The Honolulu Star Advertiser reported on Monday, October 3, 2016, in the news article, “Federal funds will help state conduct study on new ferries,” that the U.S. Maritime Administration (MARAD) awarded Hawaii State Department of Transportation (HIDOT) a grant of $500,000.00 to complete a feasibility study of various intra-island (within a single island) and interisland (between two or more islands) ferry services.

Although the article extensively quotes HIDOT Director Ford Fuchigami and names a MARAD official, there are no press releases referencing this matter posted to the HIDOT, MARAD or the Hawaii Governor’s websites.

Passed during the 2016 session of the Hawaii State Legislature, Senate Bill 2618 (SB 2618) authorized, set the terms of reference and appropriated $50,000.00 for the Hawaii ferry study. As State funding was insufficient to contract with the kinds of expert ferry consultants necessary to conduct such a feasibility study, it presumably led HIDOT to seek federal funding.

The Hawaii Shippers Council (HSC) submitted written testimony to the Hawaii State Senate Committee on Transportation on March 16, 2016, regarding SB 2618. Our testimony was critical of the approach taken in the legislation which stipulated a State –owned and –operated ferry system to provide both comprehensive intra-island and interisland services in Hawaii modeled after the Alaska and Washington State ferry systems. Based upon our canvassing of ferry experts worldwide, we developed a preliminary budget of between $750,000 to $1.0 million for the proposed Hawaii ferry study.

We suggested in our testimony that the State ferry feasibility study focus on the very few interisland routings that might be operated most efficiently on a private basis, and seek a Jones Act exemption. That exemption would be similar to the late U.S. Senator Daniel K Inouye’s legislation permitting the foreign-owned Norwegian Cruise Lines (NCL)’s to operate the foreign-built U.S.-flag PRIDE OF AMERICA in inter Hawaiian Island passenger service.

Typically around the world, governments put ferry services out to bid (tender) and receive proposals from private operators including provision of the ferry vessels, which are integral to the service proposal.

Exemptions from the U.S. ownership and U.S. build requirements of Jones Act cabotage would allow the world of competent international ferry operators to compete for the Hawaii interisland ferry operation with well-designed foreign-built ferry vessels for oceangoing interisland service. This would greatly increase the likelihood of a successful privately operated service.

At least Director Fuchigami indicated HIDOT is planning to study a State-owned but privately operated service (under contract) similar to the arrangement with the city bus service (that as opposed to the bill which specified a State -owned and –operated ferry). However, I would anticipate, as with the city bus service, the state-owned privately operated ferry service would require substantial state subsidies.

There is some federal operating funding, especially for commuter passenger ferry systems – such as the proposed Leeward-Honolulu ferry – but generally federal funding is not all that generous and the Alaska and Washington State ferries (after which the Hawaii Legislature modeled their study parameters) are chronically short of funds for both operating purposes and especially capital expenditures.

Presumably Director Fuchigami is anticipating U.S. built interisland ferry vessels – as required by the Jones Act – constructed in U.S. shipyards, which typically cost five times the cost of a foreign built ship. Without a substantial federal subsidy, it’s likely newbuild acquisition costs would prove prohibitively high for the State to shoulder. An outright federal construction subsidy would have to be provided through Congressional legislation and would be administered by MARAD. The alternative is Title XI (of the Merchant Marine Act of 1936), the federal ship financing program, is an administrative program providing federal loan guarantees for U.S. ship construction.

Interestingly, MARAD at the urging of the Hawaii Congressional delegation assessed the Hawaii Superferry prospectus as sound and funded the construction of the two ships with Title XI, which ended up costing the U.S. taxpayer $140 million, State taxpayers $50 million and private investors $30 million. It is our opinion, that the Superferry would have failed financially even without the legal issues it faced.

The requirements to study intra-island services – which will please individual legislators whose districts are involved — will end up as wild-goose-chases and wasting a lot of money. For example, the Leeward Coast to Downtown Honolulu service proved in several previously federally-funded trial operations that they could not attract many riders even when no fare was charged.

The idea of running a ferry from Lahina to Kahului is real head scratcher. The trip around West Maui would be a lengthy ride through the usually rough Pailolo Channel (between Molokai and Maui) and during Winter months heavy weather along the North Shore of Maui to approach Kahului Harbor. It’s difficult to envision how a Lahina-Kahului ferry would generate the levels of ridership to justify the operation.

The article ended with this quote from Director Fuchigami, “If the feasibility (study) comes back and says … the community’s not going to support it, we’re just going to walk away from it.” This is reflective of Governor David Y Ige’s administration sensitivity to the environmental activists and their renewable energy allies, which were responsible for his win in the 2014 Democratic Party primary over the incumbent Governor Neil Abercrombie and subsequent general election victory that year. The environmental activists were largely responsible for the adverse court decision which was the proximate cause of the Hawaii Superferry’s bankruptcy in 2009, and the administration doesn’t want to cross them with the current ferry effort. Hopefully the Ige administration will be as cognizant of the operating and financial issues of the proposed ferry operations as they are of the environmental concerns of their political allies.

Key excerpts include:

The U.S. Maritime Administration has agreed to help finance a feasibility study for establishing a publicly financed Hawaii ferry service, a plan that may reignite public debate over one of Hawaii’s hot-button transportation and environmental issues.

Lauren K. Brand, the associate administrator for Intermodal System Development in the Maritime Administration, agreed to commit $500,000 for the ferry study after listening to a presentation by Hawaii officials last summer, said Hawaii Department of Transportation Director Ford Fuchigami.

Fuchigami emphasized that any new system would be different from the privately run “Superferry” that ended operations in 2009, and said the latest push for ferry service came from state lawmakers, not from Gov. David Ige’s administration.

State lawmakers this year approved Senate Bill 2618 instructing the department to study the possibility of re-establishing a ferry system, appropriating $50,000 to fund the effort. Ige signed the bill into law, and Fuchigami said he approached Brand for additional money needed for the study.

Fuchigami said his department is developing a work scope that will be used to solicit proposals from companies that want to do the feasibility study. He said the study will cover the options for service both between the major Hawaiian islands, and also service between some ports on the same islands.

“I think it’s a good idea,” he said. “Interisland travel, when it comes to airlines, people complain that it is very expensive.”

Having a ferry alternative should help reduce that cost, and establishing a system to shuttle between West Oahu and downtown Honolulu would help to get cars off of the road, he said.

For intraisland service, Fuchigami said he is interested in the possibility of restarting service from Kalaeloa to urban Honolulu and establishing service between the Maui ports of Lahaina and Kahului.

“The intent is to get more cars off the road, to help alleviate the H-1 (and) H-2 merge, and so forth,” Fuchigami said. “We have to be able to offer different modes of transportation to get people into town, to get cars off the road.”

Brand told Hawaii officials the state likely will need different kinds of vessels to accommodate differing sea conditions encountered on trips between the islands, and on trips between ports on the same island.

The state will have an easier time obtaining federal subsidies for a ferry system if it owns the ferry vessels, and Fuchigami said the state would seek a private company to run the ferry much the way Honolulu pays a private company to run the city bus system.

“Once the feasibility study is done, then at that point the hard decision is going to be made — do we move forward from there?” he said. Considerably more state funding would be needed to acquire vessels and move forward with a ferry system, which means the Legislature would have to agree to the idea.

“This thing’s not going to happen overnight,” Fuchigami said. “It’s going to take some time, and I wouldn’t be surprised if this was going to take me about five years to even get this thing going.”

Fuchigami said the outlook for the ferry effort so far “looks positive,” with people coming forward to say they support the idea. On the other hand, “If the feasibility (study) comes back and says … the community’s not going to support it, we’re just going to walk away from it,” he said.