The State of Hawaii has come to realize that its economy is fragile and heavily dependent on tourism's revenues.  Much emphasis is being afforded the visitor industries with high growth rates and which employ larger segments of the workforce.  While this is a necessary strategy, the State must not neglect the infrastructure on which these industries are all dependent - Hawaii's Port system.

VALUE OF THE PORT SYSTEM

ECONOMIC ACTIVITY

In 1992, the major harbor industries produced $1,933,900,000 in direct sales (MacDonald and Deese, 1994; Lee and Olive, 1994, adjusted by SMS Research for major commercial harbor industries.)  That year, while Hawaii's Gross State Product amounted to $33 billion, $10.3 billion in imports passed through the State's commercial harbors - a third of the value of goods and services produced in Hawaii. Similarly, a third of the tourists' expenditures in 1992 was on goods that were largely imported through Hawaii's port system.

Commercial harbor activity is best described in these categories: Ocean Transportation; Ship Building & Repair; Commercial Fishing; Ocean Recreation; and other support industries.  Harbor users range from the major cargo carriers to commercial fishermen and charter boat operators with a single vessel.  Other shipping and manufacturing operations (i.e.; cement distribution and foreign trade zones) also occupy harbor lands.

Ocean Transportation supports every sector of the State's economy by bringing in 98.6 percent of all imported food, building materials, manufactured goods and energy products (Lee and Olive, 1994.)  Ocean Transportation activity, understandably, keeps pace with Hawaii's fluctuating economy.  Ship Building & Repair, however, is a slower-growth sector of the harbor industries, impacted by the absence of local parts-manufacturers.  Parts for building and repairing ships must be ordered and imported from outside the State, resulting in lengthy delays, additional shipping charges and higher costs of doing business.

Commercial Fishing and Ocean Recreation are export industries, bringing overseas income to Hawaii (MacDonald and Deese, 1995.)  While both have experienced strong growth, Ocean Recreation's potential appears particularly favorable.  Ocean Recreation's charter, excursion and cruise vessels, part of the larger visitor industry sector, transport tourists to some of Hawaii's distinctive and popular attractions.  While definitive growth analyses are currently not available, the sentiment is that Ocean Recreation's potential is one of explosive growth.

EMPLOYMENT

Harbor industries directly accounted for 8,298 jobs in 1992 (MacDonald and Deese, 1994; Lee and Olive, 1994, adjusted for commercial harbor industries by SMS Research.)  Although the number of jobs is relatively small, the harbor industry employment trend reflects Hawaii's dependence on Ocean Transportation.  A six-month long dock strike in 1949 led to a surge in unemployment from about 5 percent in 1948 to an annual average of I I percent in 1949.  Reductions in the per capita personal income trend of 10 percent and the Gross Territorial Product trend of 12 percent, occurring in both 1949 and 1950, could be attributed to this dock strike.

Commercial harbor industry employment is therefore indicative of Hawaii's dependence on ocean shipping.  Major disruptions in harbor employment impact the flow of maritime commerce with serious implications for the State.

ECONOMIC IMPACT ANALYSIS

Commercial harbor facilities have traditionally been developed to satisfy the requirements of harbor users.  The Harbors Division convenes User Group meetings to solicit user needs and plan the appropriate improvements.  Thus far, Harbors Division's plans and developments have served the users well.  Recent slowing economic trends, however, are requiring the justification of Harbors Division's special fund expenditures with the determination of larger economic benefits than project development costs.  Because the individual harbor projects do not necessarily generate the income necessary to justify the costs of development, a study to determine the economic value of the entire port system is being conducted.  Entitled the Economic Impact Analysis, this study will be produced as a separate report in the spring of 1997.

The Economic Impact Analysis will establish the port system's s vital function as an integral component of the State's economy.  While it is common knowledge that 98.6 percent of Hawaii's imported goods come through the harbors, it has been extremely difficult to quantify this statement with a dollar value.  The Economic Impact Analysis intends to determine and validate the value of each commercial harbor and thus promote the importance of Hawaii's port system.

The Analysis will define the port system's economic worth by examining and documenting sales realized, tax revenues created, incomes generated and jobs provided.  These values quantify the economic benefits and will be compiled with the public service functions performed by the entire system into a concise, accountable analysis.  This analysis will be used to:

• assess the impact of new commercial harbor facilities construction;
• establish the economic benefits of harbor/channel dredging;
• assess the impact of intermodal facilities development;
• allocate harbor investments;
• rank facilities investment plans;
• justify investments in cruise terminal development;
• determine the impacts of master plan development;
• develop the harbor's revenue financial model;
• link the financial model to the impact models; and
• evaluate the effect the port system has on the cost of goods, the consumer and on the State's overall economy.

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