WAILUKU, Maui — If the Hawaii Superferry leaves the state, other harbor users will have to pick up the tab for $40 million in ferry-related improvements at four ports, according to Department of Transportation officials.

The state issued general obligation reimbursable bonds to purchase the barges, ramps and other equipment and facilities necessary for the new interisland ferry service, DOT Director Barry Fukunaga testified yesterday in Maui Circuit Court. The money to pay off the debt will come from the DOT Harbor Fund, which contains proceeds from harbor-use charges, rentals and other sources of income.

Under the terms of an unprecedented operating agreement between Hawaii Superferry and the DOT, the company will be contributing to the fund a minimum of $2.3 million or 1 percent of its gross revenues, whichever is greater, in each of the first three years of the 22-year deal. Future payment amounts will be renegotiated in years four, 10 and 15, according to the agreement.

The ferry also will pay dockage, passenger and vehicle fees, like other harbor users.

Michael Formby, deputy DOT director of the Harbors Division, told the Advertiser yesterday the Harbor Fund is not limited to using Hawaii Superferry payments in its obligation to pay the principal and interest on the $40 million in bonds.

"If (Superferry) does not operate then the state would not get the revenue expected from them, but the Harbors Division still has to repay the debt, payment for which is made from all revenue sources available to the division," Formby said in an e-mail.

No taxpayer funds are being used for the ferry projects, he said, since the money to pay for them is not coming from general revenue sources.

NO OTHER RAMP USERS

Formby said the harbor improvements made via the bonds are "public purpose improvements" to Kahului, Nawiliwili, Kawaihae and Honolulu harbors. Although the improvements were done in anticipation of the start of the Hawaii Superferry, the company does not have exclusive rights to the facilities.

Fukunaga testified that no one else has plans to use the barges and ramps at the present time.

Fukunaga's February 2005 determination that the ferry-related projects were "minor" and qualified for an exemption from state environmental review laws triggered a lawsuit that led to the Maui court hearing, now in its third week.

The Sierra Club, Maui Tomorrow and the Kahului Harbor Coalition, which filed their original complaint in March 2005, last month won a Hawai'i Supreme Court ruling that the state erred in granting the exemption.

Maui Judge Joseph Cardoza has prohibited the DOT from allowing the ferry to use the Kahului port until he can rule on whether the company can resume service while the state performs an environmental assessment.

The three groups claim the 350-foot vessel should remain tied up in Honolulu until the assessment can address such concerns as traffic and the potential for whale collisions and the spread of invasive species. Company officials have indicated the ferry will go elsewhere if they aren't allowed to restart operations soon.

Fukunaga was called as a witness yesterday by Deputy Attorney General William Wynhoff in an attempt to explain the potential costs of keeping the ferry out of service.

Under questioning by attorney Isaac Hall, representing the Sierra Club and the two other groups, the DOT director said he was aware of resolutions passed by the Kaua'i, Maui and Hawai'i county councils in 2005 calling for an environmental impact statement of the ferry-related projects. Fukunaga also said the operating agreement acknowledged the possibility that an environmental assessment might be needed.

Hall has suggested that both the company and the state chose to gamble on not being required to conduct an environmental study, despite early opposition to the ferry service. Since the gamble was lost, Hall says they shouldn't be able to come to court now and talk of the potential financial harms they will suffer if the ferry is further delayed.

'WE HAVEN'T BEEN BILLED'

In response to a question by Hall, Fukunaga said Hawaii Superferry has not been asked yet to make any payments since the commencement of the ferry service remains in limbo. Neither has the DOT been required to pay any money on the bond debt. "We haven't been billed yet" by the state finance office, Fukunaga said.

He also said no default notices have been issued to either the state or Hawaii Superferry, an attempt by Hall to point out there is no financial urgency that would warrant putting the ferry in service before an environmental assessment is conducted.

After the court hearing, Fukunaga told The Advertiser the DOT's arrangement with Hawaii Superferry is unique because the current port tariff system does not address interisland ferry operations.

"As a result, we felt it necessary to develop an operating agreement that allowed us to formally establish rates and charges for their activity and use of our harbors," Fukunaga said in an e-mail. "Additionally, the charges were intended to reflect the investment in improvements and equipment that the state would be undertaking to accommodate the ferry."

In recognition that Hawaii Superferry is a start-up operation, the state didn't demand high payments to get an immediate return on its investment, he said. Instead, the initial three-year period of charges and obligations ensured "a reasonable rate of return while both parties gained experience on the operation."

A NEW BUSINESS MODEL

No other harbor users have operating agreements with the state, but Fukunaga said "this is a direction that we want to go in" because it clearly establishes each parties' responsibilities and obligations.

The issuance of bonds for harbor-user projects is not unique, he said. The DOT recently issued $100 million in bonds to pay for work at Sand Island for the Matson and Horizon container yards, Pier 4 development at Hilo Harbor for Young Brothers and other projects, according to Fukunaga.

The infrastructure investments are made with the expectation the beneficiaries will continue to operate and generates revenue for the Harbors Division, he said.

"In the same manner, we invested in harbor improvements and equipment for the ferry with the same expectation."

He said the state Legislature showed the same confidence in the company by approving the $40 million expenditure, and the U.S. Maritime Administration was willing to back a $140 million loan guarantee for construction of the Hawaii Superferry's two vessels.

The Maui court hearing will reconvene at 9:30 a.m. today, with testimony expected to wrap up by week's end.

Reach Christie Wilson at cwilson@honoluluadvertiser.com.