Kewalo plan now includes 70 new slips, fueling dock

A long-planned boat dock renovation and expansion at the state-owned Kewalo Basin small-boat harbor in Kakaako could begin as early as August, but the $20 million project in the hands of a private developer looks somewhat different from a prior state vision.

Development firm Howard Hughes Corp. presented refined project plans this month to the board of the Hawaii Community Development Authority, a state agency that owns the decaying harbor and selected the company in 2014 to advance preliminary plans that HCDA started devising in 2005.

The new plans call for adding 70 slips to the 144-slip harbor, which is down from 100 additional slips envisioned in HCDA’s original plan.

Another change is keeping all the slips on fixed docks, as opposed to switching to a floating dock system.

And a fueling dock is back in the plan after being removed earlier by HCDA.

Hughes Corp. said its refinements were made after detailed study of the facilities, and represent improvements upon HCDA’s original vision that will deliver financial benefits to the state and better facilities and services to harbor tenants, which include charter boat operators and some pleasure craft owners.

“Ultimately we’ll make it a better area for the boaters,” Race Randle, Hughes Corp.’s director of development, told HCDA board members.

Randle also said an improved harbor will be a good fit with the company’s emerging neighborhood of condominium high-rises called Ward Village, where Hughes Corp. plans to develop up to 22 residential towers, including several overlooking the harbor. The first tower, Waiea, is slated to open at the end of this year and features a penthouse recently marketed for sale at $36 million.

Randle said the harbor plan changes were primarily driven by public concern over one part of HCDA’s vision: a proposed wall at the harbor’s entrance that would deflect ocean surges. He said surfers and others raised objections to the wall because it would affect surf breaks just outside the harbor and have other environmental impacts.

Without the wall it wasn’t possible to add two new piers just inside the harbor channel, Randle said. He also said engineers found the existing pilings under the crumbling piers to be in fine shape, so it was more feasible to keep the existing pier layout. Only one pier will be extended to provide the majority of the extra slips.

The decision to add a fuel dock raised some concerns from the board, including whether it was a hazard and whether Hughes Corp. added it to boost income from harbor operations.

Jim Hayes, chief operating officer of Almar Management, a firm that runs the harbor for Hughes Corp., said the fuel dock with two 10,000-gallon tanks was added to improve access to fuel for tenants and to increase oversight compared with the current practice where boat operators pump gas and diesel from trucks largely after harbor office hours.

“There’s no real oversight,” Hayes said of the current system, which leaves fuel spill reporting up to boat and fuel truck operators. A fuel dock would be operated by harbor management and provide fuel to tenants who don’t order enough to make it worth truck deliveries. However, fuel truck deliveries would still be allowed by Hughes Corp.

Steve Scott, an HCDA board member, doubted whether the fuel tanks would be safe in a tsunami. Scott Ezer, a Hughes Corp. consultant and vice president of local planning firm HHF Planners, said the area for the tanks is outside the tsunami danger zone on federal flood maps, though Scott was unconvinced.

“I still think it’s a problem,” he said.

HCDA board member Beau Bassett pressed Hughes Corp. on how much revenue it projects from fuel sales. Randle said it would be about 10 percent of harbor revenue, though that doesn’t factor in boaters from outside the harbor buying fuel, which would be up to the harbor master depending on traffic management.

Other improvements in the plan include an upgraded electrical system and closed-caption cameras to improve security at the harbor.

Kewalo Basin was once home to Hawaii’s aku boat fleet, but shifted to mainly tour, fishing and dive charter boat operations; meanwhile, facilities at the harbor degraded under the state Department of Transportation.

DOT announced it would transfer harbor management to HCDA in 2005 after racking up decades of deferred maintenance.

“It’s in pretty bad shape,” Hayes said of the harbor. “Most of the piers are in disrepair.”

HCDA drafted repair and renovation plans and retained California-based Almar in 2009 to manage the harbor for a fee.

After some state-financed repairs, HCDA and Almar raised slip occupancy to about 100 percent from 40 percent, in part because HCDA opened slips to recreational boats while giving priority to commercial boats.

Almar proposed handling the improvement project, but HCDA instead accepted an offer from Hughes Corp. The agency said a private developer could carry out the plan faster and at no cost to taxpayers. HCDA selected Hughes Corp. in 2014 and agreed to a 30-year lease that can be extended to 45 years.

Hughes Corp. projects that it will take three years to finish the work.

To minimize disruptions to tenants, the developer plans to first rebuild and dramatically extend one pier that has about eight or 10 tenants. When finished, the pier known as Pier C would accommodate boats as other piers are redone one by one.

When the work is completed, rates could as much as double under caps set by HCDA. Hughes Corp. representatives said future rates haven’t been decided yet, but should be a little less than rates at private marinas in Hawaii.

Under the lease, Hughes Corp. must pay HCDA $550,000 upfront plus annual rent that the agency previously estimated would amount to about $14 million over the first 30 years. Randle said the company expects it will take 16 to 18 years for it to recover the project’s $20 million cost.

No tenants at the harbor testified at the hearing last week. One person at the meeting objected to the project on grounds that DOT shouldn’t have turned over the harbor to HCDA. The agency received 24 written comments supporting the plan.

HCDA’s board is scheduled to decide on a development permit for the work at a June 1 meeting at 1 p.m. at its offices at 547 Queen St.