The state Aloha Tower Development Corp. has been tapped to make $842 million in improvements to Hawai'i's commercial harbors over six years for the Department of Transportation.

Lawmakers passed a bill yesterday essentially making the ATDC the development arm of the Transportation Department's Harbors Division.

The DOT calls the bill "landmark legislation" that was badly needed because the agency is consumed with managing harbors and lacks resources to upgrade aging and cramped harbor facilities on such a large scale.

Senate Bill 3227 also represents a dramatic broadening of the ATDC, which was created in 1981 to pursue redevelopment at Honolulu Harbor but has largely focused on redeveloping state waterfront property for nonmaritime uses such as Aloha Tower Marketplace.

DOT officials, in collaboration with a coalition of harbor users, project that harbors statewide handling cargo, fuel, cruise passengers and other commerce will run out of space in three years if no improvements are made.

If that happens, it would constrain a channel of transportation that accounts for nearly 80 percent of consumer goods and could limit the state's gross domestic product by an estimated $50 billion through 2030.

The improvement plan addresses projected harbor needs through 2030 on O'ahu, Maui, the Big Island and Kaua'i.

"The Legislature, together with the administration and key harbor users, recognizes that extraordinary means must be employed to catch up on deferred harbor infrastructure development," the bill states.

Much of the propulsion toward getting harbor improvements made came from the Hawai'i Harbors Users Group, a coalition formed in 2005 with members including Matson Navigation Co., Horizon Lines, Young Brothers, Norwegian Cruise Lines, Hawaii Superferry, Tesoro, Hawaii Stevedores and other harbor users.

COLLECTIVE EFFORT

Previously, harbor users often lobbied for projects for their own benefit, which yielded mixed results. But as needs for facilities grew more dire, harbor users recognized they needed an effort to collectively benefit trade.

"We put our differences down competitively and came up with priorities that we feel are right for the harbors and the state," said Gary North, the group's chairman who earlier this month retired as Matson's senior vice president for the Pacific. "That's never happened before."

Most of the needed improvements are at Kahului Harbor on Maui, where nearly half the project's budget — $345.1 million — is directed. Maui's population has expanded by 32 percent over the past 15 years, increasing the demand for goods and conflicts between passenger and cargo traffic.

"Kahului is out of space right now," said Michael Formby, deputy director of the Transportation Department's Harbors Division.

Improvements for Kahului include building a new ferry and barge slip, terminal building and cruise ship terminal on the west side of the harbor, along with a new breakwater to shield against wave surges. A new breakwater is planned for the east side of the harbor, which also would get an upgraded fuel line.

Honolulu Harbor is scheduled to receive $257.3 million in improvements, including a deep-draft wharf that could berth two container ships, and a 70-acre container yard at Kapalama connected to Young Brothers' interisland barge yard.

On the Big Island, $87.8 million in improvements are planned for Kawaihae Harbor, including the construction of a new multi-use pier that would eventually be used by the Superferry. At Hilo Harbor, $61.4 million in planned upgrades include a new pier and interisland barge handling yard, and a third harbor entrance to help separate cruise passenger and cargo traffic.

At Nawiliwili Harbor on Kaua'i, the state plans to spend $10.3 million for a new multiuse berth along the jetty to help with a new liquid bulk storage facility.

To pay for improvements, the DOT will sell revenue bonds that would be paid off using income from harbor tariffs, which would be increased gradually over six years as project expenditures are made. The DOT, a harbor users group and a consultant are figuring out how much tariffs need to rise, but Formby roughly estimates a 10 percent increase in the first year.

WORK STARTS IN JULY

Harbor users, according to North, agree that some increase is necessary. "We recognize there have to be higher rates to support the program," he said.

The first fiscal year of the project begins in July with work primarily limited to planning, design and environmental permitting. A land acquisition for Kahului Harbor also is part of first-year work totaling $124.4 million that was included in Gov. Linda Lingle's supplemental budget last year.

More design work and some demolition and construction is slated for the next fiscal year starting July 2009, while major construction would ramp up in the following two fiscal years and be completed by the fiscal year ending June 2014. The ATDC's expanded harbor improvement role is to be repealed in 2016 under the bill.

To help execute the plan, the ATDC expects to receive additional funding to add project managers to its staff, which presently comprises a chief executive, a development director, a project manager and a secretary.

The agency, which since 2005 has assisted DOT with a handful of maritime improvement projects at Honolulu Harbor, welcomed an expanded role in harbor improvement work statewide.

The ATDC's seven-member board of directors would receive six new members, including two appointed by the governor from the maritime industry. Other additions to the board are the director of the state Department of Budget and Finance, and the mayors of Hawai'i, Maui and Kaua'i counties or designated representatives.

Existing ATDC directors include three public members plus representatives for the Honolulu mayor and state directors of DOT, the Department of Land and Natural Resources, and the Department of Business, Economic Development and Tourism.