Report to the Hawaii State Legislature FEASIBILITY STUDY ON INTER-ISLAND AND INTRA-ISLAND FERRY SYSTEMS December 2017 Authored by the Department of Transportation Statewide Transportation Planning Office & Harbors Division Table of Contents Executive Summary i List of Tables/List of Figures iii Study Background & Premise 1 Past Ferry Feasibility Studies & Demonstration Projects About Ferry Systems Hypothetical Vessels Determining Feasibility Technical Feasibility Analysis 8 Assessment of Harbor Infrastructure Environmental Regulatory Requirements Other Regulatory Requirements Conclusion Commercial Feasibility Analysis 16 The Ferry Feasibility Market Study Conclusion Financial Feasibility Analysis 32 Projected Costs & Revenues State and Federal Subsidy & Funding Public-Private Partnerships Conclusion Conclusion 43 Appendices Executive Summary The Department of Transportation presents this ferry feasibility study in response to two legislative actions in 2016 and 2017 that queried whether the State of Hawaii ought to establish an inter-island and/or intra-island ferry system. This study is the result of a year of research into the operations of past ferry operations here in Hawaii and existing ferry systems in other parts of the United States, a market study built on the voices of 1,500 Hawaii residents, and a sequence of analyses that broadly considered the critical components of a ferry system. Apart from the contract to SMS Hawaii to conduct the market study, this report is the product of Department of Transportation staff. This study is organized into three areas: technical feasibility, commercial feasibility, and financial feasibility. • The technical feasibility analysis describes the service to be offered and considers route feasibility based on use of hypothetical vessels and a survey of existing port infrastructure. Regulatory requirements, including compliance with State and federal environmental laws, are also part of this section. • The commercial feasibility analysis focuses on the probability of commercial success and this section of the study features an analysis of the market study findings, how the market is expected to respond to a ferry system, and whether there is sufficient interest or need for the service to justify further action. • The financial feasibility analysis considers all projected costs, revenues, and funding and financing options, and concludes whether resources are or will be reliably available to support a ferry service. A prospective ferry system must be technically, commercially, and financially sound to be considered “feasible” and to urge the State of Hawaii to proceed with next steps in the establishment of a ferry system. The study team tested the feasibility of an inter-island system between Honolulu and five neighbor island destination; an intra-county system between Maui and Molokai to restore the service absent since Sea Link ceased its operations in 2016; an intra-island commuter system on Oahu between Kalaeloa and Honolulu, similar to two previously operated demonstration projects; and an intra-island commuter system on Maui between Lahaina and Central Maui, either Maalaea or Kahului. In each area of analysis, the inter-island, intra-county, and intra-island ferry systems are infeasible. From a technical standpoint, the lack of available pier space and the Page | i significant costs required of constructing new pier facilities to accommodate a ferry system are the primary barrier to feasibility. From a commercial perspective, the expectations of Hawaii’s residents and the reality of a ferry system are incompatible. While the interest or support for a ferry system, inter-island or other, is significant, the pool of likely users is relatively insignificant. Financially, none of the proposed ferry systems is self-sustaining, and a State subsidy is largely the missing factor in making the numbers pencil. Hawaii State law declares that the establishment of a ferry system to provide the people of Hawaii with an economic means of transportation is a public purpose. Alongside this declaration is the core message received through the market study: Hawaii residents strongly support an inter-island travel alternative. However, at this very point in time inter-island travel by ferry, and even commuting by ferry, cannot be provided at cost that would be considered economical. The public purpose cannot be met. Until a ferry vessel technology exists that facilitates the transport of passengers between two points for a substantially lower cost, or at a speed drastically quicker than the available alternatives, even despite the voiced support for a ferry, the market demand for and likelihood of residents to use a ferry will probably not change. Page | ii List of Tables/List of Figures Introduction TABLE 1: PAST STUDIES, REPORTS & PUBLICATIONS ON A FERRY SERVICE IN HAWAII after 2 TABLE 2: COMPARISON OF FERRY SYSTEMS OPERATING IN THE U.S. after 4 Technical Feasibility Analysis TABLE T1: INFRASTRUCTURE GAP ANALYSIS OF STATE COMMERCIAL AND SMALL BOAT HARBORS after 9 TABLE T2: FEDERAL AND STATE APPLICABLE PERMITS, CONSULTATIONS & APPROVALS FOR HARBOR PROJECTS 11 Commercial Feasibility Analysis TABLE C1: PROPOSED FERRY ROUTES BY PRIORITY ORDER, PROSPECTIVE FERRY STAKEHOLDERS 19 TABLE C2: SUPPORT OF INTER-ISLAND FERRY BY COUNTY, GENERAL PUBLIC 20 TABLE C3: ACCEPTABLE FERRY CROSSING TIMES, GENERAL PUBLIC 22 TABLE C4: AVERAGE PRICE WILLING TO PAY FOR AN INTER-ISLAND FERRY (ROUND TRIP), GENERAL PUBLIC 24 TABLE C5: TOTAL PASSENGER TRIP FOR PASSENGER-ONLY FERRY, BY INTER-ISLAND ROUTES, GENERAL PUBLIC 24 TABLE C6: TOTAL EXPECTED REVENUE FROM PASSENGER-ONLY FERRY BY INTER-ISLAND ROUTES, GENERAL PUBLIC 25 TABLE C7: TOTAL PASSENGER TRIP FOR PASSENGER AND CAR FERRY, BY INTER-ISLAND ROUTES, GENERAL PUBLIC 25 TABLE C8: TOTAL EXPECTED REVENUE FROM PASSENGER AND CAR FERRY BY INTER-ISLAND ROUTES, GENERAL PUBLIC 25 TABLE C9: PASSENGER TRIPS AND REVENUE FOR A LAHAINA - KAUNAKAKAI FERRY, GENERAL PUBLIC 28 TABLE C10: PASSENGERS TRIPS AND REVENUE FOR OAHU INTRA-ISLAND COMMUTER FERRY, GENERAL PUBLIC 29 TABLE C11: PASSENGER TRIPS AND REVENUE FOR MAUI INTRA-ISLAND COMMUTER FERRY LAHAINA – KAHULUI, GENERAL PUBLIC 30 TABLE C12: PASSENGER TRIPS AND REVENUE FOR MAUI INTRA-ISLAND COMMUTER FERRY LAHAINA – MAALAEA, GENERAL PUBLIC 30 Financial Feasibility Analysis TABLE F1: PROJECTED REVENUE & COSTS, YEAR 1 OF OPERATION, HONOLULU-KAHULUI PASSENGER-ONLY INTER-ISLAND FERRY 36 TABLE F2: PROJECTED COSTS & REVENUE, YEAR 1 OF OPERATION, MAUI-MOLOKAI PASSENGER-ONLY INTRA-COUNTY FERRY 37 TABLE F3: PROJECTED COSTS & REVENUE, YEAR 1 OF OPERATION, OAHU PASSENGER-ONLY INTRA-ISLAND COMMUTER FERRY 38 TABLE F4: PROJECTED COSTS & REVENUE, YEAR 1 OF OPERATION, LAHAINA-MAALAEA PASSENGER-ONLY INTRA-ISLAND FERRY 39 Introduction FIGURE 1: HYPOTHETICAL VESSELS USED IN THIS STUDY 6 Technical Feasibility Analysis FIGURE T1: MAP OF HAWAII’S HARBORS 9 Commercial Feasibility Analysis FIGURE C1: CONCERNS OR ISSUES WITH A FUTURE INTER-ISLAND FERRY SERVICE, GENERAL PUBLIC 18 FIGURE C2: SUPPORT OF INTER-ISLAND FERRY, PROSPECTIVE FERRY STAKEHOLDERS 19 FIGURE C3: SUPPORT LEVEL FOR EACH TYPE OF FERRY SERVICE, PROSPECTIVE FERRY STAKEHOLDERS 19 FIGURE C4: SUPPORT OF INTER-ISLAND FERRY, GENERAL PUBLIC 20 FIGURE C5: LIKELIHOOD TO USE EACH TYPE OF FERRY SERVICE, GENERAL PUBLIC 21 FIGURE C6: DEMAND FOR FERRY ROUTES, GENERAL PUBLIC 21 FIGURE C7: ACCEPTABLE FREQUENCY FOR THE FERRY SCHEDULE, GENERAL PUBLIC 22 FIGURE C8: LIKELIHOOD TO USE FUTURE FERRY SERVICE, GENERAL PUBLIC 23 FIGURE C9: IMPORTANCE OF THE MOLOKAI FERRY 27 Page | iii Study Background & Premise Act 196 (Session Laws of Hawaii, 2016) requires the undertaking of a study by the Department of Transportation on the feasibility of establishing an inter-island and intra- island ferry system. The act also appropriated $50,000 for the expenses associated with conducting this study. In conducting this study, the Department of Transportation must accomplish the following: 1. Include a comparison of various jurisdictions with successful ferry systems including Washington and Alaska; 2. Emphasize compliance of the ferry system with the State's environmental protection laws, including Chapter 343, Hawaii Revised Statutes; 3. Identify appropriate routes and harbors for the ferry system; 4. Consider the potential costs and revenues of the ferry system; 5. Include financing options for the ferry system, including the establishment of rates or fees to address operating costs; 6. Consider the particulars of the ferry system, including vessel design and speed, passenger capacity, cargo capacity, automobile capacity, and compatibility with harbor infrastructure; 7. Consider and determine the impacts the ferry system would have on traffic congestion on all islands served by the ferry; and 8. Consider the impacts the ferry system could have on the transmission of invasive species between islands and determine inspection requirements to limit the transmission of invasive species between islands. In 2017, the Hawaii State Legislature adopted House Concurrent Resolution 47, Requesting that the Department of Transportation Conduct a Study on the Need and Feasibility of Establishing a Government-subsidized Ferry Service between the Islands of Maui and Molokai. The resolution specifies a request for this study to consider the potential costs, financing options, and parameters of a ferry system, as well as whether the use of a ferry system would be advantageous for visitors, school athletic teams, and those who require disability accommodations.