HAWAI'I SUPERFERRY
Hawaii's image affected by decision
| • | Special session Hawaii Superferry's only hope |
By Greg Wiles
Advertiser Staff Writer
The impact of the Maui court's ruling may extend well beyond the operation of one company, business leaders said.
The problems suffered by the Hawaii Superferry reinforce the state's image of having a poor business climate, the executives said. Even more importantly, this case may offer a glimpse of future community conflict as the state deals with larger issues involving rail transit, renewable energy and other big projects.
"It is a public relations disaster for Hawai'i," said Mike Fitzgerald, head of Enterprise Honolulu, a nonprofit that advocates economic development on O'ahu.
"We're presenting ourselves as a place that can't mind our own affairs — that we're incompetent and that we don't know what we're doing."
Hawai'i has had a reputation as having a bad business environment, though the climate has improved slightly in recent years as Gov. Linda Lingle's administration tries to advance the state as one that welcomes new businesses and works on solutions to perennial business complaints, such as high workers' compensation costs. A ranking by the Tax Foundation for 2007 found Hawai'i had the 24th-best business tax climate in the nation.
But when it comes to regulatory issues, investors may still wonder whether to make large bets on Hawai'i, business leaders said. The Superferry attracted $300 million of investments, including $140 million of government-backed bonds, and that investment is in jeopardy.
The Superferry owners had moved forward based on assurances from state officials that no environmental assessment would be needed. But the Maui court sided with the Sierra Club, Maui Tomorrow and the Kahului Harbor Coalition in ruling that the environmental assessment was necessary and that the ferry could not run while the study is being done.
Paul Brewbaker, chief economist for Bank of Hawaii, said what's happening to the Superferry reinforces some investors' beliefs that putting money into Hawai'i projects is riskier than other locales.
"The perception is that Hawai'i investments also bear the risk that rules will change in the middle of the game, and as a result we have a less rational pattern of development and a more capricious pattern of outcomes," Brewbaker said.
Investors have suffered other recent, high-profile setbacks:
"Somebody looking at Hawai'i with this in mind would see an uncertain and somewhat volatile investing environment," said an investment manager who declined to be named because he's in talks with the state on a project.
"If you can't be sure your investment is secure, people aren't going to do it."
The news of the Superferry's setback is being reported nationally and is sure to be talked about by financiers in major capital markets. J.F. Lehman & Co., the majority Superferry backer that's headed by former U.S. Navy Secretary John Lehman, has offices in New York.
The controversy may have its most direct impact on funding of big projects planned here, but Jim Tollefson, Chamber of Commerce of Hawaii president, said the impact also could be felt by the state's small businesses, which benefit from the added economic activity of large developments.
"We're concerned that the controversy and the negative press it's generating is going to do further damage to Hawai'i's business image and will discourage future capital investment," Tollefson said. He noted several Mainland business people have asked him about the Superferry case.
"We are a capital-deficient state. Without outside capital, the economy will be severely impacted."
Brewbaker said victories such as that by the Sierra Club suggest to others that they can use the legal system to undermine major investments in spite of their prior approval.
But Jeff Mikulina, executive director of the Sierra Club's Hawai'i chapter, said the Superferry and Hokuli'a cases point out the need for businesses to follow not only the letter of the law, but the spirit of it as well.
"It's frustrating to hear people characterize this as being a blemish on the business environment when it's almost a textbook case on how not to conduct business in Hawai'i," he said.
The Superferry "took a chance, and unfortunately for them, they weren't proactive in going through the environmental review, which would have been complete by now.
"We have a clear law and process to follow."
Enterprise Honolulu's Fitzgerald disagreed, noting the current system isn't producing the right result when businesses can be stopped after committing millions of dollars to projects.
He said a serious effort needs to be launched looking into the polarization that's embodied both sides of the Superferry issue and how it relates to other developments as big projects such as rail transit, wind farms, solar farms, biofuel processing plants and others start being considered for the state's future.
"I think the Superferry is a symbol," Fitzgerald said. "It's a frustration by many people in Hawai'i about how we're doing things, how we're making decisions that affect the land, the water, the whole place.
"We need to bring some cool heads together, we need to listen carefully to each other ... and we need to find a middle ground going forward, or we're going to leave ourselves in a hell of a mess."
Reach Greg Wiles at gwiles@honoluluadvertiser.com.
