Friday, April 10, 2009 | Modified: Wednesday, April 15, 2009, 12:00am
Hawaii taxpayers could pay $40M Superferry bill
Pacific Business News (Honolulu) – by Chad Blair
Hawaii taxpayers could end up paying for most of the $40 million in harbor improvements carried out to accommodate Hawaii Superferry, which removed its ship, the Alakai, from Hawaiian waters on March 28.
It also is possible that Hawaii Superferry will be held responsible for reimbursing the state. The state Department of Transportation and the Attorney General’s Office are reviewing the enforceability of the state’s operating agreement with Superferry.
The state spent the $40 million, using general obligation reimbursable bonds, to construct barges with ramps at harbors in Honolulu, Kahului on Maui, and Kawaihae on the Big Island. A ramp also was built for Kauai’s Nawiliwili Harbor.
Under terms of the agreement, Hawaii Superferry was to reimburse the state for the $40 million. A fee schedule between the D.O.T. and Superferry called for minimum monthly payments of $191,667, or 1 percent of gross receipts, “less certain adjustments,” for the first three years.
The payments began Dec. 13, 2007, when Superferry resumed its Honolulu-Kahului sailings following a court-ordered suspension. Superferry had paid the state $2.6 million when it halted service March 19. Service stopped after the Hawaii Supreme Court ruled that a state law exempting Superferry from an environmental impact statement was unconstitutional.
“A lot depends on future events that are currently unknown,” said Mike Formby, the D.O.T.’s deputy director of harbors. “We don’t know how long Superferry will be out of the state, or how long the Chapter 343 review will take. So we have not come up with a final analysis or assessment.”
Formby was referring to Hawaii Revised Statutes Chapter 343, which calls for an environmental impact statement under the Hawaii Environmental Policy Act.
“Our basic position is that, although Superferry has left the market, we reserve all rights as to the enforceability of the operating agreement,” he said. “We are not conceding that it is void or unenforceable.”
The $40 million was used up faster than expected because of repairs made to the Kahului barge, battered by rough winter seas in 2007 and 2008.
The Kawaihae barge was rendered inoperable following the October 2006 Big Island earthquake and towed to the protected waters of Honolulu Harbor. The Kahului barge is expected to join it shortly.
Only Superferry can use the barges, which were made specially for the Alakai. Also, they are “foreign hulled,” meaning they do not qualify under the federal Jones Act for use by vessels sailing directly between U.S. ports, Formby said.
It was the harbor improvements that triggered the court-ordered environmental impact statement.
Belt Collins, which has a $1.3 million contract to conduct the EIS, has halted work until the D.O.T. can assess what is now required under Chapter 343 and state procurement law.
Formby said he expects the EIS to be completed within three to six months.
“That $40 million will be satisfied over time,” said Gary North, chairman of the Hawaii Harbor Users Group, adding that his members understand “everybody pays” for use of harbors.
Some lawmakers say they were worried all along about getting stuck with the $40 million tab.
“Neighbor Island senators especially asked Superferry, blatantly, what happens if it fails?” said Sen. Kalani English, D-E. Maui-Molokai-Lanai. “We were told, ‘Oh, we’ll pay it back, it’s all going to pay off.’ Those weren’t the exact words, but that was the general sense. And now this has happened and the state has to pay for it.”
English, now chairman of the Senate’s transportation committee, supports interisland ferries but opposed the Legislature’s decision to exempt Superferry from state law.
“If Superferry does get a military contract, which we know they are pursuing, then the taxpayers of Hawaii have subsidized their proof-of-concept experiment,” English said. “That’s what this was, to figure out all the bugs and fix it.”
Hawaii Superferry officials had little to say about the rest of the $40 million or about the future of its operations in Hawaii.
“[There is] no clarity on those issues at this time,” Hawaii Superferry President and CEO Tom Fargo said through a spokeswoman.
cblair@bizjournals.com | 955-8036
Source: http://pacific.bizjournals.com/pacific/stories/2009/04/13/story3.html?b=1239595200^1809947
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