When it comes to industries with the potential to help diversify Hawaii’s economy, few have greater promise than the maritime industries, especially ship maintenance and repair.

But a legislative initiative to help develop a new dry dock at Pearl Harbor Naval Shipyard shows just how thorny it can be for the government to engineer solutions, even when the stated goal is a worthy one: to help protect good jobs, including high-paying skilled positions.

Advocates of a proposed, state-supported venture say it’s necessary to save hundreds of jobs. Opponents of the proposal, specifically some members of the very industry the plan is meant to benefit, say it’s a matter of fairness and maintaining a level playing field for all companies.

And there’s another issue: neither the Navy nor the shipyard would confirm that a significant number of jobs are even at risk.

Cory Lum/Civil Beat

One thing is not in dispute: ship repair is a significant industry in Hawaii — a major beneficiary of the kind of lucrative federal contracts that support a lot of jobs.

According to the website USAspending.gov, the official source for spending data for the U.S. government, the state’s ship repair industry received $208.2 million in contracts in the 2018 fiscal year. The biggest recipient was BAE Systems, a prime ship repair contractor, which got $136 million, the site reported.

The shipbuilding and repair industries produced about 2,500 jobs and $200 million in income, according to a 2015 study by the U.S. Maritime Administration. The industry added about $275 million to Hawaii’s GDP, MARAD reported.

Many of the ship repair jobs are high-paying positions for people like machinists and union welders. Among the industry’s more prominent supporters is former U.S. Rep. Colleen Hanabusa, who served on the House Armed Services Committee.

Hanabusa has long touted ship repair apprentice programs as a way to train workers for well-paying careers. She has told Civil Beat previously that the maritime industry presents young people in Hawaii a “phenomenal job opportunity.”

Could Navy Ship Repair Work Dry Up?

But some lawmakers and industry members worry a big chunk of Hawaii’s ship repair business is poised to evaporate.

They say the Navy plans to move ships to San Diego for maintenance and possibly never bring them back.

Paul Brewbaker, a Hawaii economist hired by a ship repair industry association to study the issue, estimated the negative impacts of displaced ship repair activities over the next seven years could amount to the loss of nearly $1.3 billion in Hawaii gross domestic product, $351 million in lost labor earnings, and an annual average decrease of 900 jobs each year.

Lawmakers are now citing those figures in legislation designed to mitigate the risk of losing business.

Pearl Harbor Naval Shipyard is the Navy’s largest repair facility between the West Coast and Asia with four dry docks capable of working on submarines and surface ships. The bills would help add a fifth dry dock, which proponents say Hawaii needs to keep work here. Both measures are awaiting final approval by the Legislature.

Pearl Harbor Naval Shipyard

One problem is that the dock would be built and owned by one private company, an affiliate of Pacific Shipyards International, a major player in Hawaii’s maritime industry known for receiving sweetheart deals from lawmakers in the past.

One of the measures would provide tax credits to the developer; the other measure calls for the state to issue special state bonds to Pacific Shipyards’ affiliated company Pearl Harbor Floating Drydock LLC to help finance the project.

The bonds total $60 million. The tax credits would be up to 35% of the cost of designing and building the dry dock, which could be as much as $21 million.

Local competitors are crying foul, saying the project represents yet another inside deal for a well-connected firm.

“They’re saying the entire industry is on board, but we’re not,” Ian Caliedo, president of maritime contractor C & S Services Inc., said in an interview. Caliedo said the bills benefit one company – Pacific Shipyards – at the expense of his and others.

Fred Anawati, president of Marisco Marine and Industrial Service Co., agreed. He accused the legislation’s proponents of falsely stating it would benefit the entire industry when the legislation is aimed at just one company.

“If you’re going to give a tax credit be up front about it,” Anawati said. “We’d like to have a level playing field.”

Tom Yamachika, director of the nonpartisan Tax Foundation of Hawaii, said such gripes aren’t unusual when the government steps in to the market, especially to benefit one company over others.

“The potential for unfairness kicks in very heavily,” he said.

Proponents of the bills were not talking to the media last week.

Iain Wood, president the Ship Repair Association of Hawaii who is also Pacific Shipyards’ chief executive, did not return phone calls. Hawaii Sen. Michelle Kidani, who authored both bills, also did not return calls. Sen. Stanley Chang, who co-authored the tax credit bill, referred calls to Kidani.

A spokesman for the ship repair association denied that the measure was intended to benefit Pacific Shipyards. Even though the measure clearly states the bonds are meant to help the company’s affiliate, Pearl Harbor Floating Drydock, construct a “purpose-built floating drydock at Pearl Harbor to service submarines and surface ships,” association spokesman Alan Hayashi said the named company is merely “a placeholder for the future holder of the asset.”

“It could be ABC Corporation,” Hayashi said.

Regardless, Hayashi said, while one company might own the dock, many subcontractors would benefit from being able to do work on ships that otherwise would be sent to the West Coast.

“Everyone gets to use it,” he said. “That’s what gets lost on how this is structured.”

Navy Says Current Facilities Are Adequate

Beyond the question of whether the measures benefit one company at the expense of others are more fundamental ones. For example, it’s not clear the dry dock is needed to prevent the Navy from moving surface ships out of Hawaii for good, as the legislation envisions.

“They’re planning to move in 2023 most of not all of the repair work to the West Coast,” Hayashi said.

But Charles Oki, a Navy spokesman in Honolulu, couldn’t confirm the Navy had such plans.

And Cameron Salony, director of congressional and public affairs for the Pearl Harbor Naval Shipyard, said the shipyard’s assets are adequate to do the repairs that need to be done.

“Current existing facilities are sufficient to support planned surface ship maintenance availabilities in Hawaii,” he said in a written statement.

Meanwhile, a Navy report on long-range plans for maintaining vessels for the 2020 fiscal year comfirms that one asset, Pearl Harbor’s Drydock 2 is moving toward obsolescence, but not until 2030.

There’s also a final, even more basic question: If it is true that the Navy plans to move ships from Hawaii, what guarantee is there that the Navy will agree to lease and use Pacific Shipyards’ floating dry dock?

“Who are they to say the Navy is even going to do that?” Caliedo asked.

Hayashi acknowledged the Navy had made no promises, but he said Hawaii needs something concrete to take to the Navy.

“This solidifies our position,” he said.

“Hawaii’s Changing Economy” is supported by a grant from the Hawaii Community Foundation as part of its CHANGE Framework project.