTY TAX GRANT PROGRAM TO PROVIDE RENT FORGIVENESS AND RELIEF; AND (3) ALLOWING OUTDOOR DINING AND RETAIL ACTIVITIES IN CITY PARKING LOTS, YARDS, AND LANDSCAPE AREAS.

WHEREAS, on March 4, 2020, Governor David Ige ("Governor") issued a Proclamation declaring the existence of a state of emergency in the State of Hawaii ("State") due to the COVID-19 outbreak and invoking his authority under the Hawaii Emergency Management Act, HRS Chapter 127A; and

WHEREAS, on March 21, 2020, the Governor issued a Second Supplementary Proclamation requiring, subject to limited exceptions, all persons entering the State to be subject to a mandatory 14-day quarantine, effective March 26, 2020, which resulted in a dramatic reduction of visitors to the Hawaiian islands; and

WHEREAS, on March 23, 2020, the Governor issued a Third Supplementary Proclamation directing individuals to stay at home unless performing essential activities and placing restrictions on non-essential businesses; and

WHEREAS, these extraordinary measures have helped Hawaii to achieve among the lowest infection and death rates in the United States, but have also had a devastating impact on the local economy; and

WHEREAS, despite the gradual lifting of restrictions on non-essential businesses and City and County of Honolulu ("City"), State, and Federal economic relief measures, the economic hardship for many Hawaii businesses due to the COVID-19 pandemic has been severe, and many such businesses have had difficulty paying their rents and are vulnerable to closure due to lost revenues; and

WHEREAS, Hawaii has been reported as having the highest percentage of businesses in the country negatively affected by the COVID-19 pandemic, as well as the highest share of small businesses operating in "high-risk industries," such as restaurants, hospitality, and tourism; and

WHEREAS, this has also resulted in reductions of work hours, furloughs, or terminations for tens of thousands of workers; and

1 OCS2020-0794/8/18/2020 3:31 PM CITY COUNCIL 20-208 CITY AND COUNTY OF HONOLULU No. HONOLULU, HAWAII RESOLUTION

WHEREAS, a coalition of local labor, business, and industry groups including: the Chamber of Commerce Hawaii, Hawaii Construction Alliance, Hawaii Food Industry Association, Hawaii Food Manufacturers Association, Hawaii Restaurant Association, Retail Merchants Association of Hawaii, the National Association of Industrial and Office Properties ("NAIOP") Hawaii Chapter, the Hawaii Lodging and Tourism Association, and many individual business owners and workers, has come together to develop the H.E.R.E.S. package of initiatives to support business and retain or generate new jobs to help the local economy recover; and

WHEREAS, the City Council finds that implementation of this package of

BE IT RESOLVED by the Council of the City and County of Honolulu that it urges the City Administration to adopt the Honolulu Economic Recovery and Employment Support package, including the following elements:

1. Supporting City projects to provide construction jobs, generate economic activity, and stimulate community spending;

2. Establishing a commercial property landlord-tenant real property tax grant program for properties classified as Commercial and Hotel and Resort conditioned upon landlords providing rent forgiveness to their tenants; and

3. Allowing outdoor dining and retail activities in City parking lots, yards, and landscape areas abutting parcels with restaurant or retail establishments; and

BE IT FURTHER RESOLVED that the commercial property landlord-tenant real property tax grant program include the following elements:

1. Owners of properties classified as Commercial and Hotel and Resort shall be eligible to apply on behalf of their business tenants for a grant not to exceed the value of the annual real property tax for the subject properties, provided that:

a. Applications may be subject to audit or investigation; and

b. Fraudulent applications shall be subject to the applicable criminal and/or civil penalties; and

2 OCS2020-0794/8/18/2020 3:31 PM CITY COUNCIL 20-208 CITY AND COUNTY OF HONOLULU No. HONOLULU, HAWAII RESOLUTION

2. Eligibility for properties classified as Hotel and Resort shall be limited to that portion of the property leased to tenants operating a commercial business; and

BE IT FINALLY RESOLVED that copies of this resolution be transmitted to the Mayor, the Managing Director, and the Director of Budget and Fiscal Services.

INTRODUCED BY:

DATE OF INTRODUCTION:

AUG 18 2020

Honolulu, Hawaii Councilmembers

3 OCS2020-0794/8/18/2020 3:31 PM July 2020

Profile of Survey Respondents

1,234 total business respondents broken down into 18 primary industries.

Nearly one-third (29.7%) are in the Food Services and Retail Trade industries. (N=1,234)

Food Services 16.6% Retail Trade 13.1% Health Care and Social Assistance 12.6% Professional, Scientific, and Technical Services 10.1% Other Services 9.4% Real Estate Rental and Leasing 7.5% Art, Entertainment, and Recreation 5.0% Manufacturing 4.7% Construction 4.5% Finance and Insurance 4.1% Wholesale Trade 3.2% Educational Services 2.9% Transportation and Warehousing 1.9% Accommodation 1.2% Information 1.1% 1.1% Agriculture, Forestry, Fishing and Hunting 0.6% Management of Companies and Enterprises 0.4%

68.5% earned less than $1 million in estimated annual revenue in 2019. (N=1,145)

90.4% employed under 50 full-time equivalent employees as of the end of 2019. (N=1,191)

4 1 July 2020

Profile of Survey Respondents

1,234 total business respondents broken down into 18 primary industries.Mahalo to our partners for making this survey possible Nearly one-third (29.7%) are in the Food Services and Retail Trade industries. (N=1,234)

Food Services 16.6% Retail Trade 13.1% Health Care and Social Assistance 12.6% Professional, Scientific, and Technical Services 10.1% Other Services 9.4% Real Estate Rental and Leasing 7.5% Art, Entertainment, and Recreation 5.0% Manufacturing 4.7% Construction 4.5% Finance and Insurance 4.1% Wholesale Trade 3.2% Educational Services 2.9% Transportation and Warehousing 1.9% Accommodation 1.2% Information 1.1% 1.1% Agriculture, Forestry, Fishing and Hunting 0.6% Management of Companies and Enterprises 0.4%

68.5% earned less than $1 million in estimated annual revenue in 2019. (N=1,145)

90.4% employed under 50 full-time equivalent employees as of the end of 2019. (N=1,191)

4 2 July 2020

Profile of Survey Respondents

1,234 total business respondents broken down into 18 primary industries.

Nearly one-third (29.7%) are in the Food Services and Retail TradeAloha, industries. (N=1,234)

Thanks to the wisdom of our government leaders to prioritize public health and our compliant citizens, our Food Services 16.6% Retail Trade 13.1% curve among the lowestHealth in Care the and nation. Social Assistance 12.6% Professional, Scientific, and Technical Services 10.1% A lockdown was imposed to achieveOther this remarkableServices outcome. Public gatherings9.4% of all types were canceled while lawmakers pausedReal high Estate “pedestrian Rental and Leasing traffic” areas of our economy7.5% including the majority of transient accommodations, restaurantsArt, Entertainment, and andretail. Recreation Local households moved5.0% to self-isolation and practiced “work from home, stay at home.” BusinessesManufacturing considered non-essential4.7% were mandated to close and passenger arrivals were held to a 14-day quarantine.Construction As thousands of businesses4.5% shuttered their doors in unison, hundreds of thousands of employeesFinance and stood Insurance in line for unemployment4.1% checks including a weekly Federal bonus to assist them with the pandemicWholesale hardship. Trade 3.2% Educational Services 2.9% Transportation and Warehousing 1.9% Accommodation 1.2% Information 1.1% 1.1% Agriculture, Forestry, Fishing and Hunting 0.6% Management of Companies and Enterprises 0.4%

68.5% earned less than $1 million in estimated annual revenue inOf 2019.~33,000 employer(N=1,145) establishments statewide, banks administered ~$2.5 billion in Paycheck Protection Program (PPP) funding to 75% of them. In total, nearly 25,000 businesses received PPP funding. How will the 3 out of 4 businesses that received PPP funding fare in the new normal? Congress recently extended PPP so the remaining 25% may receive PPP funding if they qualify. Mayor Kirk Caldwell launched a grant program to provide additional relief to these 75% of employer establishments along with 90.4%smaller employers employed that may not under qualify for 50 PPP. full This-time program equivalent could help up employees to 7,000 small businesses as of thewith financialend of aid. 2019. However, (N=1 that,191) still leaves at least 18,000 businesses, or 1 out of 2 businesses across

During the last recession in 2008, a net 1,600 businesses closed representing 5% of employer establishments. Without additional funding, there will be severe damage to our economy. We could face over 5,000 additional business closures compared to 2008, which will cut essential tax revenue and jobs, their entrepreneurial spirit will drive a good economic recovery.

4 3 July 2020

Profile of Survey Respondents

1,234 total business respondents broken down into 18 primary industries.

Nearly one-third (29.7%) are in the Food Services and Retail Trade industries. (N=1,234)

Food Services 16.6% Retail Trade 13.1% Health Care and Social Assistance 12.6% Professional, Scientific, and Technical Services 10.1% Other Services 9.4% Real Estate Rental and Leasing 7.5% Art, Entertainment, and Recreation 5.0% Business Economic Development &Manufacturing Tourism (DBEDT), member4.7% organizations, banks, credit unions and others have been during this crisis andConstruction helps understand the economic4.5% scope of the pandemic in order to find solutions. This survey isFinance a collaborative and Insurance public and private4.1% effort and was designed by many of our Wholesale Trade 3.2% Educational Services 2.9% Transportation and Warehousing 1.9% enough for the employer establishmentsAccommodation statewide, 1.2%and to diagnose the outstanding need after these various programs including loan deferralInformation are accounted1.1% for. As the economy reopens under new social distancing guidelines, local businesses will face difficult1.1% challenges in order to survive. Agriculture, Forestry, Fishing and Hunting 0.6% Some of the Managementkey findings of Companiesconfirmed and what Enterprises we have 0.4%heard anecdotally:

• 2 out of 3 businesses had to close due to COVID-19, with food services, retail, and accommodations at risk; 68.5 • %The earned 60% of businesses less than that remain $1 million closed – orin are estimated only partially reopened annual – expect revenue to miss rent payments through the rest of the year; in 2019. (N=1,145) This Final Report includes the survey results. Please contact me with any questions or concerns.

90.4%Sincerely, employed under 50 full-time equivalent employees as of the end of 2019. (N=1,191)

Ryan Tanaka President Island Business Management, LLC [email protected] 4 4 July 2020

Profile of Survey Respondents

1,234 total business respondents broken down into 18 primary industries.

Nearly one-third (29.7%) are in the Food Services and Retail Trade industries.industries. (N=1,(N=1,234)

Food Services 16.6% Retail Trade 13.1% Health Care and Social Assistance 12.6% Professional, Scientific, and Technical Services 10.1% Other Services 9.4% Real Estate Rental and Leasing 7.5% Art, Entertainment, and Recreation 5.0% Manufacturing 4.7% Construction 4.5% Finance and Insurance 4.1% Wholesale Trade 3.2% Educational Services 2.9% Transportation and Warehousing 1.9% Accommodation 1.2% Information 1.1% 1.1% Agriculture, Forestry, Fishing and Hunting 0.6% Management of Companies and Enterprises 0.4%

68.5%68.5% earned less than $1 million in estimated annual revenue in 2019. (N=1,(N=1,145)

90.4% employed under 50 full-timefull-time equivalent employees as of the end of 2019. (N=1,(N=1,191)

4 5 July 2020

78.4%Profile areof tenantsSurvey in buildings Respondents whose property owner is located within the State of . (N=992) 1,234 total business respondents broken down into 18 primary industries.Over $25,000 8.7% 77.1% have $20,001 - $25,000 2.2% monthly base-rent Nearly$15,001 - $20,000 one-third4.4% (29.7%) are in the Food Servicespayments and less Retail than Trade$10,001 - $15,000industries. (N=17.6%,234) or equal to $10,000. (N=970) $5,001 - $10,000 20.9% Food Services 16.6% $3,001 - $5,000 Retail Trade23.0% 13.1% Health Care and Social Assistance 12.6% Less than $3,000Professional, Scientific, and Technical Services 33.2% 10.1% Other Services 9.4% Real Estate Rental and Leasing 7.5% Art, Entertainment, and Recreation 5.0% 75.9% do not pay percentageManufacturing rent above4.7% their base rent. (N=964) Construction 4.5% Finance and Insurance 4.1% Wholesale Trade 3.2% Educational Services 2.9% report >75% of their revenue comes from tourism. (N=1,001) 21.6% Transportation and Warehousing 1.9% Accommodation 1.2% Information 1.1% 1.1% RevenueAgriculture, Forestry, will not Fishing increase and Hunting to 0.6%previous levels until tourismManagement returns.of Companies Businessesand Enterprises 0.4% need help

reducing expenses to match lost revenues. 68.5% earned less than $1 million in estimated annual revenue in 2019. (N=1,145)

90.4% employed under 50 full-time equivalent employees as of the end of 2019. (N=1,191)

54 6 JulyJuly 2020 2020

ProfileRent: COVIDof Survey-19 ImpactRespondents & Relief

1,2From34 April total through business Ju respondentsne 2020, businesses broken down reported into whether18 primary they industries.paid for rent in full, partially, or not at all.

Nearly one-third (29.7%) are in the Food Services and Retail Trade industries. (N=1,234)

Food Services 16.6% Retail Trade 13.1% 65.0%Health Care and Social Assistance24.6% 10.4%12.6% Professional, Scientific, and Technical Services 10.1% Other Services 9.4% Real Estate Rental and Leasing 7.5% Paid forArt, Entertainment,rent in andfull Recreation Partially 5.0% Not at all Manufacturing 4.7% Construction 4.5% Finance and Insurance 4.1% Wholesale Trade 3.2% Educational ServicesThe two industries2.9% that owed the most rent per month, in Transportation and Warehousingterms of 1.9%rent not paid at all, are Food Services ($7.2 Accommodationmillion)1.2%and Retail Trade ($6.7 million), comprising Information 1.1% 52% of1.1% fully unpaid rent across all industries. (N=970) Agriculture, Forestry, Fishing and Hunting 0.6% Management of Companies and Enterprises 0.4%

in in 68.5% earned1 less 3 than $1 million in estimated1 annual 10 revenue in 2019.businesses (N=1,145) reported to have businesses reported to have not paid rent in full. not paid rent at all.

90.4% employedThe estimated under 50total full rent-time owed equivalent per month employeesis $32 as of the end of 2019. (N=1,191) in partially unpaid rent (assuming 50% of million rent was paid) and another $27 million in fully

unpaid rent. (N=970)

4 6 7 JulyJuly 2020 2020

Profile of Survey Respondents 44.1% that have not paid rent at all are currently closed. (N=984) 1,234 total business respondents broken down into 18 primary industries.Not paid at all 44.1% 21.6% 12.7% 21.6%

Paid partially Nearly one-third16.9% (29.7%29.3%) are in the Food28.1% Services and25.6% Retail Trade industries. (N=1,234) Paid in full 11.6% 18.0% 23.3% 47.2%

Food Services 16.6% Retail Trade 13.1% Business is currently closed Business closed but is now partially reopened Health Care and Social Assistance 12.6% Professional,Business Scientific,closed but and is Technicalnow reopened Services Business never closed 10.1% Other Services 9.4% Real Estate Rental and Leasing 7.5% Art, Entertainment, and Recreation 5.0% have not receivedManufacturing any rental assistance4.7% at all from their 61.5% Construction 4.5% landlord. Rent deferralFinance wasand Insurance the most common4.1% form of rental Wholesale Trade 3.2% assistance over rentEducational reduction Services and rent2.9% restructure. (N=943) Transportation and Warehousing 1.9% Accommodation 1.2% Information 1.1% 1.1% 61.5% Agriculture,of Food Forestry, Services Fishing and Hunting 0.6% 44.7%Management of Companies and Enterprises 0.4%

and 52.9% of Retail Trade

received no rental assistance 68.5at all.%(N=964) earned less than $1 million in estimated annual revenue in 2019. (N=1,145) 27.5%

90.4% employed under 50 full-time equivalent Newemployees Normal as of 8.8% the end of 2019. (N=1,191) 2.2%

Rent Reduction Rent Deferral No assistance at all Rent Restructure

47 8 JulyJuly 2020 2020

ProfileOnly 2.2% of Surveyof rental agreements Respondents have been restructured as businesses enter the new normal. (N=943) 1,234 total business respondents broken down into 18 primary industries.>$5,000 14.4%

$3,001 to $5,000 9.6% Of businesses that Nearly one-third (29.7%) are in the Food Servicesreceived and rent Retail $1,001 to $3,000 24.7% assistance from their Trade industries. (N=1,234) landlord, 76.0% $0 to $1,000 51.3% Food Services received less than16.6% Retail Trade 13.1% (N=271) Health Care and Social Assistance $3,000.12.6% Professional, Scientific, and Technical Services 10.1% Other Services 9.4% Real Estate Rental and Leasing 7.5% BusinessesArt, expected Entertainment, and to Recreation miss rent payments5.0% through year-end: Manufacturing 4.7% Construction 4.5% Finance and Insurance 4.1% Wholesale Trade 3.2% Educational Services 2.9% Transportation and Warehousing 1.9% in Accommodation in 1.2% in 1 2 Information3 41.1% 9 10 1.1% RetailAgriculture, Forestry, Fishing and HuntingRestaurants0.6% Accommodations Management of Companies and Enterprises 0.4%

68.5Existing% earned Business less than Relief $1 million Programs in estimated annual revenue in 2019. (N=1,145) received financial support from PPP and/or the 90.9% Small Business Administration relief programs. (N=948) 90.4%% employed under 50 full-time equivalent employees as of the end of 2019.received (N=1,191) assistance from the City & County of 38.3% (N=943)

22.3% received loan deferrals from their bank. (N=933)

48 9 JulyJuly 20202020

ProfileImpact ofof COVID-19Survey Respondents on Revenue & Operations

1,2Majority34 total of business business respondents (60.2%) closed broken due down to COVID- into 1819, primaryand industries.37.2% remain closed or have only partially reopened. (N=1,005)

39.8% did not close. Nearly one-third (29.7%) are in the Food Services and Retail 23.0% closed but have now reopened. Trade industries. (N=1,234) 21.2% closed but have now partially reopened. Food Services 16.6% 16.0% closed and remainRetail Trade closed. 13.1% Health Care and Social Assistance 12.6% Professional, Scientific, and Technical Services 10.1%

Other Services 9.4% Majority ofReal businesses Estate Rental and Leasing reported some degree7.5% of hardship Art, Entertainment, and Recreation 5.0% imposed by COVID-19Manufacturing on their ability4.7% to pay rent (88.2%), Construction 4.5% employees (86.7%)Finance and Insurance, and operating4.1% expenses (89.3%). Wholesale Trade 3.2% Educational Services 2.9%

Transportation and Warehousing 1.9% Rent Employees AccommodationOperating Expenses1.2% Information 1.1% 1.1% 1 in 3 businesses Agriculture, Forestry, Fishing and Hunting 0.6% 38.3% Extreme HardshipManagement of Companies and Enterprises 0.4%35.5% reported extreme 33.7% hardship.

(Rent: N=921, Employees: N=890, 32.8% Operating Expenses: N=912) 68.5Medium Hardship% earned less than $1 million30.2% in estimated annual revenue 35.2% in 2019. (N=1,145)

17.0% Minimal Hardship 21.0% 20.4% 90.4% employed under 50 full-time equivalent employees as of the end of 2019. (N=1,191)11.8% No Hardship at All 13.3% 10.7%

No Hardship at All = 100% able to pay; Minimal Hardship = greater than 90% probability of being able to pay; Medium Hardship = 75-89% probability of being able to pay; Extreme Hardship = less than 75% probability of being able to pay

49 10 JulyJuly 2020 2020

ProfileBusiness of Survey Outlook: Respondents New Normal

1,234 total business respondents broken down into 18 primary industries. expect their annual revenue

85.9% to decrease in 2020. (N=852) Nearly one-third (29.7%) are in the Food Services and Retail Trade industries. (N=1,234)%

Food Services 16.6% Retail Trade 13.1% Health Care and Social Assistance 12.6% Professional, Scientific, and Technical Services 10.1% Other Services 9.4% Real Estate Rental and Leasing 7.5% No -(1 - 20%) -(21 - 30%) -(31 - 50%) >-(50%) Art, Entertainment, and Recreation 6.9% 5.0%0.6% 1.2% 0.7% change Manufacturing 4.7% 4.7% Construction 4.5% Finance and Insurance +(1 - 20%) +(214.1% - 30%) +(31 - 50%) >+(50%) 17.6% 13.8% 26.2%Wholesale28.3 Trade% 3.2% Educational Services 2.9% Transportation and Warehousing 1.9% 28.3% expect revenue Accommodation 1.2% Information 1.1% to decline more than 1.1% Agriculture, Forestry, Fishing and Hunting 0.6% 50% in 2020. Management of Companies and Enterprises 0.4%

68.5% earned less than $1 million in estimated annual revenue in 2019. (N=1,145) 1 in 2 expects a decline in revenue of 30% to 50% in the new

normal, including 77.6% of Food Services and 65.0% of 90.4%Retail Trade. employed(N=852) under 50 full-time equivalent employees as of the end of 2019. (N=1,191)

410 11 July 2020 JulyRent 2020 Outlook: New Normal JulyRentJuly 2020 2020 Outlook: New Normal

As ProfileAsbusinessesRent Outlook: expectof Survey to miss rentNew Respondentspayments Normal through December 2020. This number may businessesrise if COVID-19 expect cases to miss notably rent paymentsrebound, and through counties December are forced 2020. to Thisreverse number their may Asreopening plans. The demand for rent assistance remains as businesses 1,2rise if34 COVID-19 total businesscases notably respondents rebound, and countiesbroken aredown forced into to reverse18 primary their reopeningbusinessesanticipate moreplans expect .staffThe to cuts missdemand and rent other forpayments rent reductions assistance through to survive. December remains as2020. businesses This number may industries.anticipaterise if COVID-19 more staff cases cuts notably and other rebound, reductions and counties to survive. are forced to reverse their reopening plans. The demand for rent assistance remains as businesses anticipate more staff cuts and other reductions to survive. Nearly one-third (29.7%) are in the Food Services and Retail Trade industries. (N=1,234)

45.2% expect to miss rent payments between June and Food Services 16.6% 45.2%December 2020 basedexpect Retailon to Tradethe miss expected rent payments market betweenconditions13.1% June in the and Health Care and Social Assistance 12.6% new normal. (N=925) DecemberProfessional, 2020 Scientific, based expectand Technical on toServices the miss expected rent payments market conditionsbetween10.1% June in the and 45.2% Other Services 9.4% (N=925) new normal. Real Estate Rental and Leasing 7.5% December 2020Art, Entertainment, based and on Recreation the expected 5.0%market conditions in the new normal. (N=925) Manufacturing 4.7% Construction 4.5% Finance and Insurance 4.1% 2 out of 3 businessesWholesale that Trade are currently3.2% closed – or partially Educational Services 2.9% 2reopenedout of 3 willbusinessesTransportation miss a andrent Warehousingthat payment are currently 1.9%between closed June – andor partially December reopened2020. (N=946 )will miss a rentAccommodation payment1.2% between June and December 2 out of 3 businesses thatInformation are currently1.1% closed – or partially 2020. (N=946) 1.1% reopenedAgriculture, will miss Forestry, aFishing rent and Huntingpayment0.6% between June and December Management of Companies and Enterprises 0.4% 2020. (N=946) Business never closed 69.7% 16.6% 13.7%

Business never closed 69.7% 16.6% 13.7% Business closed but is now reopened 61.0% 24.2% 14.8% 68.5% earnedBusiness less never than closed $1 million in estimated69.7% annual revenue16.6% 13.7% Business closed but is now reopened 61.0% 24.2% 14.8% in 2019. (N=1,145) Business closed but is now partially reopened 36.5% 31.5% 32.0% Business closed but is now reopened 61.0% 24.2% 14.8% Business closed but is now partially reopened 36.5% 31.5% 32.0% Business is currently closed 33.8% 26.9% 39.3% 90.4%Business closed employed but is now partially under reopened 50 full-36.5%time equivalent31.5% employees 32.0%as of Business is currently closed 33.8% 26.9% 39.3% the end of 2019. (N=1,191) Will not miss rent payment Will miss 1 to 3 months of rent Will miss 4 to 6 months of rent Business is currently closed 33.8% 26.9% 39.3% Will not miss rent payment Will miss 1 to 3 months of rent Will miss 4 to 6 months of rent

Will not miss rent payment Will miss 1 to 3 months of rent Will miss 4 to 6 months of rent 11

11

4 1112 JulyJuly 2020 2020

Profile of Survey Respondents

Of businesses that expect to miss rent payments, 1,234 total business respondents broken down into 18 primary 48.5% expect to be unable to pay 4 to 6 industries. months of rent in full between June and December

2020. (N=392) Nearly one-third ( ) are in the Food Services and Retail 29.7% Trade industries. (N=1,234)

Food Services59.4% of retail businesses expect16.6% Retail Trade 13.1% (N=392) Health Care and Social Assistanceto miss 4 to 6 months of12.6% rent. Professional, Scientific, and Technical Services 10.1% Other Services 9.4% Real Estate Rental and Leasing 7.5% Art, Entertainment, and Recreation 5.0% 1 to 3 months 4 to 6 months Manufacturing 4.7% Construction 4.5% Information 28.6% 71.4% Finance and Insurance 4.1% Wholesale Trade 3.2% Retail Trade 40.6% 59.4% Educational Services 2.9% Transportation and Warehousing 1.9% Art, Entertainment, and Recreation 44.4% 55.6% Accommodation 1.2% Information 1.1% Wholesale Trade 45.5% 54.5% 1.1% Agriculture, Forestry, Fishing and Hunting 0.6% Real Estate Rental and Leasing 47.4% 52.6% Management of Companies and Enterprises 0.4% Food Services 49.2% 50.8%

Educational Services 54.5% 45.5%

68.5% earned Manufacturingless than $1 million55.0% in estimated annual45.0% revenue

in 2019. (N=1,145) Accommodation 57.1% 42.9%

Finance and Insurance 57.1% 42.9% 90.4%Health Careemployed and Social Assistance under 50 full-time60.0% equivalent employees40.0% as of Other Services 64.7% 35.3% the end of 2019. (N=1,191) 83.3% 16.7%

Transportation and Warehousing 87.5% 12.5%

12 4 13 JulyJuly 20202020

ConclusionProfile of Survey Respondents

Although temporary business closures may have reduced payroll and operating expenses,1,234rent total is abusiness fixed cost respondentsbusinesses must broken continue down to pay into. Of 18 the few primary businessesindustries. that have received some form of rent assistance, most received rent deferrals, which will only contribute to an increasing rent burden over the coming months. Nearly one-third (29.7%) are in the Food Services and Retail RevenuesTrade industrie in the news. normal (N=1,234 are) expected to fall below pre-COVID-19 levels (for the next five years),1 so businesses will struggle to pay off the accumulated rent burden. Because counties are collecting property taxes in full, landlords are left with few Food Services 16.6% options but to continue to expecRetailt rent Trade payments from their business tenants.13.1% Health Care and Social Assistance 12.6% Professional, Scientific, and Technical Services 10.1% Rent reductions will be necessaryOther Services for many businesses to survive9.4% and lease restructuring would Realallow Estate landlords Rental and Leasing and tenants to redefine 7.5%lease terms Art, Entertainment, and Recreation 5.0% accommodating market conditionsManufacturing in the new normal.4.7% Financial aid for landowners would help incentivize them to doConstruction so. 4.5% Finance and Insurance 4.1% Wholesale Trade 3.2% Educational Services 2.9% 45,000 Transportation and Warehousing 1.9% Pre-COVID-19 COVID-19 Establishing New Normal Accommodation 1.2%

40,000 Information 1.1% 1.1%

35,000 Agriculture, Forestry, Fishing and Hunting 0.6% Management of Companies and Enterprises 0.4%

30,000

25,000

68.5 20,000 % earned less than $1 million in estimated annual revenue Mar 21 to Sep 1: quarantine

Daily Daily Passenger Count requirement for travelers entering in 2019. (N=1,145) May 18: "Act With Care" 15,000 order begins; reopening of scheduled to end with restrictions medium-risk businesses

10,000 May 7: "Safer at Home" order begins; Mar 31 to Jun 16: phase 1 reopening of quarantine requirement for Mar 25: "Stay at Home" businesses 5,000 inter-island travelers in effect 90.4%and "Workemployed from Home" under 50 full-time equivalent employees as of orders begin; closure of non-essential businesses the -end of 2019. (N=1,191) Jan 01 Jan 21 Feb 10 Mar 01 Mar 21 Apr 10 Apr 30 May 20 Jun 09 Jun 29 Jul 19 Aug 08 Aug 28 Sep 17 Oct 07 Oct 27 Nov 16 Dec 06 Dec 26

1 “UHERO Forecast with Scenario Analysis: Battered by COVID-19, Hawaii begins to reopen,” UHERO, May 28, 2020

134 14 July 2020 Profile of Survey Respondents

1,234 total business respondents broken down into 18 primary industries.

Nearly one-third (29.7%) are in the Food Services and Retail Trade industries. (N=1,234)

Food Services 16.6% Retail Trade 13.1% Health Care and Social Assistance 12.6% Professional, Scientific, and Technical Services 10.1% Other Services 9.4% Real Estate Rental and Leasing 7.5% Art, Entertainment, and Recreation 5.0% Manufacturing 4.7% Construction 4.5% Finance and Insurance 4.1% Wholesale Trade 3.2% Educational Services 2.9% Transportation and Warehousing 1.9% Accommodation 1.2% Information 1.1% 1.1% Agriculture, Forestry, Fishing and Hunting 0.6% Management of Companies and Enterprises 0.4%

68.5% earned less than $1 million in estimated annual revenue in 2019. (N=1,145)

90.4% employed under 50 full-time equivalent employees as of the end of 2019. (N=1,191)

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