State fees imposed on goods unloaded at Hawaii harbors would increase by 55 percent over the next three years under a plan tentatively approved by the state Department of Transportation to provide additional cash for construction of a major new cargo terminal at the former Kapalama Military Reservation.
If the new wharfage fees win approval from Gov. David Ige, an initial 17 percent increase would take effect in early 2017. That first bump in harbor fees would be followed by a 15 percent increase on July 1 and another 15 percent increase on July 1, 2018, for a compounded increase of 55 percent in three steps.
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The state Department of Transportation has approved a multistep increase in wharfage fees, with the first step expected early next year. The increases will affect the prices of food, general merchandise, fuel, autos and building materials shipped to Hawaii. Here is the schedule of increases:
Early 2017: 17 percent
July 1, 2017: 15 percent
July 1, 2018: 15 percent
Annual increases of 3 percent a year or the increase in the consumer price index would be authorized starting July 1, 2019.
Source: State Department of Transportation
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The increases are expected to boost wharfage fee collections from $93.6 million in the fiscal year that ended June 30, 2015, to $137.3 million in the year that will end June 30, 2019.
State Department of Transportation spokesman Tim Sakahara said the department gave preliminary approval Friday to new state rules that would implement the higher wharfage fees, and those rules have been submitted to Ige for his review.
The department’s Harbors Division said the first step in the series of increases would boost the state wharfage fee on a 40-foot container shipped to Kahului from the mainland to $208.69 from $179.13, according to material provided by state transportation officials.
The fee on a similar container shipped from the mainland through Honolulu and on to Kahului would increase to $440.55 from $378.15.
The new rules also include a new $15 security fee for each container or shipped item under 60,000 pounds. That money will be used to comply with the requirements of the U.S. Coast Guard and U.S. Department of Homeland Security.
Michael Hansen, president of the Hawaii Shippers Council, said Hawaii residents should know the new fees are “a direct cost to the consumer.”
Hansen said his organization has concerns about the increases, in part because the state has not clearly broken down exactly how the additional money will be spent.
“We recognize the fact that the Harbors Division has funding requirements that need to be met in order to have the facilities that are necessary for the flow of commerce,” said Hansen, who represents businesses that move large amounts of cargo through the system to Hawaii. “The issue that we have is that harbors hasn’t shown what they intend to use these additional revenues for.”
The Harbors Division said the extra money will be used to finance the planned $450 million Kapalama Container Terminal, which it describes as the “heart” of the state’s overall $850 million Harbor Modernization Plan. Construction of the Kapalama facility is scheduled to begin next spring and should be completed over four years.
Hansen said the state also imposed a series of wharfage increases from 2010 to 2014 that when compounded amount to more than 70 percent. The latest proposal for still more increases has the shippers council wondering, “Is there some structural problem here that people are not sharing with us?” he asked.
Economist Paul Brewbaker said the new fee schedule “might not break anybody’s back,” but it is “not trivial.” The fees are a fixed cost that cannot be avoided by the companies that import goods into Hawaii, and the fees might increase the pressure on those companies.
As the imported goods move through the business chain, “at that end of the stack, at the upper end of the stack, it’s not like people just pass through a markup,” Brewbaker said. Companies might not be able to pass on the extra costs to consumers because of competition from other businesses, he said.
