During April, sales of 217 houses and 343 condo’s were reported through the Honolulu Board of Realtors compared to 229 (-5.2%) and 379 (-9.5%) a year ago. The median sales price (mid-way) was $600,000 for houses and $319,000 for condos compared to $585,000 (+2.6%) and $305,000 (+4.6%).

The Dalai Lama wrapped up a whirlwind four-day visit to Hawaii in mid-April. It was the fourth visit the Dalai Lama has made to Hawaii, the last being in 2008.  The spry 76-year-old Tibetan spiritual leader packed the Stan Sheriff Center twice with 9.000 admirers each time besides making various other appearances both to large crowds along with private visits with Native Hawaiian spiritual leaders. Included was a blessing of the voyaging, double-hulled canoe Hokule’a that is scheduled for a four-year voyage around the world beginning in 2013. He also drew laughs and roaring applause from a presentation to students at Kailua High School where he answered questions from students on a wide variety of topics.

From the 4/25/12 Kokua Line: Since gambling is illegal in Hawaii, can you play the Mega Millions lottery by sending money to someone on the Mainland to purchase a ticket for you? Answer: Under Hawaii law, this is considered to be gambling. “As long as the elements of consideration, chance and reward exist, it is gambling regardless of where the drawing took place” according to the Honolulu Police Department’s Narcotics/Vice Division. However, if you purchased the lottery ticket while visiting another state where gambling is legal (every other state except Utah), you could claim the winnings . . . of course, less taxes.

Soaring electricity bills are pushing officials to consider a major shift in Hawaii’s energy infrastructure that could replace costly fuel oil with less expensive natural gas as a source for some of the state’s power generation. The prospect of shipping LNG (liquid natural gas) to Hawaii has been discussed at various times in the past but plans never advanced largely because of the high costs. Now, with natural gas trading at decade-low prices on the Mainland and fuel oil in Hawaii at record highs, LNG is back on the table as a potential energy source, particularly since it burns both cheaper and cleaner than coal or oil. The residential rate for electricity in Hawaii averaged a record 34.7 cents a kilowatt-hour in 2011 compared to a national average of 11.8 cents a kilowatt-hour. Nearly 80% of the electricity consumed in Hawaii today is produced by burning oil, by far the highest percentage of any state. In second place is Alaska with about 14% of its electricity coming from oil.

One of the most asked questions these days is . . . will the rail ever be built? The city is still waiting for federal funding to appear. A lawsuit to stop the rail has been filed by former Gov. Ben Cayetano along with several others that oppose it. Cayetano is running for Mayor and has stated that he’ll stop the rail if elected. On April 17th Circuit Court judge Karl Sakamoto struck down a procurement rule that the city used to award more than $144 million in rail related contracts, declaring the 1995 rule invalid because it conflicts with state procurement law. A minimum of three competitors is required for each public contract to hire an architect or engineer. At least 26 contracts for professionals including architects and engineers were apparently awarded using the now-invalid rule. On the flip side, the federal Department of Transportation gave the city the go ahead on April 20th to start building holes for pillars on a 2.5-mile stretch from East Kapolei to Fort Weaver Road where there are no culturally significant areas. The pillar holes are 40 feet deep by eight feet in diameter. The rail proponents say that waiting to build would cost the city money each month with delay claims and escalation in costs. Mayor Carlisle who is in favor of the rail has obtained approval from the City Council for a $450 million city-backed line of credit to appease the Federal Transit Administration who stated that the rail financial plan must be strengthened before it will agree to commit $1.55 billion in federal funds.

The Big Island is one of the top exporters of queen bees, which are in high demand to bolster struggling colonies nationwide. Hawaii provides about 30% of the queen bees sent to the mainland. An estimated 400,000 queens make the move each year from the sunny hillsides of   Kona. Although some pollination is done by wind, a huge variety of fruits, nuts, flowers and plants rely upon honeybees for pollination Each queen goes for $17 to $25. Across the nation, beekeepers have been losing close to a third of their hives each year over the past few years. The decline is attributed to a number of factors, including pesticide use, disease, parasites and habitat issues. Bees are produced in numerous locations in Hawaii; however, Kona has an ideal climate for queen rearing with plenty of sunshine and very little wind plus lots of undeveloped land. Raising queens is a labor-intensive undertaking. Using thousands of miniature hives, breeders trick worker bees into thinking they don’t have a queen, so the bees will raise a new one by feeding a larva exclusively on “royal jelly” secreted from glands on their heads. Without the protein-rich diet, the larva would just become another worker bee.

In what has been called one of the weirdest and wackiest tax provisions in the country, a state law allows Hawaii residents to claim up to $3,000 in personal income tax deductions for qualified expenses related to maintaining “exceptional” trees on their private property. The law authorizes a per-tree deduction once every three years. Based upon age, rarity, location, size, historical or cultural value or other factors, the trees must be deemed exceptional by a county arborist panel and formally bestowed that distinction. Properties with exceptional trees often also have historic homes, which provide them a double whammy in avoiding taxes. For example, the Walker Estate at 2616 Pali Hwy has 10 exceptional trees ranging from a mango to an Indian gooseberry. The 100+ year-old property is assessed at $7.8 million but apparently paid only $616 in property taxes in 2011.

UH is betting that it can save money on travel subsidies by directly booking trips for Big West Conference opponents vice providing a monetary subsidy. As a condition for membership in the Big West Conference (most sports except football), the team must underwrite travel by Conference teams to Honolulu. Following are the number of tickets UH must provide Big West opponents for games in Hawaii: baseball (32), soccer (28), softball (26), water polo (23), women’s volleyball (21), women’s basketball (21) men’s basketball (19). For football, as a member of the Mountain West Conference, there is no option, UH pays Conference opponents from California $150,000 and teams from beyond California $175,000.

About 9,000 U.S. Marines stationed on Okinawa will be moved to Hawaii, Guam and other locations in the Asia-Pacific under a U.S.-Japanese agreement announced 4/26. About 2,500 Marines will be relocated to Hawaii increasing the number of Marines stationed in Hawaii from the current about 11,700 to a future of about 14,200. Officials say that Kaneohe Bay is the preferred location but it will be crowded and multiple locations will be considered to accommodate the additional troops. A likely option is the former Naval Air Station Barbers Point, which closed in 1999 and is now called Kalaeloa. The 2,500 Marines are expected to be relocated to Hawaii in phases over the next couple of years.

Bank of Hawaii and First Hawaiian Bank both placed high on a list of top financial institutions in the United States. Bank of Hawaii Corp. was ranked as the nation’s top performing bank among public and private banks and thrifts with at least $10 billion in assets. It was the second year in a row that Bank of Hawaii, the state’s second largest bank was awarded the No. 1 spot. First Hawaiian Bank, Hawaii’s largest bank by assets, was ranked second among public, private and foreign-owned banks and thrifts with assets of $10 billion or more. First Hawaiian Bank is owned by Banc-West who in turn is owned by French banking giant BNP Paribas.

Hawaii remains among a minority of states without a state-funded preschool program according to a recent report. Eleven states did not offer this schooling, up from ten a year ago. The report also showed that funding for state programs was declining . . . Gov Abercrombie is considering converting the non-used Waikiki Natatorium into a sand volleyball court. The area is actually large enough for two courts. The momentum behind this decision was provided by UH’s recent decision to sponsor a women’s sand volleyball team and bring national competition to Hawaii . . .  Mustapha El Akkari arrived at the Brigham Young University-Hawaii campus on a basketball scholarship and then went on as a senior this year to be elected as the 57-year-old University’s first non-Mormon as well as its first Muslim student body president.

Hawaii’s unemployment rate held steady at 6.4% in March for the second month in a row. The March rate shows modest improvement over 2011 and 2010 when unemployment averaged 6.7% and 6.9% respectively. Nationally, the unemployment rate fell to 8.2% in March from 8.3% in February . . . The Navy wants to cover Ford Island’s historic runway with photovoltaic panels, an addition the service said would “define and interpret” the original runway while providing environment-friendly power. The neighboring Pacific Aviation Museum calls the proposal an “atrocity” in light of the airfield’s rich history.

During March, sales of 222 houses and 338 condos were reported through the Board’s MLS compared to 249 (houses) and 331 (condos) a year ago for a decrease of 10.8% (houses) and an increase of 2.1% (condos). The median (midway) price paid for island properties in March was $625,000 for houses compared to $548,500 last year (+13.9%) and $311,750 for condos compared to $315,000 last year (-1.0%). The most meaningful price statistic at this early stage in the year is to compare the year-to-date (YTD) median sales data that reflect the first quarter or January through March. Houses were $616,950 compared to $559,000 last year (+10.4%) while condos were unchanged at $310,000.

With prices being relatively flat and interest rates being so low, a marvelous window of opportunity exists to make an upward move. Granted, you’ll get less for the home you sell; however the property you buy will cost you less. If both properties sell for 10% under market value, the more expensive, move-up property will make you more money than you’ll lose on the home you sell.

Hail . . . Floods . . .Tornado . . . Big Mess! . . . so read the front page headlines of the Star-Advertiser on March 10th, the day after a Windward Oahu tornado/hail storm with record-size hail up to four inches in diameter hit the Windward side, making national news. Particularly hard hit was Kailua where most of our staff lives. I recognize that the weather has recently created some major problems on the Mainland and so; a few tornados and some hail and flooding may be nothing to get too excited about. However, this is sunny, tropical Hawaii. I’ve lived in Kailua for some forty years and had never seen hail here.

In mid-March the average U.S. rate on a 30-year fixed mortgage rose above 4% for the first time in five months. The sharp increase suggests that the window to buy or refinance a home at historically low rates may be closing. Rates tend to track the yield on the 10-year Treasury note. The economic outlook has improved in recent weeks, leading investors to shift money out of long-term U.S. Treasury bonds and into stocks. That has driven Treasury yields higher. As more people refinance home mortgages to take advantage of low interest rates, the tax rules are tripping some up, particularly those that borrow more than what they owe on their existing mortgage. If you plan to do this, we recommend that you discuss it with your CPA or tax advisor. This applies to all homeowners, but particularly those that own expensive homes valued at $1 million or more. The IRS apparently is targeting owners that have refinanced expensive homes according to a March 12th article in The Wall Street Journal.

March Hawaii held their first GOP caucus in March, won by Mitt Romney with 45.4% of the vote. The caucus determines which candidates share 17 of the state’s 20 delegates to the Republican National Convention this summer in Tampa. Previously, Hawaii Republican awarded delegates at state party conventions. The voter turnout of 10,239 was well above what was expected.

Honolulu’s poor road conditions ranked it third worse in March for major U.S. cities, behind No. 1 San Jose and No. 2 Los Angeles according to a Washington, D. C. based non-profit group known as TRIP (The Road Information Group). The average additional cost to Honolulu vehicle owners is $701 in accelerated vehicle depreciation, additional repairs, and increased fuel and tire wear. The recent heavy rains has exacerbated the problem as potholes on our roads abound.

A telephone survey of 1,172 likely voters on Oahu in February showed 55% were opposed to the rail with only 34% in favor with the rest in the “no opinion” category. The public’s main concern is cost. 59% were “very concerned” about cost with 21% “somewhat concerned.”

Dynasty trusts are long-term trusts designed for multi-generational use. They can survive for 21 years beyond the death of the last beneficiary alive when the trust was written. If you were setting up one today and had a 2-year-old grandchild, your dynasty trust could last for 21 years after the death of your grandchild. Dynasty trusts are used, at times, for real estate, particularly vacation homes like a beachfront house in Hawaii that the owner wants to be available for future use by his family members. One of the tax provisions considered by President Obama has been a shortening of the time frame in which to shelter dynasty trust assets. As a result, some estate attorneys are recommending that those interested in establishing a dynasty trust take action before the end of 2012. There are a host of things to consider when putting vacation homes in a trust such as allocating use between heirs, handling repairs, etc. If you would like additional information, a good place to start would be to Google dynasty trusts on the Internet.

During February, there were 217 sales of houses on Oahu compared to 181 a year ago, an improvement of +19.9%. Sales prices of houses also improved with the median (midway) price increasing from $570,000 a year ago to $625,000 this February. Unfortunately, we didn’t experience the same improvement with condos. The number of condo sales in February declined from 295 a year ago to 227 this year, a drop of ­–23.1%. The median sales price declined from $320,000 a year ago to $315,000 this February, a drop of –1.6%. The two-month year-to-date (YTD) figures for houses were number of sales 381 to 401 (+5.2%) with median prices $570,000 to $615,000 (+7.9%). The YTD figures for condos were sales 564 to 504 (–10.6%) with prices $307,500 to $309,500 (+0.7%). Keep in mind the YTD statistics reflect only two months of data.

Foreclosure actions against Hawaii homeowners hit a six-month high in January according to a report issued in mid-February by real estate research firm RealtyTrac. There were 652 Hawaii foreclosures in January (all islands) the most for any month since the new law (Act 48) became effective last May. Act 48 reformed the rules for non-judicial, or out of court foreclosures which used to be how lenders handled most Hawaii foreclosures because it was quicker and cheaper than going through a court action. A key provision of the new law gave qualified homeowners the option of having a mediator assist with foreclosure mitigation in front of a representative of the lender before a foreclosure could proceed. Mediation was supposed to curb what consumer advocates said were lender abuses while allowing the foreclosures to proceed in cases where homeowners had no realistic prospect of maintaining their mortgage. Act 48 required the lender to follow a series of steps that could render a non-judicial foreclosure sale void if the steps, even very minor ones, were violated. As a result the lenders have used judicial foreclosures almost exclusively since the law became effective. As of December, all foreclosures in Hawaii are in court, which is resulting in delays in resolving the foreclosures.

Five years after the housing bubble burst, America’s wealthiest families are now losing their homes to foreclosure at a faster rate than the rest of the country with many of them doing so voluntarily. Over 36,000 homes valued at $1 million or more were foreclosed on or at least served with a notice of default in 2011. While that’s less than 2% of all foreclosures nationwide, it represents a much bigger share of foreclosure activity than in previous years. Until recently, many homeowners at the high-end of the housing market were able to postpone the foreclosure process in view of their other assets. However, as property values have continued to decline, many high-end homeowners have chosen to walk away from their expensive home because they owe more on the property than it is worth. With lower-priced homes, owners usually default because they can’t afford the payments and it may be a choice between feeding their family and paying the mortgage on a home that’s under water. With expensive homes, some of the owners may be able to afford the payments; however, they make a business or financial decision to stop making the payments and walk away from the property when the home is worth considerably less than what they owe.

Whether the NFL Pro Bowl returns to Hawaii remains to be seen; however, in its current form, it essentially is a fake football game that leaves a lot to be desired. One proposal being considered is to reward the best players in the AFL and the NFL with an all expenses-paid, televised, golf tournament that would be scheduled in Hawaii before the start of summer training camps. The players love coming the Hawaii. By having the event in June, they could get a real summer vacation along with some golf and/or some beach time. Moreover, players selected from the two Super-Bowl teams would be able to participate. The league benefits because it still would get the broadcast and sponsorship revenues associated with the multi-day event. Companies would benefit by the sponsorship opportunities associated with such an event. And, charities would benefit as they would be recipients of proceeds from the golf tournament. Perhaps the event could be spread out over several different golf courses with the golfers playing rounds at each course. And, perhaps some fans could participate under some selection process, fans that would be willing to pay to be part of an NFL player experience. And last but not least, Hawaii would benefit as such an event would show-off the state far better than a Pro Bowl at Aloha Stadium.

The Navy, University of Hawaii and U.S. Department of Energy have joined forces on a project they hope will speed up the effort to commercialize wave power. The partners are moving ahead with plans to create a “Wave Energy Test Site” offshore from Marine Corps Base Hawaii that is scheduled to be completed in 2014. The potential of wave power is staggering. Hawaii’s total electricity consumption last year was about 10 terawatt-hours (Twh). It is estimated that wave power alone could supply up to 80 Twh to Hawaii. However, today wave power is similar to where wind power was 10-20 years ago. Wave power involves what is called an “oscillating water column.” As a wave rises within the device, it drives air past a turbine that produces electricity. As the wave recedes, air is sucked back into the device, which continues to drive the turbine. While other states might have a higher total wave energy resource because of their longer coastlines, Hawaii offers some unique advantages such as the absence of a continental shelf to slow down incoming waves and the fact that waves hit the islands from all directions making the waters suitable for a range of technologies. Moreover, the waves provide high energetic resources in a very small area.

Schools from the Mountain West and Conference USA announced in mid-February that they will form a new, super football conference in 2013-2014. The new group will include at least the following 16 members: Alabama-Birmingham, Air Force Academy, Colorado State, East Carolina, Fresno State, Hawaii (football only), Marshall, Nevada, New Mexico, Nevada-Las Vegas, Rice, Southern Mississippi, Texas-El Paso, Tulane, Tulsa, and Wyoming. The new conference will stretch 4,800 miles from Honolulu to Greenville, NC (home of East Carolina). Money, of course, drives the problem. The 16 teams are expected to form two geographic divisions, east and west, with both Semifinal and Championship games leading hopefully to BCS contests. Travel subsidies to be paid by Hawaii have not been finalized. Most of Hawaii’s non-football sports will compete in the California-based Big West Conference beginning in 2012, as the Warriors leave the Western Athletic Conference (WAC) after 33 years.

General Growth Properties plans to acquire the Sears department store space at Hawaii’s Ala Moana Center. They plan to keep the store open until sometime in 2014 and then fold the square footage into the mall’s more profitable inline retail space. Sears opened in the Ala Moana Center as the anchor tenant on 8/13/1959. General Growth is purchasing 11 stores in nine states for $270 million with the Ala Moana store easily being the most valuable. There are seven Sears stores in Hawaii; only the Ala Moana store is affected.

D.R. Horton, the developer seeking to build 11,750 homes on prime farmland in Ewa, continues to put forward a case for the Ho’opili project since hearings began at the State Land Use Commission in October. Ho’opili means coming together in Hawaiian. The master plan for the development, in addition to the homes, includes 3 million square feet of commercial space, five schools and 159 acres of commercial farms. The development is planned for an area bordered by Kunia Road, Fort Weaver Road, UH West Oahu and H-1. One of the major objections, increased traffic, should be ameliorated by an additional H-1 lane in each direction between the Kunia and Waiawa interchanges. However, many commuters are skeptical that the additional lanes will solve the commuting problem

Pope Benedict XVI announced in February that the canonization of Molokai’s Blessed Mother Marianne Cope will take place on October 21st. Mother Marianne, known as “the beloved mother of the outcasts” came to Hawaii in 1883 to care for leprosy patients and their children. She spent the last 30 years of her life in the outpost at Kalaupapa. It is very unusual for any diocese to have more than one saint associated with it as soon will be the case St. Marianne and St. Damien both from Kalaupapa.

A University of Hawaii scientist who is an expert in the movement of ocean currents says that he expects heavy debris from the 2011 Japanese tsunami to reach small atolls in the Northwestern Hawaiian Islands within a few months and reach the main Hawaiian Islands in about a year. Some 1-2 million tons of debris are believed to remain in the ocean but only 1-5% of that should reach Hawaii, Alaska, Oregon, and/or Washington. So far, no debris has landed on American shores. The major question is how much debris has sunk and how much remains afloat.

One of our clients, Joyce McCarthy, is the Key 2nd Assistant Director for “The River” a new TV series Tuesday nights on ABC. The two-hour pilot was shot in Puerto Rico. The remaining eight episodes are being shot in Hawaii. The plot involves a show within a show. TV star Emmet Cole has disappeared in the Amazon. The producers are willing to fund the rescue mission as long as it is “filmed” as a reality show. His wife, Tess, convinces their estranged son, Lincoln, to help look for him. Emmet has left behind taped footage leaving clues as to his whereabouts. Strange, often-paranormal activity ensues. Joyce believes the network will decide the show’s future in late-May. If it is picked up, filming will resume in the summer. She estimates that the show employs 250-300 people, most of whom are local.

The two-car trains for the Honolulu rail transit project will hold 318 passengers, however, only 64 of them will have seats, which means that up to 254 riders would be required to stand. Passengers on the city’s rail line are expected to travel on some of the longest average passenger trips of any U.S. system with more people required to stand than with most other systems. May be time to go back to the drawing board.

The Ironwoods Housing project in Kailua has been renamed Ka Malanai (“The gentle breeze”). This information was provided by the developer. Construction is expected to start later this year. Homes should become available about 18 months from the start of construction. Ka Malanai will be located along Kailua Road, in the Lanakai direction from Macy’s, opposite the Kailua District Park. A total of six four-story condominium buildings will be built with the bottom floor being parking. There will be 153 single-story homes ranging from one to three bedrooms with size being just under 800 to over 1,800 livable square feet (excluding lanais). Common area amenities will include landscaped courtyards, barbeque and leisure areas, mail centers, parking areas and potential storage facilities. No commercial/retail will be available, however, downtown Kailua is a short walk away. Prices will be established upon the commencement of formal selling efforts. The developer expects sales will be conducted via lottery. Please e-mail us at home@stott.com if you would like future information provided to you.

Hail in Paradise? Tuesday morning 3/6 we got a call from one of our clients that they were experiencing dime-sized hail in Waimanalo and had frozen several of the ice-balls

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The number of visitors to the Aloha State rebounded in 2011 to its highest level since 2007. A 2.3% increase in visitors from the U.S., along with double-digit percentage gains from Canada and Australia, helped offset a 5% decline in visitors from Japan, which suffered a devastating earthquake and tsunami last March. Visitor spending was up 15.6% last year to $12.58 billion, just shy of the record $12.63 billion in 2007. The recent surge in tourism, that accounts for as much as 40% of the state’s economy stands to brighten Hawaii’s economic outlook as it emerges from one of its worst downturns in decades. Officials cite several factors including more Americans bypassing crime-stricken Mexico and a decline in Japanese visitors that wasn’t as steep as expected. Meanwhile, a weakened dollar is enticing more visitors from countries like Australia.

In late-January the Federal Reserve stated that the national economy was improving, but not enough to warrant raising interest rates for at least two-and-a-half more years. The central bank indicated that it expects to keep rates low until late 2014, a change from the Fed’s original pledge to keep rates low only until mid 2013. What we shall probably continue to have will be very low interest rates coupled with low prices providing a marvelous window of opportunity to purchase real estate that is likely to last until at least the early-to-mid-2014. A case could be made that mortgage rates will not be this low again for years, quite possibly during the lifetime of most readers of this e-mail. Don’t wait too long to buy though. In some areas of the country, large inventories of homes exist that have been created by short sales and foreclosures. As this inventory gets sold off, there will be increased demand for those homes and prices will rise.

Two 40-45 foot humpback whales spent nearly eight hours frolicking in Honolulu Harbor on January 5th to the delight of tourists who got within 10 feet of the endangered, federally protected mammals that winter in Hawaii waters. The whales shadowed a commercial fishing boat for several days while the five-person crew had fished for ahi 400 miles north of Oahu. The whales then followed the boat to Honolulu Harbor. Humpbacks had not visited the deep water of Honolulu Harbor since the mid-1990’s. At Aloha Towers, the two whales ventured within 10-15 feet of humans and then stayed on the bow of a commercial boat for about two hours while it refueled. Several whale-watching boats had the whales swim alongside of the boats. Around noon, they followed one of the whale-watching boats back out to sea.

Honolulu tops the list of American cities as the best place to keep New Year’s resolutions according to the editors of livability.com who studied more than 500 American cities for factors such as residents’ health, population growth, financial strength, recreational activities, cultural amenities and general happiness. Honolulu was chosen for its healthy and peaceful lifestyles. Known for being one of the slimmest cities in the United States, people are less likely to suffer from sickness, depression, migraines, insomnia, and allergies according to their website. “With a seemingly endless amount of activities both on and off the main island, the temptation to sit on the couch is small. Honolulu is home to beautiful beaches and an array of art galleries, spas, museums and boutiques. The physical beauty of Oahu itself is incredibly inspiring and lends itself to a backdrop for anyone on a journey of self-improvement. The availability of fresh seafood, tropical fruit and organic vegetables makes the city one of the best places to eat healthy.” The top ten cities: Honolulu, Fort Collins, Des Moines San Jose, Provo, Omaha, Madison, Richmond, Santa Fe and Charlotte.”

Former Hawaii Governor (1994–2002) Ben Cayetano confirmed on Jan 17th that he will run for mayor of Honolulu this year, setting up a three-way race that could determine the future of the city’s $5.1 billion rail project. Cayetano will face incumbent Mayor Peter Carlisle and attorney Kirk Caldwell who served as acting mayor after Mufi Hannemann resigned for his unsuccessful bid for the Democratic nomination for governor. If no candidate exceeds 50% of the vote, the top two candidates will go on to the Nov 6th general election. Carlisle and Caldwell are both supporters of the Honolulu rail project while Cayetano opposes it. He is a plaintiff in a federal lawsuit that opposes the rail project. Cayetano has said, “There are some people who believe Honolulu can’t become a great city unless you have a rail system running down the waterfront. I think that’s nuts. You ruin the beauty of the city and the character of the city when you design a system that has no respect for the culture of Hawaii.” He said that he would rather see money spent on fixing the aging infrastructure, including the sewers and water lines.

The Government has found a new way to tax you . . . a 3.8% tax on home sales called a Medicare tax that will take effect January 1, 2013 after the presidential election and after almost a full year for revisions and changes. The tax applies to high-income taxpayers with Adjusted Gross Income (AGI) of greater than $200,000 single and $250,000 married. For additional information, Google “3.8 medicare tax” on the Internet.

Fireworks-related injuries on Oahu during New Year’s celebration plummeted 81% compared to last year, the first New Year’s under a ban on most consumer fireworks on Oahu . . . Hawaii is one of seven states in which a photo ID is requested to vote. However, a photo ID is merely requested and not required in any of the seven states that request it. This may change in Hawaii. House Bill 1359 introduced during the last legislative session would make a photo ID mandatory in Hawaii.

We recently encountered a client that had not depreciated investment real estate they owned. Depreciation is a method of matching the cost of acquiring a property over its estimated economic life. The IRS requires that residential investment properties be depreciated over 27.5 years using the straight-line method; commercial properties are depreciated over 39 years. Land is not depreciable; therefore, the value of land should be excluded from the computations. When the property is sold, the depreciation claimed each year is recaptured and taxed accordingly. The IRS will assume that depreciation has been taken and will hold the investor liable for the depreciation recapture tax even if the investor failed to take advantage of the depreciation.

United Airlines will begin a daily non-stop flight between Honolulu and Washington’s Dulles International Airport in June . . . The fee is being offered in Foster Tower, making this condo one of the few fee units in Waikiki with a spectacular ocean view. The fact that the Queen Liliuokalani Trust made the fee available came as a surprise to many people in the real estate business. We have a number of owners on our newsletter mailing list that own units in Foster Tower.

Former Hawaii Governor (1994–2002) Ben Cayetano confirmed in January that he will run for mayor of Honolulu this year, setting up a three-way race that could determine the future of the city’s $5.1 billion rail project. Cayetano will face incumbent Mayor Peter Carlisle and attorney Kirk Caldwell. If no candidate exceeds 50% of the vote, the top two candidates will go on to the Nov 6^th general election. Carlisle and Caldwell are both supporters of the Honolulu rail project while Cayetano opposes it. He is a plaintiff in a federal lawsuit that opposes the rail project. Cayetano has said, “There are some people who believe Honolulu can’t become a great city unless you have a rail system running down the waterfront. I think that’s nuts. You ruin the beauty of the city and the character of the city when you design a system that has no respect for the culture of Hawaii.” A telephone survey of 1,172 likely voters on Oahu in February showed 55% were opposed to the rail with only 34% in favor with the rest in the “no opinion” category. The public’s main concern is cost. 59% were “very concerned” about cost with 21% “somewhat concerned.”

In mid-March the average 30-year fixed mortgage rose above 4% for the first time in five months. The sharp increase suggests that the window to buy or refinance a home at historically low rates is closing. Rates are rising because they tend to track the yield on the 10-year Treasury note. The economic outlook has improved in recent weeks, leading investors to shift money out of long-term U.S. Treasury bonds and into stocks, which has driven Treasury yields higher. Tax rules are tripping some people who are refinancing mortgages, particularly those that borrow more than what they owe on their existing mortgage. We recommend that you speak with your CPA or tax advisor before refinancing. This applies to all homeowners, but particularly those that own expensive homes valued at $1 million or more. The IRS apparently is targeting owners that have refinanced expensive homes according to a March 12^th article in The Wall Street Journal.

Dynasty trusts are long-term trusts designed for multi-generational use. They can survive for 21 years beyond the death of the last beneficiary alive when the trust was written. If you were setting up one today and had a grandchild, your dynasty trust could last for 21 years after the death of your grandchild. Dynasty trusts are used, at times, for real estate, particularly vacation homes like a beachfront house in Hawaii that the owner wants to be available for use by his family members. One of the tax provisions considered by President Obama has been a shortening of the time frame in which to shelter dynasty trust assets. As a result, some estate attorneys are recommending that those interested in establishing a dynasty trust take action before the end of 2012. There are a host of things to consider when putting vacation homes in a trust such as allocating use between heirs, handling repairs, etc. If you would like additional information, a good place to start would be to Google “dynasty trusts” on the Internet.

The Navy, the University of Hawaii and the U.S. Department of Energy have joined forces on a project they hope will speed up the effort to commercialize wave power. The partners are moving ahead with plans to create a “Wave Energy Test Site” offshore from Marine Corps Base Hawaii scheduled to be completed in 2014. The potential of wave power is staggering. Hawaii’s total electricity consumption last year was about 10 terawatt-hours (Twh). It is estimated that wave power alone could supply up to 80 Twh to Hawaii. However, today wave power is similar to where wind power was 10-20 years ago. Wave power involves what is called an “oscillating water column.” As a wave rises within the device, it drives air past a turbine that produces electricity. As the wave recedes, air is sucked back into the device, which continues to drive the turbine. While other states might have a higher total wave energy resource because of their longer coastlines, Hawaii offers some unique advantages such as the absence of a continental shelf to slow down incoming waves and the fact that waves hit the islands from all directions making the waters suitable for a range of technologies. The efficient waves provide high energetic resources in a very small area.

Foreclosure actions against Hawaii homeowners hit a six-month high in January. There were 652 Hawaii foreclosures (all islands) the most for any month since a new law (Act 48) became effective last May. Act 48 reformed the rules for non-judicial, or out of court foreclosures, which was how lenders had been handling them, as it was quicker and cheaper than going through a court action or judicial foreclosure. A key provision of Act 48 gave homeowners the option of having a mediator present to assist with mitigation in front of a representative of the lender. The mediation was designed to curb what consumer advocates said were lender abuses. Act 48 required the lender to follow a series of steps that could render a non-judicial foreclosure sale void if the steps, even very minor ones, were violated. As a result the lenders have opted to use judicial foreclosures almost exclusively since the law became effective. As of December, all Hawaii foreclosures are in court, which is creating foreclosure delays.

Schools from the Mountain West and Conference USA announced in mid-February that they would form a new, super football conference in 2013-2014. The new group will include at least the following 16 members: Alabama-Birmingham, Air Force Academy, Colorado State, East Carolina, Fresno State, Hawaii (football only), Marshall, Nevada, New Mexico, Nevada-Las Vegas, Rice, Southern Mississippi, Texas-El Paso, Tulane, Tulsa, and Wyoming. The new conference will stretch 4,800 miles from Honolulu to Greenville, NC (home of East Carolina). Money, of course, drives the problem. The 16 teams are expected to form two geographic divisions, east and west, with both Semifinal and Championship games leading hopefully to BCS contests. Travel subsidies to be paid by Hawaii have not been finalized. Most of Hawaii’s non-football sports will compete in the California-based Big West Conference beginning in 2012, as the Warriors leave the Western Athletic Conference (WAC) after 33 years.

General Growth Properties plans to acquire the Sears Department Store space at Hawaii’s Ala Moana Center. They plan to keep the store open until sometime in 2014 and then fold the square footage into the mall’s more profitable inline retail space. Sears opened in the Ala Moana Center as the anchor tenant on 8/13/1959. General Growth is purchasing 11 stores in nine states for $270 million with the Ala Moana store easily being the most valuable. There are seven Sears stores in Hawaii; only the Ala Moana store is affected.

D.R. Horton, the developer seeking to build 11,750 homes on prime farmland in Ewa, continues to put forward a case for the Ho’opili project since hearings began at the State Land Use Commission in October. Ho’opili means “coming together” in Hawaiian. The master plan for the development, in addition to the homes, includes 3 million square feet of commercial space, five schools and 159 acres of commercial farms. The development is planned for an area bordered by Kunia Road, Fort Weaver Road, UH West Oahu and H-1. One of the major objections, increased traffic, should be ameliorated by an additional H-1 lane in each direction between the Kunia and Waiawa interchanges. However, many commuters are skeptical that the additional lanes will solve the commuting problem.

Pope Benedict XVI announced in February that the canonization of Molokai’s Blessed Mother Marianne Cope would take place on October 21st. Mother Marianne, known as The Beloved Mother of the Outcasts came to Hawaii in 1883 to care for leprosy patients and their children. She spent the last 30 years of her life in the outpost at Kalaupapa. It is very unusual for any diocese to have more than one saint associated with it, as soon will be the case with St. Marianne and St. Damien both from Kalaupapa.

A University of Hawaii scientist who is an expert in the movement of ocean currents says that he expects heavy debris from the 2011 Japanese tsunami to reach small atolls in the Northwestern Hawaiian Islands within a few months and reach the main Hawaiian Islands in about a year. So far, no debris has landed on American shores. Some 1-2 million tons of debris are believed to remain in the ocean but only a small percentage of that should reach Hawaii, Alaska, Oregon, and/or Washington.

The Ironwoods Housing project in Kailua has been renamed Ka Malanai (“The gentle breeze”). Construction is expected to start later this year. Homes should become available about 18 months from the start of construction. Ka Malanai will be located along Kailua Road, in the Lanakai direction from Macy’s, opposite the Kailua District Park. Six four-story condominium buildings will be built with the bottom floor being parking. There will be 153 single-story condos ranging from one to three bedrooms with size being just under 800 to over 1,800 livable square feet (excluding lanais). Common area amenities will include landscaped courtyards, barbeque and leisure areas, mail centers, parking areas and potential storage facilities. No commercial/retail will be available, however, downtown Kailua is a short walk away. Prices will be established upon the commencement of formal selling efforts. Please e-mail us at home@stott.com if you would like future information provided to you.

Hail . . . Floods . . .Tornado . . . Big Mess! – so read the front page headlines of the Star-Advertiser on March 10^th, the day after a Windward Oahu tornado/hail storm with record-size hail up to four inches in diameter, hit the Windward side, making national news. Particularly hard hit was Kailua where most of our staff lives. I recognize that the weather has recently created some major problems on the Mainland and so; a few tornados and some hail and flooding may be nothing to get too excited about. However, this is sunny, tropical Hawaii. I’ve lived in Kailua for some forty years and had never seen hail here.

Fireworks-related injuries on Oahu during New Year’s celebration plummeted 81% compared to last year, the first New Year’s following a ban on most consumer fireworks on Oahu. Hawaii held its first GOP caucus in March, won by Mitt Romney with 45.4% of the vote. The caucus determines which candidates share 17 of the state’s 20 delegates to the Republican National Convention this summer in Tampa. Previously, Hawaii Republicans awarded delegates at state party conventions.

Honolulu’s poor road conditions rank it third worst in the nation for major U.S. cities, behind No. 1 San Jose and No. 2 Los Angeles according to a Washington, D. C. based non-profit group known as TRIP (The Road Information Group). The average additional cost to Honolulu vehicle owners is $701 in accelerated vehicle depreciation, additional repairs, increased fuel, and tire wear. The recent heavy rains have exacerbated the problem.

Health officials at Honolulu Airport have discovered a mosquito species capable of spreading dengue and yellow fever, a species not found on Oahu in 63 years. As a result residents have been asked to remove standing water to prevent the spread of mosquitoes. Evidence of the species was found in eggs left in a mosquito trap, all from a single mosquito. Health officials are attempting to identify the country of origin of the eggs using DNA testing.

The following prices for a gallon of regular gasoline on 3/24/12 are based upon Oil Price Information Service, Wright Express, and AAA. The national average was $3.89 with nine states and Washington, D.C. being in the “four dollar club.” At the top of the list was Hawaii at $4.52. Experts are projecting that the national average will climb from $3.89 to $4.25 by the end of April.

Honolulu is the least affordable city for renters nationwide and the second to least affordable for homeownership (behind San Francisco) according to a December report on the housing market in 200 metropolitan areas issued by the Washington, D.C.-based Center for Housing Policy. According to the author of the report, Hawaii faces a lot of unique challenges because it is an island-state that is tourism-driven with a lot of those jobs tending to be service jobs that don’t pay very well.  Plus, there’s just not a lot of space to develop so that creates a lot of demand for a small supply of housing.  While housing is expensive in Hawaii, it is also expensive in some other areas like New York City and San Francisco; however, those areas tend to be more affordable because of higher paying jobs in financial and technology sectors. The solution for many local families is to live in multi-generational households or to rent out part of their homes.

Hawaii requires mandatory health care for employees. Therefore, the state tends to rank high on many health issues compared to other states. This past year, Hawaii’s health standing improved with the islands moving up a notch to No. 4 in a national ranking by United Health Foundation, a not-for-profit, private foundation. Hawaii had the highest pubic health funding per person. They also had a very low rate of uninsured people, preventable hospitalizations, low levels of air pollution and a lower prevalence of obesity and diabetes compared to other states. VT held the top spot on the list for the 5^th consecutive year followed by NH, CT, HI, and MA. The bottom five states were MS, LA, OK, AR, and AL.

Two-thirds of Hawaii public school teachers who responded to a recent union poll said they hold one or more outside jobs. Those with outside income said they started working another job in the past one to three years. According to the teachers union, the poll helps illustrate the significant toll that furlough days, pay cuts and increased medical costs have had on teachers’ salaries since 2009. Salaries for Hawaii public school teachers vary widely depending on education, certifications, years of service and whether a teacher is serving in a shortage area.

Throngs of deal-hungry shoppers flocked to Hawaii stores on Monday, December 26^th to take advantage of after-Christmas markdowns to snap up everything from discounted TV’s and electronics to clothes on what was a day off work for many. December 26^th has become one of the busiest shopping days of the year on Oahu as people redeem gift cards, make merchandise exchanges and seek out post-Christmas bargains. By mid-day, the 10,000 parking spaces at Ala Moana Center were full with lines forming outside some of the higher-end shops as stores limited the number of people inside at any one time. Some patrons anticipated the crowds and arrived 1-2 hours before stores opened to take advantage of discounts of up to 60-70% available at stores like Neiman Marcus, Old Navy and Victoria’s Secret.

A Christmas vacation in Waikiki can be a very merry occasion unless you have to rent a car. A survey by an online car rental search firm found the average daily car rental rate at Honolulu Airport is about three times higher at Christmastime. The increase in car rates was the highest among 30 cities surveyed by CheapCarRental.net. The American Car Rental Association said industry pricing is generally based upon supply and demand. So, prices go up as reservations rise and car inventory falls. Spikes can occur near big events or major travel holidays. They tend to be more volatile in Hawaii because rental car companies can’t routinely shift inventory between markets. If you have to rent a car at Christmastime, book months in advance of your trip and/or consider using a small, economic rental company.

The International Market Place, Waikiki Town Center and the Miramar at Waikiki Hotel will be demolished and redeveloped into a three-level retail, dining and entertainment center in 2013, expected to cost up to $300 million that will revitalize an aging but iconic six-acre block in Waikiki. Queen Emma Land Co. detailed the project’s expansive scope in an environmental impact statement filed in late-December.

Despite the addition of a number of new shopping centers and stores, Hawaii lost 3,200 retail jobs over the past five years according to an analysis of data from the U.S. Bureau of Labor Statistics. Hawaii was one of 44 states to lose retail jobs since the end of 2006, according to an analysis by On Numbers, an affiliate of Pacific Business News. Hawaii had 70,300 retail jobs in November 2006, however, that number fell to 67,100 by November 2011, which reflects the impact of the recession that started in December 2007. The state was ranked 14^th in the nation for number of jobs lost and 26^th in terms of the percentage of jobs lost (- 4.55%).

There’s magic stirring in the jungles along the coast from Kahana Bay to Waimea Valley but it’s not the bright and friendly kind. It’s magic with menace, the kind so terrifying you can’t turn away. And, if the creators of ABC-TV’s new series, “The River,” deliver on their promise to scare viewers, the midseason replacement could become a terrifying ratings hit. “The River” is the story of the search for a wildlife expert who has vanished deep in the Amazon. To fund the search, his family agrees to allow a documentary crew to come along. The show’s creative team includes movie mogul, Stephen Spielberg, and is scheduled to begin airing in March. ABC has considerable experience using Hawaii as a background, as their mammoth TV hit “Lost” was shot in Hawaii.

Getting considerable early Oscar buzz is “The Descendants” starring George Clooney. The movie is the story of Matt King, a Honolulu attorney suddenly forced to deal with a failed marriage, his wife in a coma and two rebellious daughters. King, played by Clooney, is a descendant of Native Hawaiian Royalty whose status among the landed elite provided him wealth and standing as soon as he was born. The director of the movie is Alexander Payne who brought Santa Barbara’s wine country to life in his marvelous 2004 movie “Sideways” earning him an Oscar. From the Honolulu Star-Advertiser movie critic: “This deceptively breezy film is a kind of wonderful journey through the shifting landscape of human emotion, ranging from the deliciously awkward comedy to heartfelt, transformative tragedy and all points in between.”

A record four Hawaiian monk seals were born on Oahu this past year. They are an endangered species with only about 1,100 remaining. About 200 of them live on various Hawaiian Islands. This is the first time four seals have been born on Oahu since experts started keeping records 15 years ago. An ongoing problem is young pups interacting with people and becoming overly friendly. At 300 pounds, people-friendly monk seals are a threat to swimmers and to themselves because they have trouble foraging for food and defending themselves from sharks.

Hawaii will become the first state to have official high school surfing championships in 2013 when competition begins. There’s even talk now about adding body surfing and body boarding down the line. Since statehood there has been talk about a homegrown sport that would add another hook to keep at-risk students who have little interest in other scholastic or extracurricular pursuits in high school.

Hundreds of illegal vacation rentals on Oahu could be shut down under a proposed ordinance that would make it easier to enforce the law that bans short-term rentals. The proposed ordinance would require vacation rental owners to include their city permit numbers on any advertisements in an effort to deter illegal businesses. Under the plan, a vacation rental operator would face an initial fine of up to $1,000 for failing to post a permit number. If an advertisement without the number remains in place seven days after a warning, potential fines of $1,000 to $2,000 a day would kick in. The contentious debate over vacation rentals has long pitted neighbor against neighbor. Without a permit, a residence can be rented for no less than 30 days. A moratorium on issuing additional permits was instituted in 1989; however, effective enforcement of the law continues to be a problem.

Restaurants in Hawaii are adjusting to a total ban on shark fins, a pricey Chinese delicacy used in shark fin soup. The state law took effect July 1, 2010 but gave restaurants a year to use up any remaining inventory. Restaurants serving fins will now be fined $5,000 to $15,000 the first time they are caught. A third offense will result in up to a year in prison and a fine of $35,000 to $50,000. The new law replaces a prior law that banned the landing of shark fins at Hawaii ports. Now the aim is to choke-off demand for the product at restaurants. Shark finning, the act of cutting off shark fins and dumping the carcasses in the ocean has resulted in excessive over-fishing. The International Union for the Conservation of Nature says that about one-third of open-ocean shark species are in danger of becoming extinct due to over-fishing. A shark fin is essentially tasteless; the flavor comes from ingredients it’s cooked with, usually a rich savory sauce. Local restaurants are experimenting with imitation replacements that will be significantly less expensive for gourmet diners.

There are no snakes indigenous to Hawaii. Allowed to be loose in the wild, a pregnant female snake could create havoc, particularly to birds. The state has an amnesty program in which owners can turn in illegal animals with no penalty. Still, some owners let their pet snakes loose. Pig hunters in Wahiawa Gulch found a 9-foot-3-inch, 57-pound boa constrictor, on July 4th. Officials believe it was likely someone’s pet in view of its smooth skin and docile behavior. It was the third live snake captured on Oahu this year.

Since 2006, the following national retailers have opened one or more stores in Hawaii: Bath & Body Works, Bed, Bath & Beyond, Chico’s, David’s Bridal, Forever 21, Nordstrom, Petco, Target, Victoria’s Secret, Walgreen’s (11 stores), and Whole Foods Market. National retailers now searching for space include: Anthropologie, Applebee’s, The Capital Grill, H&M, Olive Garden, PetSmart, and Urban Outfitters.

The developer of a regional mall in East Kapolei, similar in size to Pearlridge Center, plans to open the first phase in 2014. The complex, to be named Ka Makana Alii, will be built in two phases and will consist of 1.1 million square feet of retail space, the same size as Pearlridge Center, and 200,000 square feet each of hotel and office buildings. The complex will be built between Renton Road and Kapolei Parkway. The first phase will be a relatively small, neighborhood retail center of about 200,000 square feet on 20 acres. The much larger second phase to be built on 47 acres is expected to open in 2015. Ka Makana Alii was first announced in 2006 and represents an ambitious goal to develop an open-air complex of 22 buildings in an area envisioned to accommodate most of Oahu’s population growth. The project is designed to have 4,500 parking spaces including 2,000 in an underground garage.

Hawaii is the most Democratic state in the nation while the GOP holds the most sway in Utah according to a Gallup Poll released in August. The poll ranked the states based on the difference in the state residents who identify as or lean Democratic and the percentage who identify as or lean Republican. Democrats had a 24-percentage-point advantage over Republicans in Hawaii. Nationwide, Democrats had a slight advantage in the first half of 2011 according to Gallup with 44 percent of Americans identifying as or leaning Democratic and 40 percent identifying as or leaning Republican. Democrats currently have a 43-8 majority in the Hawaii House and a 24-1 majority in the Hawaii Senate. The Governor of Hawaii, the Mayor of Honolulu and the four members of Congress are Democrats. When GOP Linda Lingle achieved her victory in the 2002 gubernatorial race; she became the first Republican governor of Hawaii in forty years, subsequently serving two four-year terms.

Hilo won the Senior League World Series (15 & 16 year-olds) going undefeated in the World Series. It was only the third time a team has gone undefeated. For Hilo, it was the second time they won the World Series, having also won it in 2003.

Seventeen gambling bills were submitted to the state this year with most of them designed to provide Hawaii some form of financial relief. Hawaii and Utah are hyped as the only states in the nation with no legalized gambling; however, this is not technically correct. One form of gambling that has thrived in Hawaii for decades is bingo played at military bases. Every night of the week, bingo games are held at one or more military facilities on Oahu. They are open to both military and non-military patrons. Most involve a buffet dinner where bingo sheets are provided to diners along with their meal. This may be coming to an end. The Navy Captain who has held command of Joint Base Pearl Harbor-Hickam since June has suspended the games at both the Hickam enlisted club and the Hickam officers club while conducting a review to ensure the current program is consistent with regulation and policy.

UH is studying hosting a regular-season football game in Japan. UH Athletic Director, Jim Donovan, met with officials in August at the Kyocera Dome in Osaka about playing a game as early as 2014. Without sponsorship, the cost would be $500,000 to $600,000 to rent the stadium, take care of the hotel and travel for UH and another team. However, Donovan is hopeful of securing sponsors for what would probably be a four-day trip. The UH opponent would likely come from the Mountain West Conference, which UH will join in 2012, or the Pac-12.

Aloha shirts will adorn five U.S. postage stamps next year. Two of the shirts showcase surfers and their boards; one shows fish, shells and starfish; another shows the bird of paradise flower; and one shows the Kilauea volcano. The stamps will be sold at 29 cents, the postcard rate, sometime next year . . . Canoe pavilions, a café, concession stands, a marina and an ocean activity center are among the activities the state is proposing in a master plan for Sand Island. The improvements would be paid for largely by private investors who would then be allowed to develop and operate a 400-500-slip marina on public land.

Admiral Chester Nimitz

Author: Unknown

Sunday, December 7th, 1941 . . . Admiral Chester Nimitz was attending a concert in Washington, D.C.  He was paged and told there was a phone call for him.  When he answered the phone, it was President Franklin Delano Roosevelt on the phone.  He told Admiral Nimitz that the Japanese had attacked us and that he (Nimitz) would now become the Commander of the Pacific Fleet.

Admiral Nimitz flew to Hawaii to assume command of the Pacific Fleet.  He landed at Pearl Harbor on Christmas Eve, 1941.  There was such a spirit of despair, dejection and defeat . . . you would have thought the Japanese had already won the war.  On Christmas Day, 1941, Admiral Nimitz was given a boat tour of the destruction wrought on Pearl Harbor by the Japanese.

Large sunken battleships and other Navy vessels cluttered the waters everywhere you looked. As the tour boat returned to dock, the young helmsman of the boat asked, “Well Admiral, what do you think after seeing all this destruction?”  Admiral Nimitz’s reply shocked everyone within the sound of his voice.

Admiral Nimitz said, “The Japanese made three of the biggest mistakes an attack force could ever make or God was really taking care of America.  Which do you think it was?” Shocked and surprised, the young helmsman asked, “What do mean by saying the Japanese made the three biggest mistakes an attack force ever made?”

Nimitz explained.  Mistake number one: the Japanese attacked on Sunday morning. Nine out of every ten crewmen of those ships were ashore on leave. If those same ships had been lured to sea and been sunk–we would have lost 38,000 men instead of 3,800.

Mistake number two: when the Japanese saw all those battleships lined in a row, they got so carried away sinking those battleships, they never once bombed our dry docks opposite those ships. If they had destroyed our dry docks, we would have had  to tow those battleships to America to be repaired.  As it stands now, the ships are in shallow water and can be raised. One tug can pull them over to the dry docks, and we can have them repaired and at sea by the time we could have towed them to the America. And, I already have crews ashore anxious to man those ships.

Mistake number three: every drop of fuel in the Pacific theater of war is in top of the ground storage tanks five miles away over that hill.  One attack plane could have strafed those tanks and destroyed our fuel supply.  That’s why I say the Japanese made three of the biggest mistakes an attack force could make or God was taking care of America.

Admiral Nimitz was able to see a silver lining in a situation and circumstance where everyone else saw only despair and defeatism.

President Roosevelt had chosen the right man for the right job.  We desperately needed a leader that could see silver linings in the midst of the clouds of dejection, despair and defeat.

There is a reason that our national motto is:

IN GOD WE TRUST.

Hawaii dodged a bullet with only an estimated $30 million in property damage and no loss of life from the devastating Japan earthquake and tsunami. While our thoughts and prayers obviously go out to the victims in Japan, it is important to also turn our attention to the economic impact the disaster will have on Hawaii. Nearly one in five visitors to Hawaii normally come from Japan. The University of Hawaii Economic Research Organization (UHERO) estimates that visitor arrivals from Japan will fall by 10.8% this year before rebounding by 10.3% in 2012. Recent passenger counts from Japan have been running about 25% below year-ago levels.

Thinking of renting your home for a short period of time this summer? The 14-day rule may apply. If you rent your home for 14 days or less, that rental income is not taxable. The 14-day rule is well known in places like Augusta, GA where the Masters golf tournament is held each year. Some homeoowners in the area rent their homes out to golf fanatics for large sums of money and don’t have to report any of that rental income on their federal tax returns.

Many Oahu residents are concerned not only about the ballooning cost of the multibillion dollar rail project, but also how the 20-mile steel on steel elevated rail system through downtown Honolulu will impact upon the environment, view planes, ancient Hawaiian burial sites, historic buildings, property rights, traffic and noise levels. A federal lawsuit has been filed to stop the rail; those filing the lawsuit include former Democratic Governor Benjamin Cayetano and current GOP State Senator Sam Slom.

As is so often the case, the final decision may be determined by cost. The rail project estimates jumped from $2.7 billion in 2004 to $4.6 billion in 2006 to $5.3 billion in 2011 and is still climbing. While Honolulu Mayor, Peter Carlisle, maintains the rail is on track and recently held a $30,000 ceremonial groundbreaking and press conference to announce contracts that have been awarded, the promised $1.865 billion in federal funds has not materialized. In fact, the city has apparently received just $34 million from Congress. Getting more federal funds may be difficult.

The NFL Pro Bowl has been held at Aloha Stadium every year but one since 1980. Other cities have attempted to have the game shifted to their stadiums, which has been resisted by the Pro Bowl players; various polls have shown the players overwhelmingly are in favor of keeping the game in Hawaii. A study by the Hawaii Tourism Authority of the last Pro Bowl played in Hawaii showed that there were over 17,000 Pro Bowl visitors that stayed almost eleven days, spent over $28M and generated over $3M in state taxes. Therefore, it came as a surprise when Governor Neil Abercrombie (D) decried the $4M the state gives to the NFL with the following comment: “That kind of egregious self-indulgence has to stop. Four million dollars is a lot of money. That’s the kind of thing you have to look at.” As might be expected, Abercrombie’s comments generated huge hoopla.

Hawaii passed a bill in May (Act 48) that advocates say is one of the strongest foreclosure mediation laws in the nation. The new law applies to owner-occupants of residential properties where the owner-occupants have resided in the home for a minimum of 200 consecutive days. The law prohibits lenders from holding non-judicial foreclosure auctions until the borrowers have had an opportunity to participate in a dispute resolution program that will be overseen by a trained mediator. The dispute resolution program is slated to begin operating by October 1, 2011, so in effect, both new and existing foreclosure cases are on hold for several months. Participation is optional and is not expected to be too practical for homeowners who can’t pay a reasonably restructured mortgage.

Most large Mainland banks use non-judicial foreclosures that are done outside of court as contrasted to judicial foreclosures where the foreclosure is overseen by a judge. Hawaii’s new law allows a borrower to convert a non-judicial foreclosure to a judicial foreclosure overseen by a Circuit Court judge; however, this option is not available if the borrower chooses dispute resolution. Also, a deficiency judgment may exist with a judicial foreclosure that is prohibited by the new law with a non-judicial foreclosure. So, even though a judicial foreclosure is much more expensive and takes a much longer period of time, some lenders may opt to use a judicial foreclosure, particularly if they believe they will be able collect funds from the borrower.

“Hawaii Five-O” the Hawaii based crime show has been renewed by CBS for a second season. CBS plans to continue the show on Monday nights. When CBS aired first-run episodes of “Hawaii Five-O,” CBS won it’s hour 13 times. ABC’s “Off the Map” the only other network show to be shot in Hawaii this past year was cancelled. However, a new ABC show, “The River” which shot it’s pilot in Puerto Rico is moving to Hawaii. “The River” follows the story of a wildlife expert who goes missing deep in the Amazon while on a journey with his wife and son. His family, friends and crew set out on a mysterious journey to find him.

Hawaii has frequently been the source of large linemen in the NFL draft, often of Samoan descent. This year it was different as three skill players were selected: Alexander Green (FB) in the 3rd round to the Super Bowl Champion Green Bay Packers; Gregory Salas (WR) in the 4th round to the St. Louis Rams; and Kealoha Pilares (WR) in the 5th round to the Carolina Panthers . . . UH is discussing a home and home football series with Notre Dame . . . Lowe’s opened in Iwilei in April. So, now there are three hardware giants almost within spitting distance of each other . . . Lowe’s, Home Depot and City Mill. Other large stores in Iwilei are Dole Cannery and Costco . . . Canadians have overtaken the Japanese as the top international buyers of residential real estate in Hawaii largely as a result of sales on Maui. On Oahu, sales to Japanese buyers continue to lead all other countries. As for the next big international market, most point to China; however, last year there were only 11 sales to Chinese buyers in Hawaii.

The U.S. Army is planning a major overhaul of Wheeler Army Airfield’s 25th Infantry Division Combat Aviation Brigade facilities. The project involves the replacement or renovation of nearly every aviation facility on the base and will be done over a five-year period. The Combat Aviation Brigade consists of 2,400 troops, 92 helicopters and 280 land vehicles that are housed at aging facilities at Wheeler as well as neighboring Schofield Barracks . . . The Polynesian Cultural Center on Oahu’s North Shore is embarking on a $38 million redevelopment that includes building a restaurant and dining hall, adding facilities for various activities and shows and redesigning its retail complex. The Cultural Center had 692,000 visitors in 2010 with $358 million in revenue.

The Navy plans to shut down its special warfare submarine operations in Florida and California and consolidate the command at Pearl Harbor. The U.S. military presence is shifting towards the Pacific, requiring the Navy to adjust its force posture and basing to provide at least six carriers and 60% of the submarine fleet in the Pacific.

The following information appeared in the Wall Street Journal April 9-10, 2011:

Don’t underestimate the harm that even one missed mortgage can do to your credit score. The severe consequences underscore that you shouldn’t shrug off even an accidentally missed payment. Instead, you should pay it and call the lender right away, begging forgiveness before it mars your credit record.

Being 30 days late on a house payment—even if it is an accident—can knock 100 points off a pristine 780 credit score, moving you from qualifying for the very best interest rates to the edge of subprime territory. The actual numerical drop is less severe if your starting credit score is 720 or 680, but the impact is greater, since your new score is likely to sink to a level where new credit is hard to get and very expensive.

FICO scores range from a low of 300 to 850, with scores of about 750 or higher generally qualifying for the best loan terms. FICO says a foreclosure or short sale where the size of the unpaid balance is reported are equally devastating to a good or excellent credit score, reducing it by as much as 150 points, to the high 500s or low 600s.

Recovering your original score takes about seven years. That also is how long the information stays on your credit report, where insurers and potential employers can see it. Returning to a mediocre 680 score may take only three years. Here are some other lessons from the FICO data:

Credit scores are intended to measure the risk that you won’t repay a current or future debt. So your careful payments over many years translate into a higher starting score. However, your score takes a major hit when you are 30 days late on a payment, falling 70 to 100 points.

The best way to rebuild a damaged credit score, ironically, is to use credit. “Avoiding borrowing altogether means you’ve frozen your credit history in a negative state,” says Maxine Sweet, Vice President of Public Education for credit bureau Experian. “You will be better off using a credit card judiciously and paying it off promptly, adding good-behavior points to your record.”

A person with a 620 score would pay almost 12% interest on a four-year $25,000 car loan, compared with less than 5% for someone with a 780 score—a difference of almost $4,000 over the life of the loan. On a 30-year fixed-rate $250,000 mortgage, a person with a 620 score might qualify for a 6% rate, but probably wouldn’t be able to get mortgage insurance, which is required if your down payment less than 20%. A person with excellent credit might land a rate less than 5% and pay about $3,000 a year less.

86-year-old Senator Daniel Akaka (D) has announced that he will not seek re-election next year after 14 years in the U.S. House and 21 years in the U.S. Senate. Over the past decade, Akaka has been an advocate of native Hawaiian rights. His bill, known as the Akaka Bill in his honor, would treat Hawaiians the same as American Indians and Alaska natives. The bill has passed the House but repeatedly been stalled in the Senate. It is unlikely the bill will advance prior to Akaka leaving the Senate. The leading Republican candidate for Akaka’s Senate seat will likely be former two-term Governor Linda Lingle. There are a number of Democratic candidates but no consensus leader at this time with the fundraising ability and overall appeal of Lingle. The Democratic hopefuls, in no order of importance, are newly elected Congresswoman Colleen Hanabusa, Gov. Neil Abercrombie, Lt. Gov. Brian Schatz, U.S. Rep Mazie Hirono, former Honolulu mayor Mufi Hannemann, and former U.S. Rep Ed Case. The Senate race will likely draw national interest and funding.

The New York Times asked the Gallup-Healthways Well-Being Index to come up with a statistical composite for the happiest person in America. Their result would be a tall, Asian-American, observant Jew who is at least 65 and married, has children, lives in Hawaii, runs his own business and has a household income of more than $125,000 a year. Finding the person was relatively easy as there are only a handful of Asian-American men who practice Judaism at one of the three Jewish synagogues on Oahu. Alvin Wong (69), a Chinese-American who converted to Judaism, lives in Manoa and meets all the Gallup criteria except height. He is the founder of two health care management businesses and in the process of starting a non-profit group devoted to sharing resources to cancer patients and their families. His wife, Trudy, sits on the board of the Friends of the East-West Center. They have been hosting East-West Center scholars for years and have been deluged with worldwide e-mails since the article appeared in the Times.

Astronomers will be able to peer farther into space and back in time, reaching fairly close to the “big bang” that started the universe, under a plan that would add the 14th and biggest telescope to date atop Mauna Kea on the Big Island. The Thirty Meter Telescope Observatory or TMT as it is called would be among a new class of big telescopes that can see farther than ever into the cosmos. TMT is based in Pasadena, CA and supported by various universities and astronomical organizations in the U.S., Canada, Japan, China, and India. TNT states that the planned 184-foot-tall Mauna Kea telescope should be able to get pictures 10 times clearer than the Hubble Space Telescope and be able to see 23 billion light-years in the past to within about 400 million years after the big bang. Construction could start as early as 2012, take eight years and employ 300 local construction workers and about 140 full-time operators, most working at the TMT headquarters in Hilo. The 30-meter mirror would provide nine times the image collecting area of the twin ten-meter Keck telescopes on Mauna Kea . . . An analysis of state worker employment shows Hawaii leads the nation in the ratio of state-to-private-sector jobs. Hawaii’s average was more than three times the nationwide rate at 15.1.

The state now has a 40-second greeting in Hawaiian at Honolulu International Airport that is repeated every 30 minutes. Translated, the message means, “Welcome to the Honolulu International Airport. If you’re headed out, be safe and come back soon. Kamaaina . . . welcome home. And, if you’ve just arrived . . . we hope that you enjoy your stay in our islands.”

After three years of planning, Target Corp. will begin construction this spring on a 130,000-square-foot store in Kailua. In January, Kaneohe Ranch sold the 311,000-square-foot Don Quijote site to Target despite opposition among a vocal group of residents who fear the big-box giant will change Kailua’s small-time charm, bring more people into the quiet neighborhood and cause further traffic congestion. The Kailua store will be smaller than Target’s four other Hawaii stores and is designed specifically for Kailua according to a Target spokesperson.

Hawaii has relatively low levels of gun ownership and firearms-related fatalities. The Washington-based Violence Policy Center said that in 2007, Hawaii had a gun death rate of 2.82 per 100,000 residents, the lowest in the country. Hawaii also ranked last in 2007 in gun ownership, with only 9.7% of Hawaii homes having one or more guns. However, ownership of guns in Hawaii has climbed over the past five years. 2006: 6,527; 2007: 7,317; 2008: 9,018; 2009: 13,182; 2010: 10,952. The huge jump in 2009 was caused by fears that President Obama would crack down on gun ownership in his first year in office. The Glock-19 semiautomatic pistol allegedly used by Jared Loughner in Tucson is legal in Hawaii; however, Hawaii limits the sale of high capacity magazines such as the one carried by Loughner to ten rounds; his apparently carried 33 rounds.

The Hawaii Convention Center has been awarded the 2010 “Best in Business Travel” award for the Best Conference or Convention Center/City by “Business Travel” magazine. This is the third consecutive year that the convention center has won the award. The winners were selected based upon surveys from 8,000 randomly selected “Business Traveler” subscribers. The magazine has ten editions worldwide for a total of over 500,000 readers. The Hawaii Convention Center is the largest meeting and convention facility in the state with 343,000 square feet of indoor meeting space.

Hawaii programs that depend on hundreds of millions of congressional dollars are in jeopardy after U.S. Senator Daniel Inouye (D) said in early February that he would ban “earmarks” for the next two years following a pledge by President Obama in his state of the union presentation to veto any bill that contained earmarks. Inouye chairs the powerful Senate Appropriations Committee and has been responsible for most of the federal earmark money flowing into Hawaii. He has often been dubbed the “king of earmarks and pork barrel spending.” In December, the Senate abandoned a $1.3 trillion appropriations bill, laden with about $321 million in earmarks for Hawaii projects.

Measures to legalize gambling in the islands circulate through the Capitol every legislative session but to date have gone nowhere. Hawaii and Utah remain the only states without some form of commercial gambling. Now, with Abercrombie willing to listen to ideas for legalized gambling to increase state revenues, it appears possible that the ban on gambling could change. A number of bills have been introduced including one to have Hawaii join the Multi-State Lottery Association, which is now operating in 31 states.

A very unpopular Abercrombie proposal is to raise the state alcohol tax by 50%. That would make the tax on beer the highest in the nation and the tax on wine the third highest. Opponents state that we need to increase jobs to work our way out of our dilemma. If we increase the alcohol tax, bar owners will need to increase prices on drinks which will result in fewer jobs, as fewer drinks will be served at the higher prices.

Hawaii’s population increased by 12.3% over the past decade, a gain of almost 150,000 since the 2000 census. With the recent census of nearly 1.4 million, Hawaii overtook both Maine and New Hampshire to become our 40th most populous state. It now has more residents than Maine; New Hampshire; Rhode Island; Montana; Delaware; South Dakota; Alaska; North Dakota; Vermont; and Wyoming, our least populous state . . . For the third year in a row, the Obama family vacationed over the holidays in a house on Kailua Beach about a mile from the house where Mary Lou and I have lived for over 30 years. The house the Obama family stays at is at the end of the sandy beach, which makes sense from a security viewpoint; however, the accumulation of seaweed when the tide is incoming makes it a very poor section of the beach, at times, for swimming.

Republican governor Linda Lingle, who left office in December after two four-year terms as governor, is considering her various options. She says that she is going to take six months off before deciding what to do. A likely possibility is a run against Democratic Senator Daniel Akaka in 2012 who has stated that he intends to campaign for a fifth six-year term. Lingle, 57, could be a formidable opponent for 86-year-old Akaka.

On Wednesday, January 12th a new ABC medical series began titled “Off the Map.” Oahu plays a South America jungle in the series that focuses on doctors who are battling their own “personal demons” and have chosen to hideout in remote jungle villages. The doctors soon learn that their patients may require a different type of medicine from what the doctors left behind and that they will have deal with the jungle elements, including jury-rigged medical equipment, if they want to save lives. Thirteen episodes have been ordered of the mid-season, replacement show. ABC hopes to be able to duplicate the success they had with “Gray’s Anatomy” another medical series that originally started as a mid-season replacement in 2005 in addition to their excellent, six-season, jungle-oriented-run on Oahu shooting “Lost.” One of our administrative assistants had a minor part in the “Off the Map” pilot.

Four UH men’s sports (baseball, basketball, football, and volleyball) made money during the last fiscal year while one women’s sport (volleyball) made money. However, the Rainbow Wahine volleyball team was the school’s best-per-dollar moneymaker, returning $2.02 in gross revenue for every dollar spent. Football was easily the top moneymaker with a gross of $11.6 million and a net of almost $3.9 million, while the Wahine were in second place at a gross of $2.2 million and a net of slightly over $1.1 million. Money losers were men’s golf, swimming & diving and tennis; and women’s basketball, track & cross-country, golf, sailing, soccer, softball, swimming & diving, tennis, water polo; and co-ed sailing.

Over the past year or two a number of colleges have shifted their football conference with money driving most of the decisions. UH was the senior member of the Western Athletic Conference (WAC) having been a member the conference for 32 years. The shifting of schools between conferences in order to be eligible for a better postseason bowl game made it almost mandatory for UH to do something to be able to retain a major football presence. In addition to wanting to play higher quality opponents, UH has a unique problem in view of their remote location. Not only is travel far more expensive, the time zones create the need for additional travel time. UH successfully negotiated with the Mountain West Conference for football and the Big West Conference for most of their other intercollegiate sports. The key factor in the UH negotiations were travel subsidies.

The Mountain West Conference members (football) are: Air Force; BYU (leaving next season to become an independent); Colorado State; New Mexico; San Diego State; TCU (leaving for the Big East in 2012); UNLV; Utah (leaving next season for the Pac-10); and Wyoming. Joining next season is Boise State. Joining in 2012 are Nevada, Fresno State; and Hawaii. UH already has rivalries in football with several of these schools; e.g., this year, UH played Nevada (W), Fresno State (W), UNLV (W) and Boise State (L). In my opinion, the shift to the Mountain West Conference for football and to the Big West Conference for other sports was easily the best option for UH.

UH, Boise State and Nevada all have one loss this year in WAC play. UH beat Nevada, which beat Boise State, which, beat UH. This resulted in a three-way tie for the WAC Championship. The WAC does not have a tiebreaker formula, so trophies will be awarded to each of the three co-champions.

The nine Big West Members are all located in a 439-mile stretch in California, which greatly eases both travel time and cost. The Big West Conference no longer sponsors football; however, several of the schools will provide meaningful competition in other sports such as baseball and women’s volleyball. In parenthesis are the schools’ signature sports: Cal Poly San Luis Obispo (women’s softball); Cal State Fullerton (16 baseball World Series appearances with 4 national championships); Cal State Northridge (men’s volleyball); Long Beach State (5 national championships in women’s volleyball; 4 baseball World Series appearances); UC Davis (women’s basketball); UC Irvine (4 consecutive NCAA appearances in baseball); UC Riverside (baseball and cross country); UC Santa Barbara (overall excellence); and Pacific (women’s soccer).

More than 500 homes built for use by the military at Barbers Point Naval Air Station may be sold as condominiums under a new conversion that is being studied. The homes were sold to San Francisco-based Carmel Partners five years ago and have been used as rentals. The base area, now known as Kalaeloa, has three housing areas under consideration: Orion Housing, Orion Park, and Makai Housing. The Makai homes were built in 1973 followed by the Orion and Orion Park homes in 1994. The homes are generally in good condition and feature more spacious layouts and yards than most town home projects in Hawaii. However, some elements don’t comply with current city building codes.

Hawaii hotels held their own against other island and international destinations for the first three quarters of the year according to a report issued in late October by Hotel Consultancy Hospitality Advisors, LLC. Oahu was the island destination with the greatest hotel demand. However, it is one thing to have hotel occupancy recover and completely different to have room rates climb back from their steep discounting. Hospitality Advisors estimate that it may take another four years to have Waikiki hotels recover from the recent tourism downturn.

Midweek, a Honolulu Weekly Newspaper, published a two page article 11/3/10 on the growing bed bug infestation on Oahu. The State Department of Health is being inundated with phone calls, as bed bugs have infested a Waikiki hotel and UH dorm rooms in addition to individual homes. Stott Property Management has already had to treat four of the properties we manage. Bed bugs usually travel to a new location by hitching a ride on clothes, luggage and furniture. They are resistant to most forms of over-the-counter treatments; therefore, pest control experts should be used. If your rental property is furnished, you might want to consider removing the furniture after your current tenant vacates. In most cases, furniture does not increase rental revenue after factoring in vacancy rates. If you have questions, contact my son-in-law, Tim Kelley, our property manager, at 254-1515 (locally) or toll-free at 1-800-922-6811 or via e-mail at tim@stott.com.

My wife, Mary Lou, and I started our real estate company in 1978. We do business as The Stott Team for real estate listings & sales and as Stott Property Management to handle the 400+ rental properties we manage on Oahu. I am a graduate of the United States Naval Academy and had command of two nuclear submarines stationed at Pearl Harbor. Following my retirement in 1975, I obtained an MBA degree from the University of Hawaii. Mary Lou has an undergraduate degree in Elementary Education from the University of Maryland and an MSW degree from the University of Hawaii. She has worked as an Elementary School Teacher in five states as well as a Clinical Social Worker in Hawaii. We have been married since 1956 and have three married children and seven grandchildren.

Our daughter, Tracey, began working part-time for us as soon as she was old enough to be licensed; she holds a Business degree from the University of Maryland. Her husband, Tim, was a Naval Officer on a nuclear submarine stationed at Pearl Harbor when the two of them met. Tim has an engineering degree from Tulane and an MBA degree from Chaminade University. Tim and Tracey have been married since 1993 and have two school-age children.

Our company has been relatively small as well as very large with multiple offices. Although, we are licensed to work on all islands we restrict our operations to the City & County of Honolulu (island of Oahu). All four family members work together along with nine assistants. Tracey is our listing agent; she consistently ranks among the top agents in the state. Tim supervises both our Property Management Division and our Buyer Agents. Tim and Tracey have been licensed in both Texas and Hawaii; they own eight rental properties in Texas, which provides Tim a unique background for supervising our Property Management Division .

In January 1993, my wife and I were scheduled to attend a real estate convention being held in Washington, D.C. At that time, we managed about twenty rental properties where the owners lived in the D.C. area, most of the owners being current or former military/civil service personnel that had held on to a former home they had purchased during a tour of duty in Hawaii. I did some research using tax office data and found that there were about 500 absentee owners of Oahu rental properties living in the greater DC area. We decided to go Washington, D.C. a few days early and make ourselves available to meet with them. We sent them a series of letters and for three days there was a seemingly endless stream of visitors to our Key Bridge Marriott meeting room. We thought most of the absentee owners would be interested in discussing property values, rental rates, 1031 exchanges, etc. and while there was considerable interest in such real estate topics, there was equal interest in discussing what’s been happening lately on Oahu . . . what kind of shenanigans has Mayor Frank Fasi been up to, how are the ‘Bows doing, what restaurants have opened/shut, how’s the traffic, etc. This experience gave rise to our quarterly newsletter.