On June 14, the Land Board voted to increase mooring fees for the state’s small boat harbors. The vote was not unanimous and was made after the board rejected a contested case hearing request from members of the public.
Increases in cruise ship passenger fees were initially included in the rules package approved that day, but at the request of the Department of Land and Natural Resources’ Division of Boating and Ocean Recreation, that section was removed to allow the agency to work with stakeholders and make revisions, according to an August 23 report to theLand Board.
Last month, DOBOR requested that the board approve taking the amendments to rules on cruise ship fees out to public hearings. “We have been told by [the attorney general’s office], we cannot charge a ship a different fee based on its flag,” division administrator Ed Underwood told the board.
Under the current rules, DOBOR has charged foreign vessels $1.00 per passenger for each leg of an inter-island trip (specifically to the Kailua-Kona or Lahaina small boat harbors), compared to only 30 cents per passenger for domestic vessels. That works out to 60 cents for passengers on domestic vessels versus $2.00 for those on foreign-flagged vessels that stop at those two harbors on inter-island cruises.
The proposed rules would charge foreign and domestic vessels the same, but higher rates: $3 per passenger at Lahaina, and $2 per passenger at Kailua-Kona and all other small boat harbors.
In written testimony to the board, Charles Toguchi, the Hawai‘i representative for the Cruise Lines International Association-Alaska, stated that the proposed rules would significantly increase the passenger fees for Norwegian Cruise Line’s Pride of America, which is the only large domestic cruise line in Hawai‘i.
“[T]he proposed per passenger per day fee increases 400 percent ($.60 to $3.00) in Lahaina and 233 percent ($.60 to $2.00)in Kailua-Kona. For ‘foreign flagged’ cruise lines, the proposed passenger per day fee increases 50 percent in Lahaina and there are no proposed increases in Kailua-Kona,” he wrote.
While the association did not object to the proposed fee amounts, it did want more lead time to work those fee increases into its passenger charges. Toguchi asked the board to delay implementation of the fees, should they eventually be adopted, for 18 months.
“Cruise packages that have already been sold for the next two years do not include proposed fee increases. The immediate implementation of the fee increase proposal will mean a passenger fee deficit of approximately $700,000 at Lahaina and Kona during the next two years, which will have to be paid for by the cruise lines,” Toguchi wrote.
DOBOR’s Underwood countered that his division is already operating at a $300,000/year loss with regard to the services (primarily traffic control) that it provides to the cruise lines at those harbors.
Some board members weren’t very sympathetic to Toguchi’s arguments.
“If we ever implement an increase, unless we find a way to tell them two years in advance, this is going to come up. … It’snot unusual for a business to sell something to someone and have incidental costs go up,” Chris Yuen said.
“That they have to absorb,” board member Sam Gon added.
Board chair Suzanne Case also pointedout that the cruise ship industry is anticipating increased visitors to Hawai‘i, which means that DOBOR will be operating at an even greater deficit while the industry takes in more money.
“At the same time you’re bringing in more tourists, you’re making more money off those tourists, and we’re losing money off those tourists. … Your revenues are going up and our expenses are going up,” she told Toguchi.
When Toguchi suggested that the division would immediately make up for its losses once the rules are implemented,Case countered, “We’re required bylaw to charge not more than what we’re spending for those services. … We’re always going to be at or below. So even if we make more money, we’re either still losing money or just breaking even.”
“Only before a brief period,” Toguchi replied.
Board member Stanley Roehrig was sympathetic to Toguchi’s arguments.
“This is going to affect all of the tourists who come from all over the world. If we don’t do this right and we try to jam it, we’re going to have ten times the problems [the board had with the mooring fee increases],” he said.
He agreed with Case that DOBOR shouldn’t be eating some of the costs of serving the cruise lines, but recommended that some experts be employed to help craft a solution.
“Maybe next year, nobody is going to come to Hilo,” he said. Even though the fees only really affect the Lahaina and Kailua-Kona small boat harbors, Roehrig said the fee increases affect the industry as a whole, filtering down to other harbors, tour companies, stores, etc.
Case said the problem with consenting to a delay or to a phase-in of the fee increases is the legal requirement that foreign and domestic vessels be charged the same rate. “I’m not sure there is a way to phase it in and still charge the same rate,” she said.
Gon reminded Toguchi that the board was only being asked to allow the proposed rule amendments to go out to public hearings. “The details on how we implement this thing are in the future,” he said.
Yuen added that it could theoretically take about 18 months to hold public hearings, bring the rules back to the board for approval, and to get the governor’s signature.
“Rulemakings have taken a lot longer than that,” he said, adding, “If we delay this 18 months and it saves Norwegian $300,000, it costs our boating division $300,000. There’s no way around it.”
“It seems to me, Norwegian Cruise Lines has been the beneficiary of the lower rate. … They’ve had quite a benefitfrom that for all these years and we’re talking about following the law. There’s no dispute from anybody the difference in rates violates the commerce clause [of the U.S. Constitution],” he said.
To address concerns expressed by Roehrig, Yuen moved to approve DOBOR’s request on the condition that the attorney general’s office provide the board with anopinion, not necessarily formal, prior to adoption of the rules, as to whether the commerce clause requires equal fares to be charged to different carriers.
The board unanimously approved the motion.
Before the vote, Yuen repeated his belief that it will likely take a while, “maybe the entire 18 months.” He added that if the majority of the board wants to delay the implementation of the rules after they’ve gone to public hearings, “all the board has to do is move to defer action for six months and then you’ve added six months.” — Teresa Dawson
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