Column: Development details of Aloha Stadium district remain murky

“PPPs have often tended to be more expensive than the alternative of public procurement while in a number of instances they have failed to deliver the envisaged gains in quality of service provision,” (emphasis added) according to a report by the United Nations Department of Economic and Social Affairs.

That is worrisome because the PPP — public-private partnership — methodology is being used to build the new Aloha Stadium and the adjacent mixed-use area, which comprise the Aloha Stadium district.

In fact, PPPs are failing around the world. A report titled, “History RePPPeated,” consolidates studies of 10 PPP projects in different countries and concludes that “All 10 projects came with a high cost for the public purse, an excessive level of risk for the public sector and, therefore, a heavy burden for citizens.”

PPP has even failed in Hawaii. The Honolulu Authority for Rapid Transportation (HART) tried to use the PPP methodology to build the final segment of rail from Middle Street to Ala Moana Center. But things didn’t turn out the way they were supposed to, and HART abandoned PPP. As a result, rail sits unfinished, without visible prospects for completion.

The Aloha Stadium Authority is responsible for developing the Aloha Stadium district. It is the largest urban redevelopment on state-owned land in the history of Hawaii. Since the Stadium Authority has no experience in land development, it has engaged the state Department of Accounting and General Services (DAGS) to provide assistance.

However, DAGS’ experience is largely limited to relatively small projects, such as renovating buildings, upgrading electrical systems and repaving parking lots. DAGS has, in turn, engaged consultants because it has no experience with mega projects like this one.

The inexperience of DAGS and the Stadium Authority is evident in a report to the state Legislature, “Stadium Development District — 2021 Annual Report.” The report shows the lack of a clear vision for the project. The most definitive statement describing the project is that “The Real Estate Project is expected to include retail, residential, commercial, hotels, hospitality, cultural and community facilities. The project also will include horizontal infrastructure, such as roads, parking, public spaces, and various amenities.”

One might think that the Aloha Stadium Authority and DAGS would at least have a good idea about the capacity of the new stadium. But they don’t. The report says, “How many seats will be included in the new multi-use stadium? The state is working through the minimum required capacity with stakeholders prior to release of the RFP (request for proposal). Further details will be provided at a later date.”

The PPP process involves two steps. In the first step, which is in progress, the Stadium Authority and DAGS select a developer. Two developers are in contention, and each is a consortium of local and national firms with a wealth of experience and knowledge in the intricacies of land development. In the second step, the Stadium Authority and DAGS negotiate a contract with the selected developer. As proposed, it will be a closed negotiation, and the contract will not be made public until after it is signed.

The negotiations will involve a multitude of complex issues. Negotiations typically extend for days, and the final contract will likely run into the hundreds of pages. The contract is binding on both parties. Each party is going to try to get the best deal for themselves, which is often at the expense of the other party.

During the negotiations it is possible that the Aloha Stadium Authority and DAGS will commit the state to a future they don’t foresee, that would require the expenditure of hundreds of millions of state dollars that have not yet been appropriated.

Are the Aloha Stadium Authority and DAGS up to the challenge? Is PPP the right method for developing the Aloha Stadium district? It’s your money, after all. You decide.

John Kawamoto is a former legislative analyst and a lifelong University of Hawaii football fan.