Harbors

KAPALAMA CONTAINER TERMINAL

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“Just in time” shipping reduced the need for retailers to have individual storage facilities and placed the burden of timely delivery on the cargo carriers transforming the piers into the State’s “warehouses,” further complicating the orchestration of cargo movements.

Almost ten years after the findings of the 2020 Honolulu Master Plan, the Hawaii Harbor Users Group, comprised of 11 members, was formed to ensure the economic security of the State and the maritime industry. project funding. Development Treasurer. The final stage of the Phase I development culminates a true team effort, thanks to the staff within the Engineering Branch to ensure all the planning, environmental reviews, and design work was done properly to meet the needs of our Operations team. And behind the scenes, a critical part of the whole project development process is the

But how are these projects financed and move forward to break ground?

With HHUG’s support, findings and the presentation of the Mercator Transport Group report (2006), a blue print for the development of the Kapalama Container Terminal was created and embodied in Act 200 in 2008. During 2009 the Harbors Division adopted rules to increase its tariffs to fund the Act 200 capital improvements and support the sale of $160 million in revenue bonds.

Status of Kapalama Container Terminal

Phase I of the Kapalama Container Terminal will be completed during November 2020 due to the work efforts of Dung Vo, Harbor Modernization Development Manager and William Makanui, Project Engineer, and the work efforts of the Harbors fiscal office by paying the contractors on a timely basis and the work efforts to manage the Harbors cash by the Harbor Modernization Like the Airports and the Highways Division, the smallest of the three DOT divisions earns its money without general fund support. Capital Improvement Projects receive funding from tariffs on containers, passengers, pipeline fees, land rent, and the sales of bonds.

To complete the Kapalama Container Terminal and $350 million needed to award the construction contract, Kendrick Au, Harbor Modernization Development Treasurer, instilled financial discipline as the Fiscal Officer and Administrative Services Officer, as he developed and proposed Harbor fee increases since 2015. The increases in revenue provided the financial basis for the Harbors Management team as well as the team of legal and financial advisors to lead a successful bond sale. The additional sale provided an

KAPALAMA CONTAINER TERMINAL

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additional $175 million of bond cash proceeds to fund half of the construction project at the debt repayment level just above or at the same level in 2019 and 2020.

What is remarkable is Kendrick has incredible credibility with Fitch Ratings and Moody’s Investor Service, the rating agencies for Harbors bonds. These agencies analyze the financial results and projections of the Harbor Division’s revenues and expenses to determine a credit rating and outlook for the Harbors bonds. Interestingly, Moody’s Investor Service requested for its recent ratings analysis, Kendrick’s detailed financial workpapers (Excel worksheets) to conduct a stress test of the Harbors Division’s financial forecast, in light of the COVID-19 pandemic, to determine if there were any flaws in the forecast. The result of the Moody’s Investor Service stress test and their rating analysis as well as the rating analysis performed by Fitch Ratings is that both credit rating agencies reported no change in the Harbors Divisions’ high-grade ratings of AA3- and AA- and assigned “stable outlooks” on the future outlook of the Harbors Division’s finances, all in spite of the negative financial impacts caused by the COVID-19 pandemic.

Backed by Fitch Ratings and Moody’s Investor Service high-grade ratings, the demand for the 2020 Harbors Division Revenue Bonds was tremendous, measured by the high demand for these harbor bonds compared to the available supply of the bonds. The market demand was 13 times the amount of supply that resulted in investors willing to take less yield for the bonds. The high-grade ratings allowed these 2020 Harbor Division Revenue Bonds to be issued with a shorter term than customary bonds, i.e., 20-year bonds were issued as opposed to the customary 30-year bonds, which coupled with the high-grade ratings resulting in saving the Harbors Division total debt repayments over the 20-year bond term of approximately $62.2 million, which includes reduced interest costs of approximately $49.7 million.

Harbors

Mahalos!

In serving the public and constructing important infrastructure for the residents and harbor customers like HHUGS, we wish to spotlight Kendrick and to say thanks to all in Harbors fiscal, property management and to each of the district personnel in operations that generate revenue and collect the cash, as well as the Harbors Engineering staff and former HDOT Deputy Director for Harbors Darrell Young and current HDOT Deputy for Harbors Derek Chow, who contributed to the 2020 Master Plan to build Kapalama Container Terminal. We are finally able to meet HHUGS need for added container yard capacity, delivering a conceptual plan idea from design through construction, and turning it into a functional reality. As Kendrick has said during ZOOM meetings conducted for the purpose of executing this 2020 Harbors Revenue Bond transaction, it takes all of us on the Harbors Team, including Director Jade Butay, DBEDT, B&F and the Harbors legal and financial advisors to “make this bond sale and the projects that are being funded a reality.”