Enterprise Honolulu re-enlists CEO, seeks broader corporate support

When business leaders convinced Mike Fitzgerald six years ago to take over Honolulu's haphazard economic development efforts and actually get something done, he told them it would cost at least $2 million a year to accomplish their goals.

He received assurances that the money would be there, but it never was. But even at a level of funding that fell short of Fitzgerald's estimate by nearly half, he and his staff of about a dozen at Enterprise Honolulu managed to help attract and nurture several hundred businesses on Oahu that have, in turn, created nearly 5,000 jobs paying at least $50,000 a year.

On Jan. 1, Fitzgerald, 60, will start his third three-year contract as president and CEO of Enterprise Honolulu with a higher budget, a short-term goal of doubling his staff of case managers and an eye toward transitioning the organization to the next generation of leadership.

Fitzgerald's contract, which was renewed at Enterprise Honolulu's Nov. 28 board meeting, was a unanimous vote of confidence for an organization that doesn't necessarily have a unanimous base of support from Hawaii's business community.

Fitzgerald acknowledges that some who benefit from the status quo, in a state where more than half the population earns less than a living wage from a single job, have been resistant to creating what Enterprise Honolulu calls a new "pillar" to support Hawaii's tourism-heavy economy. That pillar is based on technology and other "innovation" businesses in such industries as health care, energy and defense.

"My assignment was not to maintain the status quo but to change it," he said.

Allen Uyeda, chairman of Enterprise Honolulu's board of directors and president and CEO of First Insurance Co. of Hawaii, said the board wholeheartedly supports Fitzgerald, who was recruited to Hawaii in January 2002 after winning praise for the way he ran Enterprise Florida, the economic development organization in Orlando, Fla.

Sensitive to its commitment to raise the money Fitzgerald said he needed, the board is seeking ways to build the organization's budget, which has averaged $1.2 million a year. Roughly a quarter of that budget pays Fitzgerald's salary, though he and the board declined to provide a specific amount.

"He brings a level of professionalism that we doubt we'd be able to replicate," Uyeda said. "The board was unanimous that we wanted to persuade him to stay."

'They've done remarkable things'

Board members Kirk Belsby, vice president for endowment at Kamehameha Schools, and Kitty Lagareta, CEO of Communications Pacific, are heading a committee to explore fundraising for the organization, which will include getting existing member businesses to raise their level of commitment for Enterprise Honolulu, especially foundations that may have originally committed to the organization for a fixed period of time. (Pacific Business News is a member of Enterprise Honolulu and its publisher, Larry Fuller, serves on the board).

"Enterprise Honolulu is competing on a national scale with other economic development agencies all around the country," Belsby said. "As some of the good times seem to be more behind us than in front of us, it's ever more important to support Enterprise Honolulu."

Enterprise Honolulu was reconstituted in 2001 from the wreckage of the Oahu Economic Development Board, a public-private group known mostly for its inertia.

Convinced that Honolulu needed a skilled CEO with national credentials if its economic development efforts were ever to succeed, some of Hawaii's top business executives worked on Fitzgerald for nearly two years to get him to come to Honolulu.

He turned down the job once, unconvinced that Honolulu businesses were truly committed to change. Eighteen months later, he got another call from Hawaii, this time with the news that more than 50 companies had pledged $1 million and were willing to pay more if the economic development effort hit certain goals over five years.

Fitzgerald signed on and the old economic development board got a new name, Enterprise Honolulu.

But years later, corporate commitment is still a topic that regularly arises, mostly in private discussions.

Fitzgerald declines to name any businesses that have cut their contributions or to single out any business executives for their lack of support, but occasionally his frustration seeps out in quiet asides about key players who sit on the sidelines or politicians who don't understand his mission.

He is careful to keep Enterprise Honolulu out of political swamps and he expertly avoids making any pronouncements or casual observations that would put him sideways with legislators or administration officials.

More money from contracts

The group's founders had originally wanted funding to come entirely from the private sector, but businesses in 2008 will account for only about $1 million of the $1.4 million budget, with the rest of the money coming from city, state and federal contracts and grants, Fitzgerald said.

"With the budget they've had in the past, they've done remarkable things," Belsby said. "If we can increase that budget by 30 to 40 percent, I think providing them with those additional resources, in my mind, has a triple-digit impact to what we're doing to the local economy."

In other cities, economic development organizations are generally funded about 50-50 by both the private and public sectors. In Honolulu, that ratio is more like 90 percent private and 10 percent public, Fitzgerald said.

That is changing. Enterprise Honolulu has $500,000 in government contracts and grants going into 2008, pushing the organization's annual budget to about $1.4 million. More government work has the potential to bring in $1 million, a figure that could help the organization reach its long-held goal of a $2 million budget.

Belsby noted that the state's robust economy over the past couple of years -- helped along in the technology sector by the tax credit laws Acts 221 and 215 -- has lessened the urgency for some to invest in long-term economic development.

"Given where the economy is going for the next two, three years, I think it's going to be extremely important to at least get to that number ($2 million) or higher because we can't count on found money like we have for the past three or four years," Belsby said.

Some of the additional money for 2008 will be used to double Enterprise Honolulu's staff of three case workers -- business consultants who work closely with new and existing businesses to help them launch and expand their Hawaii operations, and keep them here.

In addition to recruiting businesses from outside the Islands, case workers help them find office and industrial space, help recruit qualified employees and help navigate the local business, government and political cultures.

From January 2002 to December 2006, Enterprise Honolulu said it helped more than 300 companies, 99 of which created 4,200 jobs with an average salary of $49,990, and more than $780 million in new investment, which generated annual payroll taxes of $12.4 million.

In 2006, the most recent figures available, Enterprise Honolulu said it worked with 40 qualified prospect companies and helped retain 381 existing jobs and create 461 new jobs with an average salary of $60,100.

"Our goal is to get twice that many," Fitzgerald said of the three case workers. "We need six full-time case managers that really know their stuff."

Enterprise Honolulu also plans to begin charging for some reports and other consulting jobs that had previously been done pro bono, Fitzgerald said.

Emphasis on retention

The organization, which has spent a third of its energy recruiting businesses to Hawaii, is also shifting some of that energy toward retaining and expanding the businesses that are already here, to ensure they are a solid position as the state's economy evolves, with a goal of 10 percent of the state's 600,000 jobs in the technology and innovation sector.

"What we hope will happen over the next three years is that the economy here will continue to develop even more so that there's an even more diversified economy with even more innovation industries," Uyeda said.

Over the past six years, Fitzgerald has seen Hawaii's technology and innovation base grow to the point that there is now upward and lateral mobility for the worker in those fields.

"That means the base is growing and diversifying," he said.

Honolulu may actually be ready to build a second tier of businesses that evolve from that growing base. For example, if there are enough technology companies in Honolulu with "clean rooms," it creates an opportunity for a company selling microscopes to come here.

"There are a number of people who wonder if Hawaii can actually be a home for innovation industries, and those who believe that with the changing global world that Hawaii has already proved that it can participate in that," Uyeda said, citing such companies as Hoku Scientific, Hoana Medical, Trex Enterprises and Referentia Systems Inc. "The question now is can they build on that and expand and achieve their potential?"

Fitzgerald's newest three-year commitment will likely be his last. He would like to stay in Hawaii, but sees himself handing over the reins of Enterprise Honolulu to a successor.

"I want to stay long enough to stabilize the organization, stabilize the funding and get it to a transitional place that everyone can agree to," he said.