Thursday, April 17, 2008

HI Superferry: About the State Audit so far...

I think it is interesting that so many reporters seem to by accepting and repeating the line that a U.S. Maritime Administration loan guarantee was necessary for HSF to buy the 2 ferries from Austal-USA with actual ABN-Amro bond financing. Austal sells plenty of these ferries around the world without loan guarantee's from the U.S. Government. The loan guarantee just offers protection to the creditor who can therefore offer a lower interest rate to the borrower, in this case HSF. Is that what this was all about, securing a lower interest rate more quickly for HSF?

One example of such a report as mentioned above is the following:; from that:
"...the June 30, 2005 deadline was issued by the Maritime Administration or MARAD....MARAD told the Superferry the company would not get the $140 million dollar loan guarantee it needed to build the ship if that June 30th deadline was not met. [This is a restatement by the reporter that is incorrect, Superferry did not need the 'loan guarantee' on a bond to have the ship built.] He says his department was aware of that deadline as well. 'We knew the deadline was in fact a deadline that the Superferry would not come to the State of Hawaii if they could not execute a ship building contract by that date,' said Mike Formby, the Harbors Director." [This is a carefully worded statement by Mike Formby that is correct, but he does not state that the 'loan guarantee' was needed, just that they would not come to Hawaii if they could not execute a ship building contract.]

Further comments below from Dick Mayer:

State Auditor Report on Superferry exemption decision‏
From: Dick Mayer
Sent: Thu 4/17/08 8:28 AM

"As you read this, keep in mind that the Hawaii Superferry Company
prematurely placed its order (Jan. 2004) for the construction of the 2
superferries about 14 months BEFORE they received any exemption
from the EIS law.

HSF consistently claimed that they had time deadlines, so they needed
quick approvals, first from the PUC (Dec. 31, 2004), then from the State's
EIS law (Feb. 2005), and finally from the State Legislature (Spring 2005)
for the $40 million barges.

Special Session Act 2 asked ONLY for an audit of the EIS exemption
decision, not all of the other decisions that were pressured (PUC +
Legislative $40 Million) to meet the needs resulting from the Hawaii
Superferry's own premature order of the 2 superferries."

First, from the AP article in the Maui News on this:
"Audit: Hawaii gave in to ferry" By MARK NIESSE, The Associated Press
POSTED: April 17, 2008

"HONOLULU — Hawaii’s government caved in to pressure from the Hawaii Superferry, allowing it to bypass an environmental review from the state, according to an audit to be released today.

The report finds that the Department of Transportation exempted the Superferry from an environmental study after the interisland ship threatened not to come to Hawaii unless it was given the go-ahead by June 30, 2005.

...Since then, the Superferry has been carrying small loads of passengers and cars from Honolulu to Maui when it hasn’t needed repairs, as it did from Feb. 13 to April 7. The ferry still hasn’t resumed voyages to Kauai.

...'There was pressure on them (the Department of Transportation) to make a decision, and they made the best decision they could make at that time under the circumstances,' Formby said. 'It would be inaccurate to say the date didn’t matter. It did matter. But at the same time, it would be inaccurate to say the harbors division didn’t do their homework, because I think they had.' [Besides the fact that the MARAD loan guarantee was not necessary for the state nor the transaction, DOT did not make adequate use of the US Army Corp of Engineers studies of Kahului Harbor with regard to Pier 2. Something that has continued with DOT's EIS and alternatives for the proposed Kahului Harbor improvements. That EIS has a lack of varied alternatives including the developing current economic considerations with regard to declining demand for passenger traffic in Kahului Harbor.]

...The state has said the exemption decision was made by Barry Fukunaga, who was then deputy director for harbors but was later promoted to DOT director and currently serves as Gov. Linda Lingle’s chief of staff.

The audit recommends that an entity should be given authority to enforce environmental laws, state agencies should document findings that lead them to make an exemption decision, and guidelines should be developed to ensure that all steps required to protect the environment have been followed.

The auditor continues to gather information about the Superferry for a second report to be released later."

Also, from the article by Derrick DePledge of the Honolulu Advertiser on this:
Posted on: Thursday, April 17, 2008

"Audit: Superferry drove state actions;
Lingle administration criticized for bypassing environmental review"
State path set in '04 Awana, ferry talks
Hawaii, ferry at odds in '04 over environment

By Derrick DePledge Advertiser Government Writer

"The state may have compromised its environmental policy because of pressure from Hawaii Superferry executives who were worried about financing for the interisland ferry project, the state auditor has concluded.

The auditor found that an internal June 2005 deadline imposed by Superferry executives "drove the process" and pushed the state Department of Transportation to bypass an environmental review. The deadline, according to the auditor, was tied to Superferry's agreement with Austal USA to secure financing to pay the Mobile, Ala.-based shipbuilder to construct two high-speed ferries.

...Most significantly, the auditor — like The Advertiser — emphasized a late December 2004 meeting at the governor's office that included the governor's then-chief of staff Bob Awana, department officials, and Superferry executives.

Staff in the department's harbors division had wanted to require a statewide environmental assessment of the project and to get Superferry to install a stern ramp on the vessel to give it more flexibility at Kahului Harbor on Maui. But Superferry executives, according an account by a department staffer, told the state that anything but an exemption was a deal-breaker and that they would not install any ramps.

"Decisions made: We need to pursue EXEMPTION; and HSF will not provide any ramps on vessel," one department staffer told colleagues afterward in an e-mail.

[JHS vessels usually have their own ramp/s on board.]

...The audit recommends that the Legislature empower a state agency to enforce environmental review laws and require agencies to update exemption lists every five years. The auditor found that the public has little involvement in the exemption process other than the right to file a lawsuit to challenge an exemption.

...Formby said, 'and basically, they look at the response you gave, and they go out and look for a way to rebut your response.'"

Aloha, Brad

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