Kaua‘i Permit Case Skewers Notion That DOT Doesn’t Need Supervision

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House Bill 2408 and Senate Bill 2937, which proposed transferring to the state Department of Transportation the authority to approve its own revocable permits, stalled out this legislative session. And that may be a good thing, given recent revelations over the way the DOT has handled some of its airport permits.

In 1993, the state Board of Land and Natural Resources delegated authority to DOT to issue revocable permits, but it was later determined the delegation was “not proper,” according to testimony DOT submitted to the state Legislature. The proposed legislation, the DOT wrote, “clarifies the statutes to allow the DOT to issue revocable permits without approval by the [Land] Board.” The department argued that the process of acquiring Land Board approval of permits causes unnecessary delays and revenue losses, is “labor intensive, time consuming, and repetitious.”

“The DOT is best suited to manage lands it owns and controls, especially with regard to revocable permits for aeronautic, airport-related, maritime, and maritime-related uses because it is most directly connected to these industries and operations, and can best adapt and adjust to accommodate industry needs,” it wrote.

The Department of Land and Natural Resources and the Office of Hawaiian Affairs, which receives 20 percent of rental revenues generated from all ceded lands, testified that the Land Board permit approval process, where permit requests are heard at a public meeting, provides much-needed transparency.

“OHA expresses serious concern regarding this measure, because it may deprive the public of any opportunity to review and comment on the use of some of our most lucrative public lands, including public lands held in trust for the benefit of Native Hawaiians and the general public,” OHA’s testimony stated.

In the future, permitting and leasing of airport lands may be done by the board of a new entity, the Hawai‘i Airport Authority, which Senate Bill 3072 proposes to create. In the meantime, that authority rests with the Land Board.

Most often at Land Board meetings, DOT permits are approved without any public comment and, until recently, minimal questioning by board members. But with the return of Land Board member Chris Yuen and the addition of member Stanley Roehrig — both from Hawai‘i island — DOT officials are commonly grilled over whether their requests for direct leases promote competition and are, in general, in the best interest of the state.

At the Land Board’s February 26 meeting, the DOT requested approval of a 35-year lease for 18,113 square feet at the Lihu‘e Airport to Jack Harter Helicopters, Inc. (JHH), one of a handful of helicopter tour companies that operate there. Straight away, Yuen pointed out that despite state laws requiring direct leases to encourage competition, the DOT had not provided the board with any specific finding that the JHH lease achieves that. If a direct lease does not encourage competition, it must be put out to public auction. The DOT, however, stated in its request that a direct lease was the only way for the department to ensure grant terms with the Federal Aviation Administration are met. Under those grant terms, all fixed- base operators — private companies that provide on-airport facilities and services for aviation-related activities — must be subject to the same rental rates. A public auction of the lease would likely cause disparate rental rates, the DOT argued.

Regardless of FAA grant conditions, it turns out that the underlying reason the department recommended a direct lease was because JHH has a vested interest in the site. The company has occupied the space under a revocable permit since 2006. According to Ethan Tomokiyo, the DOT property manager for neighbor island airports, JHH built an $800,000 hangar on the parcel in or around 2009. Tomokiyo, who has held his position since 2011, was quick to disavow any involvement.

“It was not my call. DOT did it,” he said. Tomokiyo said Harter was supposed to have applied for and secured a lease before constructing the hangar. Instead, Harter built it while on a revocable permit. “Does he take a risk too? Yeah,” Tomokiyo said. “I’ll admit, it’s not what we should have done. It’s the wrong way. Dead wrong.”

“He probably knew the lease process would take long. It takes four to six months,” Tomokiyo continued. Harter probably worked with the airport manager at that time, who determined it would be quicker to put JHH on a permit at first “and later we slide you in — that’s not a good word. Wrong. Excuse me, that’s my local. We would not ‘slide you in,’ but we would … work towards a lease,” he said.

Upon hearing the DOT’s rationale, Land Board member Roehrig just had to comment.

“What you just said makes me scratch my head. I just read the legislation, SB 2937. It says it’s a good idea to have the Airports Division do this” — issue revocable permits — “without coming to the Land Board because its quicker and, you know, less fuss and it’s all plain vanilla. But it isn’t plain vanilla. You just demonstrated if you don’t get checks and balances this is what can happen. Later on, you gotta come back and check one foul ball,” he said.

“Like it or not, that’s what the Land Board ends up doing — making sure other departments uphold our trust responsibility over state land. That’s what’s at stake here,” he said.

The Land Board deferred the lease matter in February with some specific instructions from board members about what they want to see in future permit or lease requests. When the Land Board receives requests for direct leases without an explanation of how it encourages competition, it’s a red flag, Roehrig told Tomokiyo, adding that the board has told this to DOT representatives about ten times in the last year.

“Explain if you wanna make a deal. Explain what it is. If it’s a justifiable reason, we go along with it. If you no more say nothing … we get our antenna up,” Roehrig said.

Land Board chair Suzanne Case noted that the Department of Land and Natural Resources is doing a similar analysis of revocable permits managed by its Land Division.

“The concepts we’re looking at could apply here also. These are concepts of fair price, opportunity for competition, short-term versus long-term. … The documentation of your analysis of those questions, the more you can document them in your submittal, the easier it is for us,” she said.

When the DOT brought the matter back to the board on April 22, however, its justification for the lease still had not changed and the board ended up taking the entire morning trying to determine whether issuing JHH a 35-year direct lease was fair, especially when all other helicopter tour companies at the airport only had 15-year leases. In the end, the board approved the lease, but reduced the term to 15 years and required the company to offer maintenance to other aircraft operators within one year.

— Teresa Dawson

Volume 26, Number 11 May 2016

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