For 5th Year Running, Lawmakers Consider Giving Airports More Autonomy

Jan 21, 2020

After years of failing to address infrastructure problems at state airports, lawmakers will once again consider making a change this session.

Airports are a critical part of Hawaii’s $18 billion tourism economy. Almost 10 million people visited Hawaii in 2018, nearly all of them arrived ot one of the state's airports, but they’re rated poorly by travelers and airlines.

In an interview with Hawaii News Now last summer, United Airlines CEO Oscar Munoz described his dissatisfaction with the condition of Honolulu’s Daniel K. Inouye International Airport.

“I toured with our team this morning and the baggage services, literally things are coming off the wall,” Munoz said.

He’s not alone in his reaction to airport conditions.

The Honolulu international airport was ranked the second worst large airport in North America last year by a J.D. Power passenger survey. Kahului Airport on Maui was dead last in the midsize category.

Hawaii’s airport system is an outlier in the United States. The islands’ 15 airports are owned and operated by the state government. The Hawaii Department of Transportation Airports Division administers the facilities, including oversight of maintenance and upgrades.

Hawaii is one of only three states with such an arrangement, along with Alaska and Maryland. Critics say it has proved incapable of producing facilities that compete with those administered privately.

Keli’i Akina, president of the pro-free market think tank Grassroot Institute of Hawaii, says when it comes to airports, the bureaucracy of state government is less efficient than private or independent management.

“If anything is going to get done, sometimes six to more than a dozen agencies have to sign off … in the real world, that costs time and that costs money,” Akina said in an interview.

Some at the state Capitol agree. For the past four years, Hawaii Island Sen. Lorraine Inouye has introduced measures to create an independent Airport Authority that would oversee management of the state’s airports.

S.B. 666, which stalled in the House of Representatives last year after passing the Senate, was carried over to the 2020 legislative session, making this the fifth straight year legislators will consider the idea.

Disagreements over how much freedom the proposed Airport Authority should have appear to be why its passage has been held up.

The sticking point is whether the awarding of construction contracts should follow stricter rules used by state agencies or looser rules for private companies.

Subcontractors like pipefitters and electricians submitted testimony specifically expressing concern about exempting the hypothetical Airport Authority from state procurement laws designed to protect subcontractors from a process called “bid shopping.”

When any public or private entity wants to complete a construction project, it will generally solicit bids from general contractors. Those contractors will in turn solicit bids from subcontractors who employ carpenters, plumbers, and other skilled tradesmen.

On state projects, general contractors are required to disclose which subcontractors they will employ and at what cost. Private projects do not require that disclosure.

Bid shopping occurs when general contractors are awarded the contract for a project and then go back to subcontractors and seek a cheaper agreement after the fact.

Al Itamoto with the Electrical Contractors Association of Hawaii says the state procurement rules prohibit bid shopping by requiring general contractors to disclose which subcontractor they’ve hired and at what price. Not so for private projects.

“The private jobs are the wild, wild west because the generals can do anything like that,” Itamoto said in an interview.

Joli Tokusato, an organizer with Local 5, told HPR in an interview that the union isn’t opposed to the creation of an airport corporation in principle, but wants to make sure workers don’t lose out.

“We are concerned about the unknown. You don’t know who is going to be on that board,” Tokusato said.

S.B. 666 hit a wall in the important House Finance Committee after language was inserted into the bill requiring an Airport Authority to adhere to the state procurement code.

The General Contractors Association of Hawaii submitted testimony in opposition to the version of the bill that included the procurement clause.

The change would give extra protection to subcontractors on construction projects, but proponents of independent management say it would undermine the intent of giving airport operators increased flexibility to get needed upgrades done.

In written testimony, the Department of Transportation said it currently takes an average of 4 years to complete an airport improvement project.  The department supported loosening the rules for construction bids.

The current state-run airport system is self-funded through terminal concessions sales and fees paid by airlines and passengers, and federal grants, rather than an annual appropriation of state tax dollars.

Grassroot CEO Keli’i Akina argues that fact should exempt airport projects from the state’s normal procurement rules.

“Those revenues are business revenues and they don’t need to conform to the procurement laws,” Akina said.

Legislators have until April to make revisions to S.B. 666 or once again table the idea.