REPORT TITLE:
Honokohau Harbor; Privatize


DESCRIPTION:
Requires the board of land and natural resources to develop a
request for proposals for competitive sealed proposals to lease,
improve, operate, maintain, and manage Honokohau harbor on the
island of Hawaii as a private small boat harbor.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        1797
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO SMALL BOAT HARBORS.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  The legislature finds that there is a need to
 
 2 provide for the privatization of small boat harbors in Hawaii.
 
 3 The State's small boat harbors are important assets that are
 
 4 constructed, maintained, and operated for the purposes of
 
 5 recreational boating activities, landing of fish, commercial
 
 6 vessel activities, and interisland commerce.  These harbors are
 
 7 centers of economic activity, and as such, must be managed and
 
 8 operated in a manner to facilitate recreation, commerce, and
 
 9 interisland transportation.
 
10      The legislature further finds, however, that small boat
 
11 harbors, which are regulated by the board of land and natural
 
12 resources, are currently subjected to a multitude of rules, some
 
13 of which are excessive and costly.  The legislature finds that
 
14 privatizing small boat harbors could streamline services, cut
 
15 costs, and increase revenues.
 
16      The legislature enacted Act 160, Session Laws of Hawaii
 
17 1997, among other things, to create a task force within the
 
18 department of land and natural resources to evaluate the
 
19 feasibility of, and make recommendations regarding, the
 

 
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 1 establishment of a community-based management pilot program for
 
 2 one or more more small boat harbors.
 
 3      The intent of this Act, however, is somewhat different.  Act
 
 4 160 demonstrated that community-based management is effective,
 
 5 but only up to a certain point.  The legislature finds that
 
 6 contracting out the management and operation of a small boat
 
 7 harbor is a more effective way to achieve the ends desired.  The
 
 8 intent of privatization is to make the harbor virtually self-
 
 9 supporting without raising user fees substantially for existing
 
10 permittees.
 
11      Allowing a private entity to construct and maintain non-
 
12 marina related commercial structures, such as condominiums and
 
13 retail establishments, will enable that entity to stay profitable
 
14 without the need to raise fees for boat harbor users.  The
 
15 legislature finds that the Honokohau harbor on the Big Island
 
16 represents an excellent candidate for privatization under this
 
17 pilot project because of its manageable size, excellent location,
 
18 and potential for further development.  The legislature envisions
 
19 developing the area along the lines of the Marina del Rey area of
 
20 Los Angeles.
 
21      Accordingly, the purpose of this Act is to:
 
22      (1)  Contract out to a private entity the improvement,
 
23           operation, maintenance, and management of Honokohau
 

 
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 1           harbor on the island of Hawaii as a private small boat
 
 2           harbor;
 
 3      (2)  Grandfather existing permittees and those who were
 
 4           already on the waiting list as of January 19, 2000,
 
 5           with respect to the rates they pay for slips as of that
 
 6           date, subject to increases based on the Consumer Price
 
 7           Index for Honolulu.  New users would pay market value
 
 8           for new slips as they become available;
 
 9      (3)  Give the private entity a long-term lease of not less
 
10           than fifty years to run the small boat harbor, although
 
11           the lease may be transferred;
 
12      (4)  Provide that the private entity is not subject to
 
13           existing department of land and natural resources rules
 
14           relating to the expansion of the harbor, except that
 
15           the private entity may provide no fewer boat slips than
 
16           are currently provided for in the existing plan.  The
 
17           State agrees to waive its rights to any dredged
 
18           materials resulting from the harbor expansion; and
 
19      (5)  Allow the private entity to develop ancillary
 
20           facilities for the harbor, which need not be limited to
 
21           marine-related uses.
 
22      The legislature finds that the privatization of Honokohau
 
23 harbor will enhance the successful management and operations of
 

 
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 1 that harbor and assist in streamlining the delivery of government
 
 2 services.
 
 3      SECTION 2.  Definitions.  As used in this Act, unless the
 
 4 context otherwise requires:
 
 5      "Board" means the board of land and natural resources.
 
 6      "Contractor", "private contractor", or "private entity"
 
 7 means a person who has entered into a contract with the State
 
 8 pursuant to this Act.
 
 9      "Department" means the department of land and natural
 
10 resources.
 
11      "Small boat harbor" or "harbor" means the Honokohau harbor
 
12 on the island of Hawaii.
 
13      SECTION 3.  Authority to contract.  (a)  The board shall
 
14 contract with a private entity for the lease, improvement,
 
15 operation, maintenance, and management of the Honokohau harbor on
 
16 the island of Hawaii as provided in this Act.
 
17      (b)  No contract shall be entered into or renewed unless the
 
18 board determines that the contract offers at least the same
 
19 quality of services provided by the State.  The contract shall be
 
20 approved as to form and content by the attorney general.
 
21      SECTION 4.  Request for proposals; prequalification of
 
22 applicants.(a)  The board shall develop a request for proposals
 
23 for competitive sealed proposals to lease, improve, operate,
 

 
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 1 maintain, and manage a privately run small boat harbor in
 
 2 accordance with this Act.
 
 3      (b)  The request for proposals shall be calculated to
 
 4 generate proposals from applicants on a list who have been
 
 5 prequalified by board and shall be applicable to any contract
 
 6 between the State and any private entity entered into under the
 
 7 authority of this Act.  Standards for prequalification of
 
 8 applicants under this section shall be determined by the board
 
 9 before the commencement of the selection process; provided that
 
10 any contract entered into under this Act for the operation of the
 
11 harbor, at a minimum, shall be negotiated with the private entity
 
12 found to be the most qualified.  The private entity shall
 
13 demonstrate that it has the qualifications, experience, and
 
14 personnel necessary to carry out the terms of the contract, and
 
15 the ability to comply with applicable laws.
 
16      (c)  Any contract entered into pursuant to this Act shall
 
17 include the following specific provisions:
 
18      (1)  The board may contract out to a private entity the
 
19           improvement, operation, maintenance, and management of
 
20           Honokohau harbor on the island of Hawaii as a private
 
21           small boat harbor;
 
22      (2)  Owners or permittees of existing boat slips at the
 
23           harbor as of January 19, 2000, and those persons who
 

 
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 1           were already on the waiting list for a boat slip as of
 
 2           that date, shall pay fees of not more than the rates
 
 3           paid as of January 19, 2000, for the entire term of the
 
 4           contract, subject only to adjustments based on the
 
 5           change in the consumer price index for Honolulu;
 
 6      (3)  New owners or permittees of boat slips at the harbor
 
 7           that are entered into after July 1, 2000 shall pay the
 
 8           fair market value of those slips;
 
 9      (4)  The private entity shall not be subject to existing
 
10           department of land and natural resources rules relating
 
11           to the expansion of the harbor; provided that the
 
12           private entity may provide no fewer boat slips than are
 
13           currently provided for in any existing expansion plan;
 
14      (5)  The State expressly agrees to waive its rights to any
 
15           minerals or other materials that have been dredged for
 
16           harbor expansion;
 
17      (6)  The private entity shall be permitted to develop,
 
18           manage, and operate ancillary facilities at the harbor,
 
19           which need not be limited to marine-related uses,
 
20           subject to compliance with all other federal, state,
 
21           and county laws;
 
22      (7)  Any specific exemptions for the harbor from state
 
23           statutes and rules, if any;
 

 
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 1      (8)  A plan for the orderly transition of management and
 
 2           operations of the harbor;
 
 3      (9)  A provision that the State is not obligated for any
 
 4           payments that exceed the amount of the current annual
 
 5           appropriation for the harbor;
 
 6     (10)  A provision that the contract entered into under this
 
 7           Act does not accord third-party beneficiary status to
 
 8           any member of the general public; and
 
 9     (11)  A provision that the contract entered into may include
 
10           any other requirements that the board considers
 
11           necessary and appropriate for carrying out the purposes
 
12           of this Act.
 
13      SECTION 5.  Contract term and renewal; transfer of lease.
 
14 The initial contract for the lease, improvement, operation,
 
15 maintenance, and management of Honokohau harbor as a private
 
16 small boat harbor shall be for a period of not less than fifty
 
17 years, and may be renewed for successive       year periods
 
18 thereafter; provided that the lease may be transferred to another
 
19 private entity with the prior written approval of the board.
 
20      SECTION 6.  Monitoring; right to access.  (a)  The State, at
 
21 the contractor's expense, shall employ an individual to be
 
22 responsible for monitoring all aspects of the private
 
23 contractor's performance under a contract entered into pursuant
 

 
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 1 to this Act.  The individual employed as contract monitor shall
 
 2 be qualified to perform this function by reason of education,
 
 3 training, and experience as determined by the board.  The
 
 4 monitor, with the approval of the contracting governmental
 
 5 entity, shall appoint staff as necessary to assist in monitoring,
 
 6 which staff shall be at the contractor's expense and shall be
 
 7 solely responsible to the contract monitor.  The monitor or the
 
 8 monitor's designee shall be provided an on-site work area by the
 
 9 contractor, shall be on-site on a daily basis, and shall have
 
10 access to all areas of the harbor at all times.  The contractor
 
11 shall provide any and all data, reports, and other materials that
 
12 the monitor determines are necessary to carry out monitoring
 
13 responsibilities under this section.
 
14      (b)  The monitor shall be responsible to and report to the
 
15 board at least monthly, and more often as necessary to ensure
 
16 proper operation of the harbor, concerning the contractor's
 
17 performance.
 
18      (c)  Members of the public shall have the same right of
 
19 access to harbor facilities operated by a private contractor
 
20 pursuant to this Act as they do to state-operated facilities.
 
21      SECTION 7.  Liability and sovereign immunity.  (a)  The
 
22 contractor shall assume all liability arising under a contract
 
23 entered into pursuant to this Act.
 

 
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 1      (b)  The sovereign immunity of the State shall not extend to
 
 2 the contractor.  Neither the contractor nor the insurer of the
 
 3 contractor may plead the defense of sovereign immunity in any
 
 4 action arising out of the performance of the contract, or as a
 
 5 defense in tort, or any other application, with respect to the
 
 6 performance of the contract.
 
 7      SECTION 8.  Insurance.  (a)  The contractor shall indemnify
 
 8 the State, including its officials and agents, against any and
 
 9 all liability.  Proof of satisfactory insurance shall be required
 
10 in an amount to be determined by the insurance commissioner.  The
 
11 attorney general shall determine the amount and manner of the
 
12 indemnification.
 
13      (b)  Subject to subsection (a), the contractor shall provide
 
14 an adequate plan of insurance as determined by the insurance
 
15 commissioner.  In determining the adequacy of the plan, the
 
16 contractor shall determine whether the insurance is adequate to:
 
17      (1)  Fully indemnify the State from actions by third parties
 
18           against the contractor or the State as a result of the
 
19           contract;
 
20      (2)  Assure the contractor's ability to fulfill its contract
 
21           with the State in all respects and to assure that the
 
22           contractor is not limited in this ability due to
 
23           financial liability that results from judgments;
 

 
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 1      (3)  Protect the State against claims arising as the result
 
 2           of any occurrence during the term of the contract on an
 
 3           occurrence basis; and
 
 4      (4)  Satisfy other requirements specified by the State.
 
 5      SECTION 9.  Termination of contract and resumption of
 
 6 control.  (a)  The State, upon demonstration that a breach of
 
 7 contract has occurred and that after the passage of a reasonable
 
 8 period of time the breach has not been cured, and without penalty
 
 9 to the State, may cancel a contract at any time upon giving a
 
10 six-month written notice.  A plan shall be developed by the
 
11 contractor and approved by the State establishing the method by
 
12 which the State will resume control of the harbor upon contract
 
13 termination.
 
14      (b)  Any contract entered into under this Act shall provide
 
15 that upon declaration by the State of any material breach of
 
16 contract on the part of the private contractor, the State, if
 
17 necessary, may assume immediate temporary control of the harbor.
 
18      SECTION 10.  Rulemaking authority.  The board shall adopt
 
19 rules pursuant to chapter 91, Hawaii Revised Statutes, as may be
 
20 necessary to carry out this Act.
 
21      SECTION 11.  Applicability of Act to other provisions of
 
22 law.  Any offense that if committed at a small boat harbor
 
23 operated by the State would be a crime shall be a crime if
 

 
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 1 committed at a harbor operated by a private entity pursuant to a
 
 2 contract entered into under this Act.
 
 3      SECTION 12.  Evaluation of costs and benefits of contracts.
 
 4 The auditor shall evaluate the costs and benefits of any contract
 
 5 entered into under this Act.  The evaluation shall include a
 
 6 comparison of the costs and benefits of operating, maintaining,
 
 7 and managing a small boat harbor by the State versus by a private
 
 8 contractor.  The auditor shall also evaluate the performance of
 
 9 the private contractor at the end of the term of each contract
 
10 and make recommendations to the speaker of the house of
 
11 representatives and the president of the senate regarding whether
 
12 to continue the contract.
 
13      SECTION 13.  Prohibition.  A bidder or potential bidder
 
14 shall not have any contract with any member or employee of or
 
15 consultant to any governmental entity responsible for awarding
 
16 any contract under this Act from the time a request for proposals
 
17 is issued until the time a contract is awarded, except if that
 
18 contract is in writing or in a meeting for which notice was given
 
19 as prescribed by law.
 
20      SECTION 14.  Severability.  If any provision of this Act, or
 
21 the application thereof to any person or circumstance is held
 
22 invalid, the invalidity does not affect other provisions or
 
23 applications of the Act which can be given effect without the
 

 
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 1 invalid provision or application, and to this end the provisions
 
 2 of this Act are severable.
 
 3      SECTION 15.  This Act does not affect rights and duties that
 
 4 matured, penalties that were incurred, and proceedings that were
 
 5 begun, before its effective date.
 
 6      SECTION 16.  This Act shall take effect upon its approval.
 
 7 
 
 8                           INTRODUCED BY:_________________________