The Hawaii Airports Corporation still needs your support

Aloha kakou!

At the State Capitol, the House-Senate conference committee is preparing to discuss SB 2996, SD3, HD 1 RELATING TO A HAWAI’I AIRPORTS CORPORATION. During this stage of the Legislative session, Senate and House members will try to work out their differences on this transformational legislation. 

Senate and House lawmakers are to be congratulated for their willingness to endorse significant change. There have been only two “no” votes as this bill has worked its way through the process (see who voted here). We are thankful to all of you whose supportive testimony helped move the bill forward. 

The only sticking point involves procurement. In  order to be successful, the Hawai’i Airports Corporation (HAC) must be able to promulgate its own procurement rules, as is the case with most airports in the country. The latest version of this bill advanced by the Senate (SD3) accomplishes this objective. The House version (HD1), would instead keep the HAC tied to a procurement system that will hinder the corporation’s ability to successfully bring our airports into the new millennium.

Please support the Senate version by sending an email using the text below to any or all of the House and Senate conferees:

Sen. Lorraine Inouye
Sen. Kalani English
Sen. Will Espero
Rep. Henry Aquino
Rep. Aaron Johanson
Rep. Sylvia Luke
Rep. Ty Cullen
Rep. Gene Ward

Suggested text:

Mahalo nui loa for your willingness to lead significant change in our community with the establishment of a Hawai’i Airport Corporation (HAC). We are very pleased that state lawmakers have overwhelmingly recognized the benefits of establishing an independent board charged with developing visionary and cost-efficient strategies for our state’s airports. 

A critical part of the HAC’s success lies in its ability to create less formulaic and restrictive procurement rules. We support the Senate position, which continues adherence to the State Procurement Code until new rules are promulgated. We respectfully request that conferees support the language in the Senate version.

Mahalo again for your leadership on this bill.

Wednesday, April 4:
The Hawaii Airports Corporation: Transformation for the Public Good

Very few people know that the entire $549 million operations budget for Hawai’i’s 15 state airports are paid for entirely by airlines and retail lessees. This includes:

  • The salaries and benefits of every employee and vendor in the State of Hawai’i Department of Transportation – Airports Division (DOT-A).
  • All airport costs including maintenance, utilities, and new development/improvement projects.
  • Bond payment on all debt floated for capital improvements.

These expenses are paid out of the Airports Special Fund, which is supported by tenant rent and user fees. By law, this fund cannot accrue a reserve, and moneys cannot be transferred to the state’s Treasury and co-mingled with tax collections. Whatever is deposited by users into the Airports Special Fund must be spent on airport projects.

Airlines that use Hawai’i’s airports system meet to decide upon important airport improvements as part of the Airlines Committee of Hawai’i (ACH). Airport concessionaires have their own coalition, called the Airport Concessionaires Committee (ACC). These coalitions approve airport improvement projects and anticipated costs. The projects’ design and construction are overseen by the state DOT-A, and the money for the projects is released by the Hawai’i State Legislature.

This is where the ACH and the ACC – the companies paying the bills to use and keep airports running – lose control. And this is where the trouble with current project management at Hawai‘i’s airports begins.  

Issue No. 1: Changes in administration
The DOT-A is a division of State Government and the Governor appoints the Deputy Director in charge of the division. Historically (and understandably), any incoming administration prefers to review projects that the previous administration put into the pipeline. This may make sense for large taxpayer-funded initiatives. It does not make sense for improvements agreed to and funded by private users.

Issue No. 2: Legislative spending authorization required
The DOT-A establishes a projected cost for an approved project. Even though the cost is covered by the private users, under state law, the State Legislature must authorize the expenditure. The Legislature only meets from late January to early May. If there are any changes to the cost or scope of the project after the Legislature adjourns, then the project is delayed until the Legislature reconvenes the next year. Any open project is charged substantial delay fees during this time, and cost overruns mount quickly. 

Issue No. 3: An onerous state procurement process
Procurement rules are a good thing. In the case of the Airports system, however, they have unnecessarily delayed completion of approved projects. The procurement code is so cumbersome that operating departments within the State often utilize the easiest path available, which is mandatory acceptance of the lowest bid. The code also allows bid awards – even in the case of mandatory acceptance of the lowest bid – to be challenged by any other bidder. This creates delays, which lead to higher project costs requiring Legislative approval. It’s a frustrating and inefficient cycle.

In all of these scenarios, the ACH and ACC cannot intervene.

Why is The Hawai’i Airports Corporation the solution?

A transformative bill now moving through the Hawai’i State Legislature would greatly reduce the inefficiencies and cost overruns built into the current system.  SB 2996 SD3 HD1 would establish a Hawai’i Airports Corporation (HAC), managed by an appointed Board of Directors and a Chief Executive Officer. The most current version of the proposed HAC would address the flaws inherent in the current system of oversight:

  • The HAC would approve and oversee projects. This ensures changes in administration would not affect ongoing improvements to the State’s airports.
  • The state Legislature would still need to authorize funding for large projects, but would do so in a lump sum authorization; the HAC would be able to manage changes between Legislative sessions.

Earlier versions of this legislation gave the HAC three years to develop its own procurement process – one that would protect against favoritism and cronyism, but not hamper progress by mandating the acceptance of the lowest bids or allowing challenges to the bid selections as a matter of course. This measure is currently in Conference Committee, and we are working to have the critical procurement provision reinstated.

It is clear that change is in the air. It is good change, and badly needed. Our “mahalo” to all the lawmakers who have supported this bill. 

The next time you are at the airport, be sure to look around. Observe the broken equipment, inoperative restrooms and rain-stained walls. The HAC would allow the management of the airport to use our money to make and keep our facilities modern, pleasant and clean for travelers and airport employees. 

If you are not yet a member of our action database, please consider joining. And when we reach out for support for the HAC, please do assist. It’s important to all of us.