Airport losing out on millions in federal grants
By Johnny Brannon
Advertiser Staff Writer
At a time when financial woes threaten to close small airports across Hawai'i, the state is losing out on millions of dollars in federal grants because airport money that was diverted to other expenses since 1991 has yet to be fully accounted for.
The grants are awarded every year by the U.S. Department of Transportation to build, operate and secure airport facilities, through the Federal Aviation Administration's Airport Improvement Program.
Like most major airport operators, Hawai'i receives some money from the program each year. But unlike others, Hawai'i can't tap a "discretionary" fund included in the program to preserve and enhance airport operations.
The state's problem stems from a tangled history of controversial land deals, audits, duty-free sales receipts, aborted highway projects, and the long fight over ceded land revenue owed to the Office of Hawaiian Affairs.
"Hawai'i is not currently eligible, but if they worked quickly and took care of the discrepancy here, I'm sure the FAA would support having them reinstated," FAA Western-Pacific Region spokesman Jerry Snyder said.
It's impossible to say how much money Hawai'i may have been able to receive over the past decade, because the annual amount available nationwide varies and the awards are competitive, state transportation officials say.
But the FAA doles out hundreds of millions of discretionary dollars to airport operators in every state each year, and last year awarded a record $1.68 billion.
California airports were awarded $148.2 million from the discretionary fund during the fiscal year that ended in September, for example, and Arizona airports received $52.1 million, according to FAA records. Airports in Guam, American Samoa and the Marianas received a total of $24.9 million.
Under a special arrangement, Hawai'i airports received about $3 million for security upgrades needed after Sept. 11, but have not received any other discretionary money through the program since 1990, according to the FAA.
Even tiny Rhode Island was awarded more than twice as much as Hawai'i last year, and only about $1 million was restricted for security upgrades.
Gov. Ben Cayetano last month told legislators that airport revenue had declined steeply following Sept. 11, and that the state was thinking of closing or privatizing five airfields: Dillingham on O'ahu, Port Allen on Kaua'i, 'Upolu and Waimea-Kohala on the Big Island, and Kapalua on Maui.
The state waived airline landing fees and lowered rents for airport concessionaires for months after Sept. 11, as air travel declined and businesses suffered. The move helped protect the companies from bankruptcy, but tightly squeezed the airport fund's revenue stream.
The threat of airport closures alarmed pilots, travelers and aviation firms, and some industry observers say the state should do everything it can to secure more federal money.
"It's ridiculous that the state is even considering closing any airports when their mismanagement has cost the airports many times over what that would save," said Greg Kahlstorf, president of Pacific Wings, an interisland airline based on Maui.
It would take at least a year to complete the regulatory process for closing a state airport, however. And Gov.-elect Linda Lingle, who takes office Dec. 2, has said she would not support closures because the targeted airfields serve as important transportation lifelines for outlying communities, but that she was open to management changes.
To legally qualify for most FAA grants, airports must use money they generate solely to pay for their operation, maintenance or development. But Hawai'i has often diverted money from its airport fund for other purposes, and the practice fueled a federal crackdown that resulted in stricter rules.
Federal auditors found in 1995 that former Gov. John Waihee's administration had improperly used $64.4 million from the airport fund in 1991 to buy 161 acres of Campbell Estate land in Kapolei.
The administration argued that the deal was part of a land swap that would expand the airport, but the auditors determined that was a misrepresentation, and the money was later repaid.
And auditors concluded in 1996 that the state was wrong to use airport revenue to pay $28.2 million to the Office of Hawaiian Affairs. The money was transferred as compensation for using airport land once held by the Hawaiian monarchy and ceded to the United States after annexation in 1898.
Congress in 1997 relieved the state of responsibility to repay the $28.2 million to the airport fund, but prohibited future use of airport revenue for ceded land claims.
The action had a huge impact: the Hawai'i Supreme Court last year struck down a 1990 state law that set up the mechanism for calculating the state's debt to OHA. The court ruled that the law conflicted with the federal law that forgave the airport debt.
The remaining issue that prevents the state from qualifying for discretionary airport grants centers on the use of airport-linked money for state highway projects, including some that were never completed, state officials say.
The state in 1991 diverted $250 million to the projects from a revenue stream generated by a duty-free retail concession, operated in part at state airports, which would have otherwise gone to the airport fund. A federal law tailored for Hawai'i allows such money transfers, but precludes airport operators from receiving discretionary FAA grants in any year a transfer occurred.
"At the time the funds were turned over, there were 50 projects eligible for the funds," state Department of Transportation spokeswoman Marilyn Kali said. "The diversion was to facilitate travel to the airports, and it seemed like a good trade-off at the time."
But some projects never moved forward. For instance, a new interchange leading to the Kahului International Airport on Maui was scrapped in 2000 after Cayetano withdrew plans for a controversial runway extension project, Kali said.
"The interchange wasn't deemed necessary if we weren't going to expand the runway," she said.
Even though the $250 million was diverted 11 years ago, the state still can't receive discretionary grants because it has yet to pay back to the airport fund the portion that was earmarked for highway projects that fell through.
Neither the FAA or state could say exactly how much must be returned, and FAA officials say an audit may be necessary to make that determination.
Previous audits of highway projects have proved problematic for the state.
The federal legislation allowing airport money to be diverted for highways required them to be within 10 miles of an airport and facilitate access to it. But federal auditors in 1995 determined that the state wrongly appropriated nearly $7 million for an interchange to link the H-3 and Kahekili highways, because the site in Kane'ohe was further than that limit.
Kali couldn't immediately say which projects earmarked for the airport money have not been completed, or provide other details.
State airports director Roy Sakata said officials have been working very hard with the FAA to reach an agreement on what needs to be done next, and hopes the state will be eligible for the grants in the future.
Reach Johnny Brannon at jbrannon@honoluluadvertiser.com or 525-8070.
