Commercial fishing and charter boat operators at Kewalo Basin yesterday urged a state agency to not implement harbor improvement and privatization plans because proposed fee increases would put them out of business.

More than a dozen harbor users testified against the plan at a public hearing held by the Hawai'i Community Development Authority, which expects to assume harbor operations in July from the state Department of Transportation.

The Transportation Department has operated the Kaka'ako harbor since statehood, but has sought to relinquish management in part because harbor ownership in 1990 was given to the development authority.

The authority has proposed hiring a private harbor manager and spending $14.1 million to repair unusable slips neglected by DOT, and make other improvements and additions including modified car and bus access, new restaurants, a convenience store, bait shop and fuel station.

To finance the work, the agency said it needs to double slip fees and charge a maintenance fee.

But many of the 83 or so harbor tenants — mainly fishermen and a mix of recreational charters for fishing, parasailing, tours and scuba-diving — said the fees are excessive, unfair and would force them to move or close.

"This plan is ill-conceived and unworkable," said Frank Mento of Kahala Catamarans Inc., which has operated at Kewalo for a decade. "Kahala Catamarans will not be able to remain in business under these proposed changes."

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.

Proposed monthly slip rents for commercial fishing boats range from $10 to $13.20 per boat foot, depending on boat size, double the previous rate. Rates for charter boats are higher and also would double.

Charter operators, but not commercial fishermen, also are subject to paying 2 percent of gross revenue if the amount is more than standard rent. That would increase to 4 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 provided by a private contractor expected to be selected by competitive bid next month.

Amanda Strause, who in July bought the charter boat business Waikiki Marine Sales operating at Kewalo and is struggling to turn a profit, said higher rents would force her to raise charter prices, which would drive customers to cheaper competitors on the North Shore or Wai'anae.

"Our customers will just go elsewhere," she said.

MAINTENANCE NEEDS

The development authority said harbor users are being asked to pay a fair share of improvements. It also said that DOT fees, last raised in 1996, are below market and have led to operating the harbor at a deficit that contributed to deferred maintenance that needs to be addressed.

About one-third of the harbor's 127 slips are vacant because they are condemned or unfit for use.

"There is a lot of work to be done," said Richard Kuitunen, an HCDA asset manager. "Kewalo Basin is at a decision point."

Kuitunen said proposed monthly rates are at least $2 per boat foot cheaper than space at the privately owned and operated Ko Olina Resort & Marina.

But Mike De Rego, owner of four sport-fishing boats at Kewalo, said the state Department of Land & Natural Resources, which manages harbors in Hale'iwa and Wai'anae that accommodate commercial boats, charges less.

De Rego currently pays $10 per boat foot a month or 2 percent of gross sales, whichever is greater. That would double to $20, or 4 percent, as proposed by the development authority. DLNR's rate last week increased to $7.50, or 3 percent, from $5.60, or 3 percent.

"The HCDA has grossly miscalculated the ability of the Kewalo operators to comply with these harsh financial requirements and remain in business," he said.

Most harbor users agree that facilities need to be fixed, and some suggested that smaller or more gradual slip fee increases would be acceptable.

Bill Foster, marina development chairman of the Waikiki Yacht Club, said he supports doubling the slip fees and believes club members with commercial boats would pay the higher proposed rates.

But others believe DOT was earning enough rent to have kept up with maintenance, and that it's unfair for tenants to pay more for improvements that should have been made previously.

The development authority said DOT operates Kewalo Basin at a deficit that was $916,200 in the fiscal year ended June 30, 2006. DOT spokesman Scott Ishikawa said the department under different accounting rules calculates it had a $136,837 surplus from Kewalo operations before depreciation in the same fiscal year.

De Rego suggested that the state Department of Accounting and General Services audit harbor operations before fees are raised.

OTHER RULES UNPOPULAR

Boat operators also objected to other proposed rules such as a minimum annual sales requirement that, if not met, would allow the HCDA to cancel leases.

Danny Brennan, general manager of the Makani tour catamaran, said meeting the sales requirement would require his boat to carry roughly eight more passengers per sailing, or 791 per month, than it can legally hold.

"We can't do that," he said.

Another planned rule change would allow yachts in the harbor, provided owners don't live on board. That provision has led some commercial operators to believe they will be forced out and replaced by wealthy yacht owners able to pay the higher fees.

Bus companies would have to pay $1,000 per bus annually to deliver passengers to the harbor under another proposed change. Currently, it costs $650 a year per bus to use any DOT harbor, and Kewalo operators fear lost business if bus companies avoid Kewalo because of the fee.

Several harbor tenants urged the development authority to spend more time studying what tenants can bear to pay for improving the harbor.

The authority has been meeting with a small advisory group of harbor users monthly since August 2006 in preparation for the takeover, and recently drafted rule changes and an operating plan.

Some proposed rules were modified after feedback from an informal meeting last month.

The agency is expected to consider testimony submitted yesterday, and could revise its harbor management and improvement plan. Agency board members are expected to vote on harbor operating rules before July.

A decision by the board would be subject to review by the state Small Business Regulatory Review Board and approval by Gov. Linda Lingle.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.