In July, the state Department of Transportation is to hand over management of Kewalo Basin to another state agency that proposes major facility improvements, steep increases in slip fees and private management for the neglected harbor.

A $14.1 million improvement plan would dramatically revitalize the commercial small-boat harbor. Repair of piers and numerous condemned boat slips are among proposed upgrades, as are additions of new restaurants, a convenience store, bait shop, fuel station and improved car and bus access.

But some of the harbor's 83 or so tenants — mainly fishermen and a mix of recreational charters for fishing, parasailing, tours and scuba-diving — say a proposed doubling of their rent plus new maintenance charges threaten to put them out of business.

"What this is going to do is cut the throats of the commercial (boaters)," said Kewalo-based fisherman Gary Dill. "(Proposed) rates are way, way, way too high. It's going to cause problems."

The improvement plan was recently drafted by the state Community Development Authority, an agency overseeing development in Kaka'ako that is taking over responsibility of running Kewalo Basin.

The agency's goal is to make the harbor financially self-sufficient instead of being state-supported as it is under the DOT, which has operated the harbor since the advent of statehood.

Under the tentative plan, which needs approval from the agency's board and Gov. Linda Lingle, facilities serving harbor tenants and used by tourists and residents would be made more inviting. The nearly one-third of slips that are now unusable would be returned to service to accommodate more boats. And yachts would be allowed provided owners don't live on board.

Daniel Dinell, development authority executive director, said harbor tenants generally support improving the facilities and paying higher slip fees if they will benefit from the changes.

"Tenants say they know (rent) has to increase," he said, explaining that DOT's last fee increase at Kewalo Basin was in the 1980s.

But during a Tuesday informational meeting held by the development authority, some harbor users criticized the plan. They said that they would have to pay for long-deferred repairs, new facilities and daily maintenance with fees their businesses cannot support.

Additionally, some said, they fear commercial operators will be forced out and replaced by wealthy yacht owners able to pay the higher fees.

Other proposed rules that worry some harbor users would drastically raise insurance requirements and allow the development authority to cancel leases if tenants don't meet minimum annual sales requirements that several tenants said would be difficult to achieve.

Under the plan, fees for tenants with monthly or annual permits would go up as permits expire on or after July 1, 2008, while daily slip rent rates would go up July 1 of this year.

The fee increase being sought would boost monthly slip rents $10 to $13.20 per boat foot, depending on boat size, double the previous rate. Daily dockage would rise to $16 to $877 from the current $12.50 to $163, based on boat length.

For example, monthly rent for a 65-foot commercial fishing boat with an annual lease would rise to $650 from $325. Rent for a 46-foot charter boat with an annual lease would rise to $920 from $460. The plan also calls for increasing the percentage of gross revenue charter operators pay the state. Charter operators now must pay 2 percent of gross revenue if the amount is more than their standard rent. That would increase to 5 percent under the plan.

Additionally, all tenants would pay monthly maintenance fees, which have yet to be determined, for services including bathroom cleaning, landscaping, rubbish removal and security hired through a private contractor.

"It's too much," said Greg Longnecker, owner of five boats operating out of Kewalo Basin, including the new $1 million Honolulu Screamer passenger speedboat. "I have a lot at stake. I'm concerned. None of us here are Fortune 500 companies."

DOT provides many harbor services using staff, but it expected to quit managing the harbor last year as part of a redevelopment initiative by the development authority for 36.5 acres of state land including the harbor and adjacent property.

But the project — which included harbor privatization and development of two high-rise condominiums, retail, restaurants and public amenities by local firm Alexander & Baldwin Inc. — was canceled last year after a large public outcry over private use of state land.

Despite the plan being canceled, the DOT still expected to stop managing the harbor, but did agree to continue its role until July 1.

To prepare for the transfer, the development authority has met with a small advisory group of harbor users monthly since August 2006, and it recently drafted rule changes, and a transition and operating plan.

A harbor manager also is being sought via competitive bidding to handle leasing, daily maintenance and improvement work for a fee on behalf of the agency, which expects to select an operator by April 1.

The agency's improvement plan, which would be finalized after a harbor manager is selected, proposes spending $14.1 million over three years on upgrades.

The money would come from issuing state bonds, to be paid off using income from harbor operations.

But the Lingle administration's current biennial budget, which is subject to legislative approval, included only $5.5 million to replace three piers.

The development authority said it will concentrate first on putting unproductive piers back into service to increase harbor revenue, then pursue other work as money becomes available.

Other work planned includes adding more restrooms, renovating the Fisherman's Wharf restaurant space, building 12,000 square feet of retail space, and installing a waste system, a road connection to Ala Moana Beach Park and a new signalized intersection to allow left turns into the harbor area by vehicles coming from Waikiki.

Currently, 'ewa-bound vehicles cannot make left turns into the harbor area, which leads to illegal and dangerous U-turns at the Ala Moana-Ward Avenue intersection.

As part of a separately funded improvement project, the agency plans to remove ramshackle buildings of a marine mammal lab and establish a pedestrian promenade between Kewalo Basin Park and Ala Moana Beach Park, as well as a concession stand with outdoor seating.

Much of the harbor repair work is necessary and extensive because the DOT deferred so much maintenance, according to the development authority.

For example, 22 of 28 slips on one pier are condemned. Structural damage on two other piers limits the number of vessels they can service. Of 127 total slips, only 83 or so are occupied, while there's demand for more than 127 slips, the development authority said.

The agency said fixing two piers would generate about $30,000 a month in additional revenue from use. New facilities, such as restaurants, would also generate more revenue.

Still, some tenants question the need for all the envisioned work, given the rent increase required to pay for it, and they chafe at the idea of paying fees for private maintenance.

"Your fees are too high," Capt. R.A. "Reg" White, of Paradise Cruise Ltd., told development authority staffers during last week's briefing. "This is not an industry that can withstand this kind of attack. You're looking at costing people their jobs."

Mike De Rego, a sport-fishing boat owner, said he'd have to run his boat at full capacity to pay all his expenses under the proposed fees.

Richard Kuitunen, an asset manager for the development authority, said the agency will consider harbor user comments and could refine proposed rules and fees. "Our intent is not to clear anybody out," he said. "We want everybody to stay. We didn't ask (DOT) to leave. We're trying to make the best of it."

Kuitunen added that the agency can't operate the harbor at a loss as the DOT did, or continue to defer maintenance and repairs. "Really, what we're doing is bootstrapping ourselves," he said. "If the rates stay the same, the harbor's not going to get better. It's going to get worse."

The agency has scheduled a public hearing for 9 a.m. March 7 at 677 Ala Moana Blvd., Suite 1000, on the proposed harbor fee increases and rule changes.

A decision by the board at a later date would be subject to review by the state Small Business Regulatory Review Board and approval by the governor.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.