Thursday, November 4, 2010

Problems with the New Littoral Combat Ship Dual Contracts Plan


Navy asks Congress to buy both LCS designs
By Christopher P. Cavas - Staff writer Nov 3, 2010

Rival teams from Lockheed Martin and Austal USA have been waiting all year to see which of their designs would be chosen for the Navy’s littoral combat ship competition. Now, if the Navy gets permission from the lame-duck Congress, the winner could be both...

Thursday, November 4, 2010

Inside Look at the New Littoral Combat Ship Plan

...The new plan to build 10 of each hull type is said to come as an opportunity. Apparently the competition has produced favorable contract prices from both contractors, and as such it is either cost neutral, or potentially cost saving, to buy 20 ships under these two contracts over the entire Five-Year plan instead of 19 under the old plan.

Dual AwardFY2010FY2011FY2012FY2013FY2014FY2015Total

There are a few hurdles to the new plan though.

In order to go with the new plan, the Navy needs Senate and Congressional approval to change the acquisition strategy. There are already statements up on both Alabama Senator websites, Senator Shelby and Senator Sessions. As a senior member of the Senate Armed Services Committee, Senator Sessions appears to have spoken to Ray Mabus about this plan on Wednesday morning and filled in on the details, because the statement implies he has thrown his full support into the plan. Senator Shelby has yet to learn the details, and finishes his statement by having concerns he hopes to work out with the Navy as he learns more details. Neither Senator Kohl nor Senator-elect Johnson has posted a statement on this news.

Both shipyards would have to agree to the new plan, and it appears pretty obvious both would do it happily. On just the details as reported in the press, Austal shares soared up 20% and trading had to be halted. Fox11 in Wisconsin quoted Richard McCreary, the President and CEO of Marinette Marine, the deal "would be a very positive event." I also thought is was noteworthy that Tim Colton, a highly respected shipbuilding consultant well known for his very clever commentary on Navy shipbuilding responded tonight by saying "Amazing, and somewhat hard to believe!"

I agree with Tim Colton that this is very hard to believe, particularly when I started looking at the details of the plan. This plan clearly comes from somewhere, and I believe it comes from way up the civilian chain of command - and by that I mean it almost certainly comes directly from the White House. There is way too much industrial and political consideration in this acquisition strategy for it not to be politically driven, which suggests to me this approach represents the Obama administrations shipbuilding jobs program. Only by accepting it as an Obama administration jobs program can you explain the enormous and obvious flaw in the plan.

The Big Flaw

My primary problem with the new acquisition strategy is how the plan to build both ships does not address the problem of each ship class having a unique combat system. Prior to the Milestone B review, the Navy told Inside the Navy (subscription only):
The Navy will draw up total life-cycle cost estimates for both the Lockheed Martin and General Dynamics versions of the Littoral Combat Ship before the program goes before the Defense Acquisition Board this year for its Milestone B. review.

The service included the announcement in a response to a Government Accountability Office report that criticized LCS life-cycle estimates.
In the September 16, 2009 statement that announced the downselect acquisition strategy, the Navy stated the plan "reduces program ownership costs, and meets the spirit and intent of the Weapons System Acquisition Reform Act of 2009." With each class having unique combat systems, this statement is no longer accurate. By building both designs but not choosing a single combat system, the Littoral Combat Ship program builds a dozen orphan ships rather than just two for some future CNO, SECDEF, etc... to retire, sell, or sink early as a cost savings measure.

The qualification standard for a "hybrid sailor" is higher on the Littoral Combat Ship than on other vessels in the Navy, and the qualifications necessary for one combat system has nothing in common with the other combat system - meaning if the Navy buys both - "hybrid sailors" are not interchangeable among the two classes of Littoral Combat Ship without undertaking a new set of extensive (and expensive) qualifications. Building both hulls with different combat systems will cost the Navy a lot more in the long run than choosing a single combat system in a competition, and spending a little bit of money up front to standardize the combat system on both ships.

The Navy can afford to do this, because there is a dirty secret here that must be addressed anyway. You know that 30mm gun for the surface warfare mission module? Word in the CIC is that it does not work for either combat system right now on either ship, in fact it may not work well with the combat system on the LPDs either, as we discussed the other day. In order to integrate new weapon systems into the Littoral Combat Ship, for each new system extensive work will be required to insure the new system works with both of the combat systems. It will not take long before the Navy spends more money maintaining and integrating new technologies into both combat systems among 2 fleets of 12 ships than it would cost if the Navy just bit the bullet now and selected a single combat system for both ships.

Selecting a single combat system would still allow the Navy to proceed under the plan to build 10 copies of both versions of the ship, although the Navy would probably be forced to get out bids for a new contract to one of the shipbuilders. If the Navy was to select, for example, the AIS combat system from General Dynamics for both hulls, the Navy could then proceed by building the 2 ships in FY2010 and 2 ships in FY2011 as Austal versions while the combat system on the Lockheed Martin version of the ship was converted to the AIS system. With an Austal build rate of 2/2/2/2/1/1 over the next 5 years, the Navy would begin funding the Lockheed Martin version of the ship with Marinette in FY 2012 under a 2/2/3/3 acquisition plan. Such a plan would allow the Navy to build at the same rate 2/2/4/4/4/4 between FY10 - FY15 as under the new plan, but would standardize the combat system.

Failure to standardize the combat system will result in early retirements of one class of Littoral Combat Ships, because it will cost too much before the end of one of the ships hull life to maintain both classes, and some future DoD/Navy leader absolutely will retire ships early to save costs - that's a fact. How do we know? Because the expense of maintaining unique, uncommon systems on ships is the same criteria ADM Roughead and other Navy leaders have used to retire ships over the last decade!...


Wednesday, November 03, 2010

LCS choice 1 or 2? Navy answers, "Yes!"

Posted by CDR Salamander

From the same Generation of leadership that gave us "Every Child Gets a Trophy" and turned the Navy Achievement Medal into an addendum to PCS orders - via NavyTimes,
The long-awaited decision on which competitor will win the Navy’s littoral combat ship competition is expected to be revealed Wednesday afternoon, and the answer will surprise most people.

The winner? Both teams.

Sources said the Navy, rather than selecting one team to build 10 ships, will instead award construction contracts to both Lockheed Martin and Austal USA to build 10 of their ships, for a total of 20 new LCS hulls.

One source said the ships will continue to be built with separate combat systems, rather than go through a time-consuming effort to install a common system on all the ships.
Really? Really?

I don't want to hear any more from these people about configuration control, systems commonality or gains from economies of scale. I don't want to hear them tell one more Commanding Officer that he needs to make hard choices.

LCS - a dog's breakfast of intellectual fail from CONOPS through production. Almost as bad as sending an XO to Court Martial for failing to implement something that doesn't exist.

If this pans out - it is only one thing; full-spectrum systemic fail.

Would someone make a d@mn decision. The right one would be to kill the entire program before it does more damage to our long-term Operational and Tactical capabilities ... but no ... punt the decision to others to deal with...

Sunday, October 17, 2010

Hawaii Superferry’s Bankruptcy = US Navy Opportunity

A good wrap-up article:


Related Stories: Americas - USA, Corporate Financials, Events, Other Corporation, Surface Ships - Other

Hawaii Superferry
Hawaii Superferry
(click to view full)

In his April 6/09 discussion of the FY 2010 budget, Secretary of Defense Robert M. Gates said that the US military wanted to charter another 2 “JHSV-like” fast catamaran ships from 2009-2011, untilthe JHSV ships begin arriving. That meant JHSV-winner Austal would find its products competing once more with Incat, which has had 4 of its wave-piercing catamarans chartered by various American services. Their Swift wave-piercing catamaran is currently chartered by the Navy as HSV-2, just as the Austal-built Westpac Express is chartered by US Military Sealift Command for the Marines.

One obvious option was the Hawaiian Superferry catamarans, a larger pair of Austal-built ships that resemble the Westpac Express….

Hawaii Superferry
Alakai arrives
(click to view full)

Oct 10/10: The US Maritime Administration (MARAD) buys the 2 ferries for $25 million each at a US District Court auction in Norfolk, VA. MARAD was able to use its owed debts to cover the bid cost, and will now look to sell the ferries. The US Navy has expressed interest in buying them. Maritime Matters | Alabama Press-Register | Honolulu Star-Advertiser | KITV Honolulu | Virginia Pilot | Gannett’s Navy Times.

May 2010: The federal government sues to get title to the 2 vessels, in order to recoup its $150 million loan guarantees. The suit leads to the October 2010 auction.

Feb 11/10: The former Hawaii superferries Huakai and Alakai are pressed into service by the USA’s Maritime Administration (MARAD), in the wake of the disaster in Haiti. The ships are managed by Hornblower Marine Services (HMS), and the deployment is seen as an earl concept test of the similar JHSV design’s operations. Haiti’s lack of port infrastructure has not, to date, been a major problem for these ships. Maritime Executive magazine.

March 30/09: Hawaii Superferry files for Chapter 11 bankruptcy, as it reportedly has just $1 million in cash, and is facing a $2.9 million principal and interest payment on one of the ferry construction loans. MarineLog’s “Hawaii Superferry files for Chapter 11” explains the situation, and details the firm’s various creditors.

  • The US Maritime Administration (MARAD) is owed more than $135.7 million because of 2 loan guarantees under the Title XI program
  • Shipbuilder Austal USA is owed $22.9 million, as a 2nd mortgage, on construction fees
  • The state of Hawaii, which provided $40 million in harbor improvements, held the 3rd mortgage.
  • Superferry is also in default to Guggenheim Funding LLC for $51.7 million, related to a secured note in August 2007.
  • J.F. Lehman & Co., the controlling private investor in the project, put up $85.2 million of the $92.9 million issued in preferred stock. The firm was founded by former Secretary of the Navy John F. Lehman, and seems set to lose its entire investment.

Unsecured creditors listed in the bankruptcy petition are headed by:

  • The Harbors Division of State of Hawaii: disputed claim for $731,080
  • MTU: $544,653 for engine maintenance related services
  • Hornblower Marine Services: $113,685 for management fees and services
  • Austal USA: $78,198 for travel and labor for professional services

See also: Journal of Commerce.

March 16/09: The Hawaiian Superferry service is shut down, after a Hawaiian Supreme court court decision strikes down a 2007 law that allowed them to operate. The ruling effectively mandates even more environmental reviews for the service, and forces the ferries to stop operating in the mean time. Alakai had been operating between Oahu and Maui. AP.

Additional Readings

  • Maritime Professional (August 2010) – Waiting for that Ship to Come In. Joseph Keefe takes a sharp look at the Hawaii Superferry saga. [Ed. note - This is a funny, if not accurate read.]

Tuesday, October 5, 2010

Well, we're almost done here...

We're told MARAD had the winning bids of $25 million on each of the 2 Hawaii Superferries over and above what was already owed to MARAD.

Now, what does MARAD do with those 2 vessels?

Friday, October 1, 2010

Ferries went to Auction Yesterday?


Global Maritime Analysis with Joseph Keefe > September 2010
"Shopping at DOT: What’s in Your Wallet?"

...The Real End of Title XI

A regular reader of this column sent me the DOT NOTICE OF PUBLIC AUCTION links for the sale of the vessels ALAKAI and HUAKAI and then added simply via E-mail, “You can get them for a penny above what is owed. Before you start rifling through the sofa cushions for spare change, just know that Marad’s David Matsuda is on record as pledging to protect the government’s interests in the matter by matching any bid that does not equal the full amount owed. A Marad PAO confirmed that metric on Monday...

Click on the two vessel names above. They go to the classifieds placed a little more than a week ago for the auction of each of the vessels. Notice they were being auctioned separately... Waiting to hear who bought 'em and at what prices, no doubt different prices.

Wednesday, September 1, 2010

Dicus: Superferry - The "Non-issue" of Campaign, etc.


"Two non-issues of the gubernatorial campaign"
by Howard Dicus (Superferry supporter)

It was a little weird to hear two perfectly intelligent men of substantial achievements who care deeply about Hawaii arguing over two complete non-issues in the debate Monday night.

Former Honolulu Mayor Mufi Hannemann and former Rep. Neil Abercrombie, in this and other debates, have discussed Hawaii Superferry and timeshare tourism. They might as well leave these topics on the table. I almost hate to bring this up because I enjoy amiable relations with both guys. And I hear their aides, spokeshumans and other impediments are increasingly temperamental as the campaign wears on. But I'm going to proceed anyhow. Vote against them if they can't take a joke.

Hawaii Superferry went broke, not merely because of the court challenges against it, but because its basic economic model was flawed. It would have required way more usage by the average resident than it could ever have reasonably counted on. I speak as a Superferry supporter who felt much of the opposition to it was invalid. I rode it once and really enjoyed it. I said at the time that the criticisms of it were more properly directed to other boats in the water that the same people have simply allowed to sail and proliferate. Yet it needed more revenue than it was ever going to get.

The ships are gone, sold off, and the company has died. Not only that, but both Hawaiian Airlines passenger service and Aloha Air Cargo service between the islands have improved a lot since Superferry "sank the island," as they said in the Master & Commander novels. Superferry's not coming back, so talking about it is kind of a waste of time at this point...

There you have it. But, we imagine there are some out there who still don't get it.

Also received the following comment today:
Doctor on a bike said...

My office looks right out on the Hawaii Superferries in Norfolk. They've been moved this morning (Sept. 1) and look to be ready to go somewhere.

To which we said...

BTW, if you go to here:
Set it to "Satellite," zoom in, and you can look down on the Alakai and Huakai and see they have been moved to a pier right next to the one they have been at.

Thursday, August 26, 2010

Interesting story on 41M Austal vessels in Trinidad & Tobago


"Trinidad and Tobago's new water taxis..."
Thursday, August 26 2010
Contributed by: ibalgobin

Water-Taxis “Paria Bullet” & “Trini Flash” undergoing sea-trials in Australia.The new Minister of Works and Transport, the Honourable Jack Austin Warner in his recently stated position has announced that he is seriously giving thought to divesting at least two (2) of our brand new Austal designed and built forty-one metre (41M) water-taxis already named “PARIA BULLET”, “TRINI FLASH”, “CALYPSO SPRINTER” and “CARNIVAL RUNNER”. This desire to want to sell-off “surplus” state assets that are “unable to pay for themselves” may be considered good thinking on his part.

The People’s Partnership Government inherited the previous administration’s business model of acquiring foreign used and/or new vessels with “built-in” maintenance contracts, some for as long as five (5) years, with foreign-based marine service providers, as is the case with the six (6) Trinidad and Tobago Offshore Patrol Craft (OPC). According to what has been previously stated by the Honourable Minister of Works and Transport and mentioned in the media, the maintenance cost alone for these four new water-taxis amount to some sixty-nine million dollars (TT$69 million), per year. Normally, as is the case with new automotive vehicles, very little maintenance is required within the first few years of operation, with the exception of routine air/oil filter changes, engine and hydraulic oil changes, lubrication of bearings, usually undertaken after a fixed scheduled number of running hours. As a matter of information, the sale of new marine vessels, normally carry a standard one (1) year shipyard manufacturer’s warranty, which would normally cover both major and minor components, ranging from engine propulsion units to navigational equipment.

In the last three (3) years, the previous administration had outsourced the purchase, maintenance and operational aspects of all of our passenger vessels to foreign entities. Examples of these contracts can be seen with the maintenance and operation of the three (3) used Hydrocruisers (existing water-taxis fleet) which is presently undertaken by Hornblower Global Maritime, Inc. (USA), the used twin INCAT inter-island fast ferries to Bay Ferries Management Limited (CANADA) and the most recent contract for the new water-taxis given to Austal Limited (AUSTRALIA). This foreign outsourcing model will invariably lead to an enormous imbalance between local revenues earned and expenditures paid-out in valuable foreign exchange, related to the operational and maintenance costs of our local passenger fleet.

As a developing country with a new administration intent on diversifying our economy from the energy sector, we all have to start to think even more creatively and look at new opportunities, as they arise.

So, from a purely economic standpoint, the new Minister cannot be faulted for wanting to divest these unproductive assets. However, there may be viable alternatives. For example, these new “surplus” water-taxis can be used to transport tourist from visiting cruise liners that dock at the port of Port of Spain and from those staying at the newly built waterfront Hyatt Regency Trinidad and the nearby Crowne Plaza hotel to Maracas Bay. Local residents will also appreciate driving to our capital cities of Port of Spain, San Fernando and soon-to-be Chaguanas, on weekends and public holidays enjoying the scenic water-taxi ride along the north coast of Trinidad, to and from our beautiful bathing beaches.

With the government owned water-taxi car parking facility available nearby, this can easily provide a convenient meeting point for our population, who will prefer to park their vehicles in a safe and secure facility, rather than to drive for several hours in slow moving traffic to and from the main beaches with their families, as is very common during national holidays. Likewise, the new water-taxis with their two levels of aircraft type seating accommodation can be utilized to offer a similar air-conditioned “tourist-like” experience to our world famous Caroni Swamp, via the Gulf of Paria sea route. The use of these environmentally friendly water-taxis with their large panoramic tinted windows and silent Kamewa waterjets should go well with environmentalists and the visiting scarlet ibis, including the aquatic wildlife.

The People’s Partnership manifesto promises not only to diversify our economy, but to also develop the maritime industry, which should include the development of our local vessel repair and maintenance capabilities. Therefore with a little creativity and thought, we can possibly do both with the newest additions to our maritime fleet.

Interior View of T&T Water-Taxis showing aircraft style seating accommodation.


- Photos courtesy and article written by Wilfred de Gannes, T&T Shipbuilding and Repair.

Sunday, August 22, 2010

What are the Hawaii Superferries Worth?

There is a new KITV report on a MARAD official's statements yesterday in Honolulu on the expected auction of the two Hawaii Superferries here and here. In those reports the MARAD official is quoted as saying the lien that MARAD has on the vessels is a total of $150 million. The report further quotes,

"'I can tell you we already have a $150 million lien on both ships. So, you can of course, provide a cash bid higher than that amount and take ownership of both the Alakai and the Huakai,' said Matsuda. Matsuda was in Honolulu Friday for the groundbreaking ceremony for the renovation of the Pier 29 container yard at Honolulu Harbor. The project is funded with federal stimulus money. Matsuda said Maritime Administration wants the Superferry vessels for military and humanitarian projects."

Hold that thought.

You can look a number of places to try to find what the two Superferries actually cost to build including all the nice extras in the interiors and things added later like the Whale detection systems to the Alakai and the ramp, wastewater treatment, and desalination plants added to the Huakai. A simple place to look is Wikipedia which says each vessel's total costs were $88 million each, here and here. Of course that's just Wikipedia and the Huakai's costs were at least $5 million more than the Alakai. But a quick thumbnail estimate is that the combined cost for the two was at least $181 million new before depreciation. Hold that thought.

Now, it took a little bit of hunting but we went back and looked at some of the early Bankruptcy Court filings, and it looks like the outstanding senior lien that MARAD has on the two vessels is actually closer to $140 million, not $150 million. Additionally Guggenheim Corporate Funding, LLC has a lesser priority outstanding lien of about $48 million and Austal had an even lower priority lien of about $22 million. The State of Hawaii was junior to them. Austal wrote off their loan as a loss. Guggenheim's lien was "secured" in equity. It is understood that all equity holders would lose their money on this. So the key takeaway on the liens is that MARAD's is $140 million, not $150 million and that Guggenheim also has a lien and would be out $48 million. The total of those two adds up to $188 million, only slightly more than what the two vessels originally cost to build. Hold that thought.

Now, let's got back to that MARAD official's quote about $150 million. First of all, does MARAD determine and run the auction? NO, they do NOT. It is the Bankruptcy Court that does that. The MARAD official's comment, "So, you can of course, provide a cash bid higher than that amount ('$150 million') and take ownership of both the Alakai and the Huakai,' said Matsuda," is not something that MARAD will determine and is misleading. First of all, MARAD's outstanding lien is $140 million, and NOT $150 million and more importantly because these ships are possibly worth closer to $180 million than $150 million, but also because it is not for MARAD to say what exact dollar figure will be enough to take ownership of the two vessels, that's the purvue of the Bankruptcy Court.

So, what are these ships worth? Well, it's somewhere between $150 and $180. They have a tax depreciable life of at least 20 years, even though the Huakai is almost like brand new and should not be depreciated as much as the Alakai. The Alakai, if you will remember, had significant damage to the rudder, was run aground going into drydock, and fell off it's blocks in drydock. But, if they were both actually being used continuously over the past 2 to 3 years, then the total depreciation on $180 million would be about $4.5 million for the Huakai and about $13.5 million for the Alakai for a total of about $18 million off of $180 million equaling about $162 million, which is about what these two vessels are really worth, leaving $140 million for MARAD, not $150 million, and the other $22 million for Guggenheim, recovering almost half of their potential loss. Keep in mind, to build these brand new for commercial use would be at least $90 million each and also the builder Austal is being paid about $180 million to build just one of these very similar ships for the U.S. military as JHSV's.

Our conclusion is then that these two vessels together are worth no less than $160 million total. Their actual worth is probably a little more than that. We would expect Guggenheim to be a bidder on this in addition to MARAD. We believe MARAD will actually be satisfied to recover their $140 million, but we also believe MARAD when they say the, "Maritime Administration wants the Superferry vessels for military and humanitarian projects."

Now, let's see if somebody gets 'em for less than that?

By the way, Mufi, your cheap friends aren't in the running.

Wednesday, August 18, 2010

More Misplaced Comments from Mufi Hannemann on the Superferry


Our responses in red. Excerpted from...

Hannemann talks about action plan
Economy, education, environment are key
POSTED: August 18, 2010

...Hannemann was unapologetic, saying his ads have facts meant to educate the public about the great disparity in the candidates' qualifications. He laughed off a section of the flier that listed "Won First Place, Lahaina Whaling Days Beard Contest" under Abercrombie's "Recognition."

The two men do have some similarities, though, in their campaigns. For instance, both veteran lawmakers said they'd put education first and start with placing the Department of Education superintendent in their cabinets (Hannemann would make the University of Hawaii president a cabinet member, too.); and both support bringing back the Hawaii Superferry.

Three Maui-based environmental groups successfully sued to kill off the Superferry after Gov. Linda Lingle's administration bypassed the environmental impact statement process. [The lawsuit wasn't what killed the Superferry, it was their own financial losses even when they were operating. HSF was never actually compelled to cease operations nor leave the state.]

Hannemann said he'd start the process from scratch to resolve Lingle's "mistakes" by hosting public meetings on the Superferry plan across the state, and he'd start a new environmental impact statement to make sure the slate is clean. [DOT has been planning to reuse the information from the Act 2 EIS and add some to that. Hannemann doesn't say whether he would rescope it. The existing vessels are logistically inappropriate for the route requirements.]

"If we're going to do this again, we have to do it right," Hannemann said.

He said he'd favor a public-private partnership that likely involves using the currently bankrupt company's two giant high-speed catamarans to transport military personnel on leave between islands. [HSF was already transporting military personnel on leave, and it wasn't making a difference with their bottom line. What Hannemann could more transparently say is "transport military personnel and their equipment on assignment between islands for training purposes."]

"It would free up a lot of lines at the airport," he said. [Not really, it never did. HSF did a small fraction of the business that the airlines did.]

But Superferry's true benefit was economic. Before service ceased about two years ago, a lot of Maui farmers, fishermen, contractors and other small-business owners used the ferry to get their goods to the lucrative Oahu markets... [Some Maui farmers were using it, and they are now using Aloha Air Cargo with no problem. The fishermen, contractors and small-business who were using it were mostly from Oahu. No surprise that the Oahu Development Board, Enterprise Honolulu, lobbied so hard for HSF and was putting out narrow and what turned out to be inaccurate economic forecasts on it as far back as 2003.]

An additional response from another commentor:

Economic? Really? Bleeding $40-$50 million out of the state’s budget for infrastructure, now to be paid off by other harbor users (though both the Alakai and floating barge are gone). Where is the economic cost/benefit study to show that a subsidized interisland ferry will help enough small businesses ship interisland to make it worth the costs, including the increasing price of fuel for the gas-guzzling fast ferry? State to pay for public meetings and preparing a new EIS?

With his above statements Mufi Hannemann reveals insight into his thought processes. The same processes he would use to try to solve any other problems. Such as with this one. It should be clear to all that regardless of his formal education, Mufi Hannemann is not the sharpest tool in the shed.

Tuesday, July 27, 2010

Superferry's Boondoggle Business Plan


Superferry’s boondoggle business plan

The July 24 letter writer Cayetano Gerardo must have missed the recent AP news item in The Garden Island, “The Hawaii Superferry was sailing under a facade of success ... shortchanging the state on its monthly fees. The company’s inability to pay fully [as early as] July 2008 indicates it was in troubled waters nine months before [voluntarily ceasing operations]...”

Indeed, let’s remember and support the elected officials who took a stand against a boondoggle business plan that was destined to fail in the free market.

Furthermore, the voters/consumers of Hawai‘i can thank the blind political supporters of the Superferry for 18 more years of higher prices to cover the more than $40 million that the state lost on the Superferry and which other harbor users now have to cover and pass on to the consumers of Hawai‘i.

Indeed, come election day let’s remember the politicians who did not speak up and those who supported a Superferry business plan that was destined to fail under top-heavy operating expenses and ultimately cost the taxpayers and consumers more money for nothing. Vote ‘em out.

Goofy Hannemann's Super Fairy Dreamin'

Larry Geller called this spot on before and after Hannemann's press conference yesterday:

Sunday, July 25, 2010

"Will Mufi 'turn to desperate measures, like, say, reviving Hawaii’s Superferry' if he becomes governor?"

by Larry Geller

Internet find:

Will Birmingham-area politicians turn to desperate measures like, say, Hawaii's Superferry to solve the Grants Mill Road bridge problem? Never say never. [The Birmingham News, Chat live with Driving Miss Crazy on Monday at 1, 7/25/2010]

Before they do anything that desperate, I hope they check Google. They’ll learn of the extensive subsidies Hawaii bestowed upon the ferry business, that it was losing money, and that the state knew about it months before the ultimate bankruptcy filing.

Of course, as a government-owned operation, it would be reasonable for Birmingham to decide to invest in a ferry as a public service, just as government runs transportation systems anywhere. New York City provides the Staten Island Ferry for free, as an example of a subsidized ferry service.

It was interesting, though, just to see “Hawaii Superferry” and “desperate measures” in the same sentence. There really isn’t much in it.

This next, however, is much more serious. It’s a snip from an interview with gubernatorial candidate Mufi Hannemann, in which he seems unaware that Hawaii Superferry was not a viable business from day one:

My next question is one of my favorites because every politician loves the idea. So Mufi is elected and on the first day of session the legislative leadership says he can give them one bill and they will immediately pass it - what is the bill.

Mufi thought about this for a good 20 seconds. And then he said funding to restart the super-ferry and do the EIS. Mufi went into great detail about the great benefit that people in the state had when it was running. [David Thielen (Huffington Post), Mufi Hanneman Interview, 7/12/2010] [The PUC CPCN needs to be redone too.]

In the audio record of the interview, Mufi says “I saw enough of it that I knew it was going to be successful” (around 29:35 in the interview). Unfortunately, this is contrary to the facts as revealed by the Associated Press story of 7/21/2010 (after the interview date).

Again, a decision by government to create a Hawaii inter-island ferry service and pay the cost could be a rational decision (if they can also figure out how to do it without causing extensive seasickness). The Hawaii Superferry, however, was to be a private, profitable business, not a municipal- or state- run ferry. The taxpayer was subsidizing the potential profit of Hawaii Superferry’s owners.

But look, Mufi has a rather poor record at implementing water transportation so far, and a tolerance for high losses:

TheBoat, Honolulu's commuter ferry from Kalaeloa to Aloha Tower, gives West O'ahu residents an oceangoing alternative to increasingly clogged highways, for no more than $4 per round-trip ticket.

What makes the service so cheap is that Honolulu taxpayers pay an additional $120 per roundtrip rider to cover the actual costs of operating TheBoat, according to a city study.

The cost of carrying each passenger on TheBoat is about 62 times more than the cost of an average trip on TheBus. It is also significantly more expensive than comparable Mainland ferry services. [Honolulu Advertiser, High subsidies may scuttle Hawaii's ferry, 2/15/2009]

It was ok with Mayor Mufi to charge taxpayers $120 for each roundtrip rider on his boat service before it was finally terminated.

Hawaii Superferry certainly had an EIS problem, but even without that, the business appears to have been dead in the water from day one. The Superferry fiasco wasn’t Mufi’s responsibility, but his lack of understanding of what ultimately sank the business combined with willingness to tolerate losses incurred by TheBoat should be a concern, given the need to control costs for a possible rail transit system planned for Honolulu.

(Thanks to Kevin for pointer to the interview story)

Monday, July 26, 2010

"Mufi fiscally irresponsible to ignore Superferry losses"

by Larry Geller

Again, the news tells us that Mufi Hannemann is serious about trying to revive the Hawaii Superferry, with the same ships that couldn’t be economically successful the first time around.

Maybe, like Sarah Palin or George Bush, he just doesn’t read the newspapers. The Associated Press revealed on 7/21/2010 that the Superferry was unable to pay its fees to the State fully nine months before it ultimately went bankrupt. Analyst Brad Parsons had estimated the costs of running such a large, fuel-hungry ship much earlier and published the information on his popular blog.

Our press seems unwilling to ask the hardball questions. Won’t a reporter please confront him on this one day soon?

Perhaps hizzoner knows the economic facts but is playing to the Oahu voter’s dreams of the Superferry’s return, and their belief that it was viable business killed by a bunch of Kauai tree huggers and Maui whale worshippers.

All the more reason for some reporter to call him on it and set the record straight.

See also:

Hannemann Wants To Revive Hawaii Superferry: Opponent Abercrombie Called That A Fantasy (KITV, 7/26/2010)

Candidates for governor pitch economic plans (AP, 7/26/2010)

Will Mufi “turn to desperate measures, like, say, reviving Hawaii’s Superferry” if he becomes governor? (7/25/2010)

[Editor's note - We believe the only reason that Goofy Hannemann raises this issue now is because he believes it is a way to energize the Oahu vote, regardless of whether it is realistic or not. By raising the Super Fairy Dream, Hannemann shows what kind of a baseless Governor he would be.]

Monday, July 26, 2010

Goofy Hannemann's Plan for Recovery: Roads, Rail & da Superferry!

Oh, man, this is a frickin' joke. Superferry should be a total non-issue. They don't even have a Certificate of Public Convenience and Necessity anymore, not to mention the EIS that the state hasn't even begun. The Superferry is so insignificant considering the problems the state has to deal with, esp. considering that the Superferry's own business plan wasn't working, it's a farce that a Gubernatorial candidate would so desperately grasp at straws to even mention it:

"Candidates for governor pitch economic plans"
MARK NIESSE, Associated Press Writer
Monday, July 26, 2010, 10:09 p.m.

HONOLULU (AP) — Hawaii's Democratic candidates for governor proposed competing economic plans Monday, with Mufi Hannemann's ideas focused on construction and Neil Abercrombie's pitch centered on energy and agricultural sustainability.

Hannemann wants roads upgraded, Honolulu's rail project built and the Hawaii Superferry revived. He also would seek an audit of state spending and a commitment for the NFL's Pro Bowl to be hosted in the islands...

Abercrombie countered that the former Honolulu mayor's ideas emphasize projects instead of long-term policies to improve the business climate.

The former congressman is aiming for the state to use more renewable energy, produce more of its own food and remove governmental red tape.

"I propose that we save the state of Hawaii and immediately invest in our survival by having a long-term plan," said Abercrombie. "What we need to have is not just projects ... What we need to have is economic plans."

Hannemann's 10-point economic plan first calls for an audit of state government to help eliminate waste.

Abercrombie responded that a study of the government would delay needed changes.

Hannemann said an interisland ferry could be successful if it were tried again and followed environmental guidelines this time. He hopes to partner with a private company to bring back the same ferries previously operated by the bankrupt Hawaii Superferry.

"If it had been done properly, we wouldn't have experience the kind of difficulties that it had," Hannemann said. "It's just too good of an idea to let it go by the wayside."

But Abercrombie said a new ferry system would need to be more financially sound than the Superferry was.

"The only way the Superferry is going to be able to come back, except in a fantasy, is if there is a partnership with the United States military," he said. Abercrombie said he would seek a public-private partnership for a ferry system.

The Associated Press reported last week that the Hawaii Superferry had fallen short on its required payments to the state nine months before the Hawaii Supreme Court decision widely blamed for the ferry's closure came in March 2009.

The leading Republican candidate for governor, Lt. Gov. James "Duke" Aiona, has an economic platform based on easing government barriers to business and encouraging technology development... >>>Full Article>>>

Saturday, July 24, 2010

Superferry Politics: The Devil is in the Details, Mr. Schatz

Candidate for Lt. Governor Brian Schatz comments on the Superferry shortly before and after the unconstitutional Act 2 was passed by the Legislature, followed by a clip on the latest news about the unsustainable business plan that the Superferry always was:


"Lessons from the Superferry"
How do we move forward?
by Brian Schatz Sep 19, 2007

OK, we’ve heard the arguments. Depending on your perspective, either the Superferry is an example of how unfriendly Hawai’i is toward business, or it’s a cautionary tale for those who skirt environmental regulations. Both sides of this cultural and environmental divide are outraged. But where do we go from here? What are the lessons from this ongoing fiasco?

For Government:

Yes should mean yes, no should mean no.

The Superferry was told by one part of the government (the Transportation Department) that an Environmental Assessment wasn’t required, and then another part of the government (The Supreme Court) told them to do it. The Superferry folks are right in saying that this situation is ridiculous and that it shows how complicated and difficult Hawai’i’s process is. [?] I’ve heard smart legal arguments on both sides, [?] but the way to prevent a mess like this in the future is to have the Legislature clarify who has the final authority to decide issues like this. [?]

For Developers:

Do the Environmental Assessment if you have any doubt at all.

There are several reasons to just go ahead and do an Environmental Assessment for a major project. First, it’s the right thing to do, because it’s often the only opportunity for the public’s voice to be heard about important projects. Second, the law usually requires it. [?] And even if you can construct a legal case in which it isn’t required, you are going to end up fighting in court, which will make people angry and delay the project anyway. Finally, the Environmental Assessment process is not an approval thing–it’s a disclosure thing, which means that when the environmental disclosure is complete, the project goes forward... [???]


"The next legislative session"
Stay away from old issues and spend a little time on things that matter, like sustainability
by Brian Schatz Nov 14, 2007

Superferry Session is pau...

Avoid superobsession

The Superferry war isn’t over until a series of court rulings are made, but for legislative purposes, it’s done, and the vote wasn’t close. As the battle rages on elsewhere, it shouldn’t occupy the energy of the Legislature. This will take discipline because both sides are still fighting mad. But it’s no longer in the Legislature’s hands. One more caution on this issue: The majority of the general public wanted the Superferry, and they were willing to carve an exemption in our environmental laws to let it happen. [?] But they do not want this to become a habit, and they do not want weaker laws.

Get focused on supersustainability not the Superferry...


"Hawaii Superferry shorted state"
By MARK NIESSE The Associated Press July 21, 2010

HONOLULU--The Hawaii Superferry was sailing under a facade of success in the summer of 2008 -- boasting of record ridership -- but it had already begun to shortchange the state on its monthly fees, according to an Associated Press review of Department of Transportation records.

The company's inability to pay fully in July indicates it was in troubled waters nine months before the Hawaii Supreme Court decision widely blamed for the ferry's closure came in March, 2009. The court overturned a state law that allowed the Superferry to operate while an environmental impact statement was being conducted...

[Editor's note - The Devil is in the Details. Good policy is not always merely a matter of political compromise. Wisdom and experience would know that.]