Missed this article...PBN on Operating Agreement, etc.

From: http://pacific.bizjournals.com/pacific/stories/2009/04/13/story3.html

Friday, April 10, 2009 | Modified: Wednesday, April 15, 2009, 12:00am HAST
"Hawaii taxpayers could pay $40M Superferry bill"
Pacific Business News (Honolulu) by Chad Blair

Christina Failma, PBN

The Hawaii Superferry dock resembles a bridge to nowhere as it sits idle
at Honolulu Harbor.

View Larger

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.