We Asked Ed Underwood How DOBOR Came Up With Fee Increase Numbers

We're wondering, at this point, if Governor David Ige is actually aware of what is going on in his DLNR, headed by his Chair pick, Suzanne Case.

In an attempt to pass off slight-of-hand fiscal management/accounting practices, Suzanne Case's DLNR and Ed Underwood's DOBOR would like the public to think that there actually was a substantive process for determining a proposed harbors rate increase package with some increases as much as 1000%.  We reached out to Ed Underwood to learn more about the accounting and fiscal-management processes that he used to arrive at the necessity of a 1000% increase in harbor tenant electrical fees.  Over the last several months, we have queried DOBOR's administrator, Ed Underwood, regarding this question, and here is a cross-sampling of our conversations (Mr. Underwood's answers were sometimes channeled through designated talking heads in the department):

Ed Underwood:  The reason why we're increasing electrical fees is because the electrical fees charged for non-metered slips have not risen since 1994, so we thought it was time for an increase. 

Hawaii Ocean News:  So why weren't there incremental changes to the fee between 1994 and 2018, a span of some 24 years?

Ed Underwood:  No answer as of this writing.

Hawaii Ocean News:  Do you have something more substantial to base a fee increase on?  For example, what real/historical data are you basing your 1000% increase proposal on?

Ed Underwood:  A while back we looked at some electrical billing from some boats (unspecified) in the Ala Wai and elsewhere and came up with an average number.

Hawaii Ocean News:  Which boats were those?  Could you tell me more about size and number of people on board and type of boat?

Ed Underwood:  We shredded all of that information so I can't give you an answer to that.

Hawaii Ocean News:  What other rationale are you using to justify this increase.

Ed Underwood:  Well, we're losing money on electricity.

Hawaii Ocean News:  How would you know that if tenant electrical usage is unmetered and you have no way of knowing actual cost per tenant; specifically, how would you know what HECO is actually charging you, per dock, per boat, for electricity?

Ed Underwood: Our electrical bills are not just for tenant usage but also for infrastructure use, like, for example, running all of the lighting on the docks and other infrastructure usage.

Hawaii Ocean News:  Since tenants are not using infrastructure electricity for their own personal use, why are you charging them for this?  Usually, infrastructure electrical cost comes out of general tenant rents and other revenues as part of the expense of operating a marina.  The Ala Wai Small Boat Harbor made $2.5 million in profits last year.  Wouldn't some of that money have been earmarked for infrastructure electrical cost at the Ala Wai?

Ed Underwood: No answer as of this writing. 

Hawaii Ocean News:   We understand that DOBOR is trying to recover a "hookup" fee from floating dock tenants.  How does that work?  So each electrical plug at each boat on the floating docks in the harbor system is being charged by HECO for a $17 hookup fee per month, the same as individual homes on Oahu?

Ed Underwood:  No answer as of this writing.

Hawaii Ocean News:  If the $17 "hookup" fee hypothesis is true, why weren't tenants charged for this since 1994?

Ed Underwood: No answer.   Look, we had statistician Paul Oshiro look at this whole thing and he concluded that electrical rates in general went up 100% since 1994.  That's why we're proposing an increase.

Hawaii Ocean News:  Why, then, did you feel you had to add the extra "zero" and make the increase 1000% rather than 100%?

Ed Underwood: No answer as of this writing.  Look,  for one utility bill at Ala Wai, the monthly amount was $12,845 and there were 320 slips on that one meter.

Hawaii Ocean News:  We submitted a UIPA formal request for per dock metering/cost and was told, in writing, that that information didn't exist.  Now you're saying it does?   If it does, which dock are you referring to?  Was this infrastructure plus tenant usage or just tenant usage?  We suspect the former since you have no way of separating this information out, and, as we've said, infrastructure costs are typically paid for out of general harbor revenue.  The Ala Wai Small Boat Harbor has $2.5 million dollars of this in profit each year, more than enough to cover electrical costs.

Which brings us to another question:  Why aren't the other 11 failing harbors in the state harbor system paying their way.  There are only 3 harbors in the system that operate at a profit, the other 11 operate at a loss. Why not bring tenant fees up in those harbors to make them current?  Why are you charging tenants in profitable harbors substantial slip fee increases while refusing to charge tenants in losing harbors enough to cover costs?

Ed Underwood: No answer as of this writing.

Below find the detailed excerpts from DOBOR's official written explanation as to why they think there should be a 1000% increase in harbor electrical fees (our observation follows each of these points):

1.  DLNR/DOBOR:  ". . . The rate that DOBOR charges its harbor users is $5.75, $11.00, and $25.00 a month.  These fees have not changed since 1994 and the amount that users pay does not cover the cost of all electricity used at DOBOR’s facilities." 

Hawaii Ocean News observation:  DLNR Infrastructure electrical usage is a separable consumable from tenant electrical usage.  Historically, tenants have been told by the DLNR that their electrical fees cover individual vessel owner usage.   "DOBOR's facilities" implies infrastructure.  It is usual and customary in all well-run facilities that infrastructure electrical usage is clearly separated from tenant usage.  Infrastructure expenses are typically paid for by general revenues.  At the Ala Wai Small Boat Harbor, for example, profits of $2.5 million suggested that your infrastructure electrical bill was paid in full.  That you are not profiting from revenues collected in the State's eleven failing harbors, is a direct result of poor fiscal management:  mooring rates at these harbors obviously need to be increased in order to pay general infrastructure and infrastructure electric bills so that these harbors operate in the black.  That "fees have not been increased since 1994" is a poor excuse, in and of itself, for a 1000% increase in any fee.  Good fiscal analysis involving detailed usage figures is the foundation of intelligent and accurate conclusions.   By your own admission, you have none of this detailed information to work with.

2.  DLNR/DOBOR: " . . . For example, in fiscal year 2018, DOBOR received approximately $31,000 in electricity reimbursement from facility users at the Ala Wai Small Boat Harbor and DOBOR paid approximately $171,000 in electrical bills." 

Hawaii Ocean News observation:  Again, you have absolutely no way to separate out facility usage from non-metered tenant usage.   This statement implies that tenants are now, suddenly, required to pay for infrastructure expenses from fees that are being represented to the public as those needed to cover the cost of electrical usage by individual tenants. To be honest with you, this has every appearance of public fraud.

2.  DLNR/DOBOR: ". . . For example, if a product was $100 in 1994 and the CPI increased 100% over 14 years, then the price of the product would be expected to be $200.00.  The data indicated that the CPI had increased over 100% since 1994.  The price per kilowatt hour increased 60% from 2006." 

Hawaii Ocean News observation: Your nebulous conclusions based on  Paul Oshiro's work in non-harbor-environment related areas does little to bolster your argument that tenant electrical rates should increase by some 1000%.   Most of our staff here has had at least one semester of Statistics at a major university and understand, at least, that all good statistical projections have a historical basis in fact.   With absolutely nothing in the way of substantive, detailed, background information, and obviously little understanding as to how consumers in a harbor environment actually use electricity, DOBOR forges ahead anyway with unsubstantiated projections resulting in ridiculous 1000% increase proposals -- this, despite the fact that Mr. Oshiro seems to suggest 100%.   

3.     DLNR/DOBOR:   " . . . To approximate a minimum increase in the rates that DOBOR charges, DOBOR increased the current rate of $5.75, to $11.50 (a 100% CPI increase) and added HECO’s minimum fee of $17.00 per month to come up with $28.00 per month." 

Hawaii Ocean News observation:  Anyone who owns a home knows this, but I'll walk you through anyway:  the $17.00/month hook-up fee is whole-facility based and/or per-meter based.  At my home, we pay $17.00/month on top of our monthly usage fee.   To suggest that HECO has been charging the unmetered tenants on the floating docks at the Ala Wai, for example, $17.00/month hook-up fees, in addition to usage,  would suggest that DOBOR billing for this would have long-ago been triggered, as this would have been a clear-cut, definable expense.  Hook-up fees have never appeared on any nonmetered tenant's electrical billing, ever in the history of State of Hawaii harbors.  If this was a legitimate expense from the outset, then, long ago, any responsible accounting system would have required DOBOR to charge for this expense to cover an obvious, clear-cut debit.   As I've said, this charge has never appeared in any billing Statewide.  Why? Because HECO does not charge $17.00/month hook-up fees for each individual non-monitored slip.    

4.     DLNR/DOBOR:   " . . . DOBOR staff used the electrical bills for the harbors of Haleiwa, Nawiliwili, Ala Wai, and Keehi, and developed an average cost per slip." 

Hawaii Ocean News observation:  By what magic?  There is no documentation that accurately tracks tenant usage vs. infrastructure usage.  By your own admission, the only "electrical bill" that you could have seen was a generalized facilities-wide billing that gave no hint as to actual tenant consumption.

4.  DLNR/DOBOR:   " . . . For example, for one utility bill at Ala Wai, the monthly amount was $12,845 and there were 320 slips on that meter."  

Hawaii Ocean News observation:  The response that we received from our UIPA request was that this very same information was not available to DOBOR or the DLNR. Our request for the numbers relating to the clearly-marked electrical metering of B, C, and D docks was answered with a "we don't have this information . . . " So now you're saying that you do, in fact, have this information?  Are you lying to the public regarding UIPA records requests?

4.  DLNR/DOBOR:    ". . .  Ala Wai’s range, using three months of bills, was $24-$60 and does not include street and harbor lights. . . ." 

Hawaii Ocean News observation:  Interesting in that this implies that you can, in fact, separate tenant electrical usage from infrastructure usage in the non-metered slips of public harbors? You've told us repeatedly in the past that you didn't have this capability.   If you do, in fact, have this capability, why not just charge based on per tenant usage?  Which vessels were being monitored?  Large sportfishing powerboats, Cal 20 sailboats, forty-five foot trawlers with families of four, twenty-one foot Aquasports . . . ?  And, $24-$60, as ethereal as these numbers may be, is not $50-$125 as per your proposal in 13-234.

 5.  DLNR/DOBOR:  ". . .  DOBOR estimated an overhead cost of approximately $20.00 per users. . .  ."     

Hawaii Ocean News observation:  Based on what?  As noted above, general "overhead costs," typically are covered by general revenue.  Electrical usage costs are covered by tenant electrical fees.  Are you saying that it costs you $20 per vessel to produce electrical billing?  Because you certainly don't do anything to maintain the electrical grid in the State harbor system. (Come to think of it, the DLNR seems to do as little maintenance as might be humanly possible in the State's harbor system. ) 

5.  DLNR/DOBOR:  ". . .  This would include the estimated cost of DOBOR’s office, harbor, ramp, and street lights as well as the personnel cost of processing invoices and payments." 

Hawaii Ocean News observation:  The estimated cost of DOBOR's office, harbor, ramp, and street lights . . . and the cost of processing invoices and payments . . ."  should be reflected in tenant electrical usage billing?

5.  DLNR/DOBOR:  " . . .  It would be greater than the amounts determined by the electrical bills in step 4, however, the amounts taken from the electrical bills do not include the DOBOR overhead. . .  .   . . . Adding the estimated DOBOR overhead . . ." 

Hawaii Ocean News observation:  The further down your document, the sillier it gets.  So you're trying to recoup unrelated DOBOR administrative costs from tenant electrical usage billing? 

Frankly, it is difficult for those on our staff with accounting backgrounds to conclude anything other than the following:  "This is nothing more than another version of the infamous shell game (you know the one, where the unwitting patsy tries to follow the location of the ball-beneath-the-shells dupe) . . . ".

In my previous email you were notified about our intention to publish an article regarding the conclusions of our research to date.  In fairness to you and the DLNR, you are free to respond to the article. We will include your comments in the publication. 

Kathrine Lindell
Hawaii Ocean News

Here is the complete DOBOR document, in its entirety, of their so-called process for arriving at a 1000% increase of harbor tenant electrical fees:

 1. Currently, DOBOR pays for electricity for its harbors and seeks reimbursement from the harbor users.  DOBOR’s electrical bills include electricity used by slip users, for common areas such as comfort stations, for street and ramp lights, and for electricity used in the harbor and administrative offices.  DOBOR wanted to increase the amount that it is reimbursed for electricity used at its harbors.  The rate that DOBOR charges its harbor users is $5.75, $11.00, and $25.00 a month.  These fees have not changed since 1994 and the amount that users pay does not cover the cost of all electricity used at DOBOR’s facilities.  For example, in fiscal year 2018, DOBOR received approximately $31,000 in electricity reimbursement from facility users at the Ala Wai Small Boat Harbor and DOBOR paid approximately $171,000 in electrical bills.  For the Keehi Small Boat Harbor, DOBOR received $14,500 and spent $101,500. 

2. Paul Oshiro, Department of Business and Economic Development and Tourism (DBEDT) Research Statistician, was contacted to see if he had any data on the increase in electrical rates statewide.  DBEDT provides economic forecasts that assist with long-term planning for the State of Hawaii (State) and they read, collect, compile, and post economic statistics on all aspects of business activity, the economy, and demographic characteristics of the State.  They also publish the State of Hawaii Data Book that provides data on a myriad of subjects.  The databook is located at: http://dbedt.hawaii.gov/economic/ .    He provided data on the increase in the Consumer Price Index (CPI) and data on the price per kilowatt hours of electricity.  The CPI measures the increase in the price of consumer goods.  For example, if a product was $100 in 1994 and the CPI increased 100% over 14 years, than the price of the product would be expected to be $200.00.  The data indicated that the CPI had increased over 100% since 1994.  The price per kilowatt hour increased 60% from 2006.

3. To approximate a minimum increase in the rates that DOBOR charges, DOBOR increased the current rate of $5.75, to $11.50 (a 100% CPI increase) and added HECO’s minimum fee of $17.00 per month to come up with $28.00 per month.  If we used HELCO (Big Island), it would be $31.50 per month and MELCO (MAUI) it would be $29.00 per month.  HECO, MECO, and HELCO all assess a minimum monthly fee to users whether electricity is used or not.  If you are hooked up to the electrical grid, you are assessed a minimum fee.  In a conversation with a HECO representative, DOBOR learned that the minimum fee covers the electric company’s overhead. 

4. DOBOR staff used the electrical bills for the harbors of Haleiwa, Nawiliwili, Ala Wai, and Keehi, and developed an average cost per slip.  This amount would reflect that average electricity usage.  Boaters in facilities such as Lahaina, Maalaea, and Heeia Kea pay the electric company directly.  Staff obtained and reviewed a sample of electrical bills for each facility and dividing the amount by the number of slips associated with the invoice.  For example, for one utility bill at Ala Wai, the monthly amount was $12,845 and there were 320 slips on that meter.  That meant that the cost to each slip would be approximately $40.00.  Using five months of bills, the cost of electricity for Haleiwa ranged from $25 to $30 per month.  This included street and harbor lights.  Keehi, using four months of bills, ranged  from $27-$32.  This amount does not include street and harbor lights.  Ala Wai’s range, using three months of bills, was $24-$60 and does not include street and harbor lights.  Nawiliwili’s cost was $24 and included street and harbor lights and was based on the amount that was paid annually.  It should be noted that this rate does not include the cost of electricity for common areas such as offices and comfort stations. 

5 DOBOR estimated an overhead cost of approximately $20.00 per users.  This would include the estimated cost of DOBOR’s office, harbor, ramp, and street lights as well as the personnel cost of processing invoices and payments.  Adding this amount to the minimum increase calculated in step 3, brings DOBOR proposed monthly rate to approximately $50.00.  It would be greater than the amounts determined by the electrical bills in step 4, however, the amounts taken from the electrical bills do not include the DOBOR overhead.  Adding the estimated DOBOR overhead, $50.00 would be consistent for rates for Ala Wai, Keehi, Nawiliwili, and Haleiwa. 

I hope this provides you with an understanding of the process that we went through to develop our proposed electric fees.  The rate increase was based on invoices from the harbors, economic information from the DBEDT, and information from the respective electrical companies.  I believe our approach to determining the rates was not arbitrary.  We were comprehensive in our analysis and analyzed all of the data that was available to the division. 

Mahalo,

Kevin H.K. Yim
Boating Staff Officer
Department of Land and Natural Resources
Division of Boating and Ocean Recreation
(808) 587-1979