Hawaii Over The Past 20 Years: Minimal Change, Minimal Growth. What Should Hawaii Plan For?

Annual U.S. Bureau of the Census data strongly suggest that Hawaii, and Oahu in particular, are stable communities with very mild growth and change particularly after the turn of the millennium.

The data suggests that mega-projects such as rail and "big wind", and mega-developments such as Ho'opili and Koa Ridge are ill conceived and unnecessary.

This slideshow provides both data evidence and brief discussion.

Politicians have engaged in biased or data-free decision making for decades. The mounting debts are sufficient proof that ignoring the trends and serially engaging in unproductive activities simply digs a deeper hole. Both Hawaii and the US are approaching the danger of the hole walls caving in and burying them, much like the PIIGS* and other countries.

What should Hawaii do in the next two decades?  The last slide provides the answer. In three sentences:

• Decline followed by stability will be the trend.
• Send “visions” and mega-projects to the cemetery.
• Maintain, Replace, Modernize should be Priority 1.

(*) Portugal, Ireland, Italy, Greece, Spain

Transportation and Energy Infrastructure Projects: Forecasting is Unnecessary

I enjoyed Dr. Martin Wachs' brief article Planning for High Speed Rail (HSR) in California. It centers around planning and forecasting: "The current debate is divisive precisely because improved data and models cannot provide a better glimpse into the future" Wachs says.

After nearly three decades in planning and policy, and six years involvement in local politics I have come to believe that forecasting is unnecessary as a primary decision making tool. Why?

Because transportation infrastructure deployment lags demand by decades. Why do we need to forecast 20+ years into the future? The need is present (or not.) Current data are the best quality data we have. So instead of making numerous uncertain assumptions about a future we do not control, let's assume that the project is built overnight and assess its benefits at the present time.

In the case of Hawaii, when I first relocated here in 1990, traffic congestion was the No. 1 issue and has remained in the top 10 ever since. Twenty three years later, roadway capacity addition has been marginal and most major bottlenecks have not been addressed. So why does the city's planned rail project have a 2030 horizon?

I think the answer is this: The proposed rail does not generate enough ridership with the current population so artificial demand balloons for population and jobs in 2030 are "forecast" to justify the system.

Similarly California has a population of 38 million with huge concentrations in Los Angeles and San Francisco metro areas. If HSR does not work for 38 million, then it won't work. Why is a 20 to 50 year projection needed?

Worse yet, the typical  planning models lack credibility because they are never tested with back-casting.  If Parsons Brinkerhoff's model is trusted to predict transit ridership (bus and rail) in Honolulu with year 2006 as baseline and 2030 as the horizon, does it also predict transit ridership for 1982?  In other words, we should check the model's ability to project forward by using the 24-year period from 1982 to 2006; for which we have perfect information. How does the model do?

I think the answer is this: It does very poorly and for this reason back-casting is never applied.(1)

Obviously, since the inception of a project, several years go by for environmental studies, design,  engineering, funding, bidding and construction. So a 10 years-out plan and forecast is needed. But multi-billion dollar energy and transportation infrastructure projects should be justified by their "now" value and not by future demand balloons.

If the projects are beneficial "now" then long range forecasts can be performed for selecting the proper size for them. For example a reversible highway sized at two lanes for sufficient congestion relief may need to be built with three lanes to accommodate future demand. Similarly a 1,000 MW power plant may be engineered with a 1,200 MW capacity for the future.

Projects funded with private capital, fully or partly as in Public-Private Partnerships, sophisticated risk analyses that protect investment from foreseeable risks are conducted. These meticulous and carefully inspected forecasts of project costs and revenues have little in common with the manipulated forecasts for taxpayer funded and subsidized systems, primarily transit systems.

For taxpayer funded projects forecasting is unnecessary and indeed misleading for decision making. It is commonly used a tool for deception, particularly for rail projects.(2)


Endnotes

(1) My students and I investigated the accuracy of traffic volume forecasts primarily in the agriculture-to-residential mega developments in Ewa between 1976 and 2002. We found this:

The study compared forecast traffic levels from Traffic Impact Analysis Reports prepared between 1976 and 2002 to actual traffic volumes recorded by the Hawaii State DOT in the city and county of Honolulu. The information extracted uniformly from 11 reports included year of report, consultant, type of project, location, movement, forecast horizon, forecast traffic volumes and forecasting method.

This study focused on road and residential developments and examined the accuracy of traffic demand forecasting, the conservative or optimistic tendency in traffic forecasts and the potential factors affecting accuracy. The results revealed that traffic forecasts are on average overestimated by 35% and there is a clear tendency to overestimate future traffic volume. Errors ranged from -40% to +200%.

SOURCE: Caroee, Maja, Panos D. Prevedouros and Alyx Yu, Volume Forecasts for Environmental Impact Statements and Traffic Impact Analysis Reports: Accuracy of Road and Residential Developments in Honolulu, Paper 13-1398, 92^nd Annual Meeting of Transportation Research Board, Washington, D.C., 2013.

(2) Flybjerg, Bent, et al., Delusion and Deception in Large Infrastructure Projects (2009)

U.S. Titanic

Cox, a former chairman of the House Republican Policy Committee and the Securities and Exchange Commission, is president of Bingham Consulting LLC, and Archer, a former chairman of the House Ways & Means Committee, is a senior policy adviser at PricewaterhouseCoopers LLP.

On November 26, 2012 the Wall Street Journal published their opinion... Why $16 Trillion Only Hints at the True U.S. Debt: Hiding the government's liabilities from the public makes it seem that we can tax our way out of mounting deficits. We can't.

It explains quite well that the cartoon below is quite real.

JONES ACT Hurts Hawaii (Alaska, Guam and Puerto Rico too)

Bloomberg indicates that U.S. islands such as Puerto Rico, Guam and Hawaii, along with the state of Alaska, feel the effects of the Jones Act more than most localities. Some of Hawaii’s political and business leaders have long complained that the restrictions mean all goods shipped from the U.S. mainland must go via the two carriers serving the state. By some estimates, Jones Act makes goods in Hawaii 33% more expensive than they could be.

For island territories the Jones Act is counterproductive and indeed hazardous. "Russian Icebreaker to Make History in Alaska" is an example of how the Jones Act endangered a community in Alaska. Even in a critical situation like this, the Russian ice breaker could not load oil from an Alaska port and take it to Nome, Alaska, but it had to backtrack to Korea to get the oil and back to Nome, Alaska.

Both Presidents George W. Bush and Barack Obama resorted to temporary Jones Act waivers so Foreign-Flag crude tankers could transport the government’s crude oil from the Strategic Petroleum Reserve (SPR) to the refineries because no Jones Act tankers were available.  The Bush waiver occurred in September 2005 following Hurricane Katrina and Obama’s from July through September 2010 in response to the loss of Libyan oil on the world market. (The Jones Act is a Critical Energy Issue)

Prophetically in the same March 2012 article Michael Hansen predicted this: "The Jones Act may now result in the closure of Tesoro’s Hawaii refinery."  It happened less than a year later: "Tesoro Corp.’s Hawaii refinery in Kapolei, the largest of the two oil refineries in the state with a capacity of 94,000 barrels a day, is closing its refining operations in April." (PBN, Jan. 8, 2013)

With this introduction in mind, here is a sample of articles asking to ban or modify Jones Act for Alaska, Guam, Hawaii, Puerto Rico and other U.S. Territories:

• The influential maritime publication Lloyd’s List endorsed an exemption from the U.S. build requirement for Hawaii, Alaska and Puerto Rico. The editorial published on Friday January 4, 2013, was written by Tom Leander, Editor-in-Chief, Asia, Lloyd’s List, based in Hong Kong. Leander writes that "many critics of the Jones Act, including Lloyd’s List, hope that the GAO will provide evidence that can be used to persuade Congress to scuttle the US-built requirement of the Jones Act as it applies to Puerto Rico — and further to Hawaii and Alaska – under a so-called sunset waiver."

• The Secretary of the U.S. Department Homeland Security, Janet Napolitano, issued a Jones Act waiver this morning to allow foreign-flag clean products tankers carry refined petroleum products from domestic coastwise ports to the North East which is suffering from shortages of motor gasoline and diesel fuel due to Hurricane Sandy.  The waiver expires on November 13.

• Hawaii Shippers Council Outlines Jones Act Reform Proposals: The Council's press release observes that "90 years of Jones Act protection has resulted in the near complete collapse of the U.S. deep draft merchant shipbuilding industry, and continuing that protection for the noncontiguous trades will not save it. The Act has generally failed to achieve its intended goal to nurture the U.S. maritime industry, and commercial deep draft commercial shipbuilding in the United States is all but ended."

• Honolulu Star-Advertiser's Guard asea on aged craft reveals Coast Guard issues with aging cutters it cannot afford to replace: “The Coast Guard in Hono­lulu faces a dilemma with its two biggest ships, the aging 378-foot cutters Jarvis and Rush, which the service wants to retire but can't because it has no replacements.” 

• Senator-candiate (at the time) Mazie Hirono provided a container load of untruths to justify her baseless support for the Jones Act: "In Hawaii especially, the maritime industry is an essential economic mover, generating more than $4.7 billion annually into Hawaii’s economy and providing more than $1.1 billion in wages and benefits for our people."

• Sen. Hirono's position is diametrically opposed to Eddie Baza Calvo's, Governor of Guam. He is "Seeking an exemption from the Jones Act to make the price of nearly everything on the island cheaper."

• Sen. Hirono position is diametrically opposed to Representative Pedro Pierluisi's, Puerto Rico member of the U.S. House of Representatives. “I am pleased that the GAO is actively working on my request to determine, once and for all, the economic impact that the cabotage laws have on Puerto Rico. This study should put an end to all of the speculation that surrounds this subject and, if the study concludes that the Jones Act is having a negative impact on our economy, could provide the basis for potential legislative action in Congress,” said Pierluisi. The U.S. Government Accountability Office (GAO) is preparing a report “to provide policymakers with a comprehensive, descriptive summary of information on the Puerto Rican and Caribbean Basin trade markets, and how the Jones Act potentially affects these markets.” 

• Adding to Hawaii's oild dependency woes, Natural gas is cheap, but Jones Act rules it out for Hawaii, says Michael Hansen, President,Hawaii Shippers Council.

• An expanded version of the article above is titled: Jones Act Requirements Could Block Natural Gas Transport to Hawaii

Endnote: These U.S. territories are exempt from the Jones Act: American Samoa, The U.S. Virgin Islands (USVI) and The Commonwealth of the Northern Mariana Islands (CNMI) due to the international treaties associated with their annexation by the U.S.

Oahu Is Rising

Literally!

This is not about economic growth, intellectual enlightenment, or attaining some other form of excellence. 

This is a matter of fact statement about the geography of Oahu: It is rising. Every century the Koolaus will grow taller.

Contrary to global warming theories that for decades have suggested that Oahu’s shores will be inundated and beaches will be lost, new scientific analysis shows that even with possible sea lever rise, and even with the constant erosion of the island by wind and rain, Oahu will grow taller thanks to strong volcanic forces that lift it up from the bottom of the ocean.

The effects of climate, soil thickness, and water contact times on Oahu, Hawaii is the title of the article by Stephen T. Nelson, David G. Tingey, and Brian Selck from the Department of Geological Sciences, at Brigham Young University, in Provo, Utah.

Here is their remarkable conclusion: “Recent work indicates that Oahu is tectonically emerging at 0.060 m/ka. As long as this uplift continues, the net size of the island will slowly increase and the Koolau Range should persist as an orographic trap to precipitation, maintaining relative aridity in the Waianae Range.”

That’s 6 cm every 1,000 years. Not sure if that's enough to protect from any sea level rise due to polar ice melting.

New 3-Cylinder Ford Engine Delivers 47 mpg!

Alan Mulally is the venerable engineer and project manager of the Boeing 777 and for several years now CEO of Ford Motor Company. Why is he kissing this new engine?

Because this super-efficient, well-balanced and light weight engine can deliver 47 mpg in a Ford Focus compact car without the complexity and price penalty of hybrid technology. Many manufacturers are now turning to 3-cylinder engines for their smaller cars but also prepare editions that match the output of common V6 engines for larger vehicles.

These smaller engines would have huge benefits for the world market, and China in particular, where Volkswagen announced plans to build its 7th plant, just a few days after Ford had said it would build its 5th.

This is good news for mobility and the planet. Smart policies* and smart engineers get the job done: Mini engines with normal performance and mini consumption and air pollution. And fewer resources used to make those engines enhances long term sustainability.

Note (*): America's new emission standards require car manufacturers to achieve a fleet average of 34.1 mpg by 2016 and 54.6 mpg by 2025.

Hawaii's Sudden Economic Tsunami

With the sudden death of US Senator Inouye and the retirement of US Senator Akaka, both in December of 2012, Hawaii instantly finds itself at the center of an unprecedented fiscal tsunami due to the total loss of Congressional seniority. The table below indicates that Hawaii's Congressional Seniority changed overnight from stellar to abysmal.

Although well over half of federal funds are appropriated by formula, a large share of local programs are funded by special appropriations and earmarks which would be very hard to obtain in the coming years.

Recent preliminary research by a group of students at UH placed the annual impact of Senator Inouye to Hawaii between $200 Million and $450 Million per year. The students surmised that the sudden loss of Senator Inouye would be similar to the sudden and complete loss of Hawaiian Airlines.

An expanded discussion by Malia Zimmerman "Hawaii, Like Alaska, Could See Huge Fiscal Impact From Loss of Congressional Seniority" combines multiple sources to provide additional information about the financial impact to Hawaii.

-------- January 11, 2013 Update -------- 

 Within about two years, I guestimate that Sen. Inouye's death combined with Sen. Akaka's retirement and the absence of no reps from Hawaii in an Appropriations Committee to cost:

•     ~ 200 high paying military contract jobs (civilian)
•     ~ 800 normal paying military contract jobs (civilian)
•     ~ 300 high paying UH research jobs
•     And a few dozen other millions in gravy
•     For a total of at least $200 Million per year of taxable income and related economic activity.

After a couple of years, the East-West Center, UH's Kakaako Medical Research Center, Mauna Kea astronomy investments, many small subsidized programs and the Armed Forces may be in jeopardy for major cuts.

Green Energy and Rail Get an F

Election politics are behind us so it is a good time to post the economic report card for President Obama's first term issued by The Economist on September 1, 2012.

I am pleased to see that for the two areas of "green energy" and "rail passenger transportation" The Economist gives the President an F. These are indeed the two areas that I completely disagree with both the President, Hawaii's Governor, most of Hawaii's current political establishment, and with the environmentalists of Sierra Club.

Indeed, biased taxpayer black holes deserve this.

It is my hope that this F along with today's sad news of the death of US Senator Inouye along with the retirement of US Senator Akaka (this is a 1-2 knockout punch for Hawaii to the very bottom of US Senate seniority combined with Hawaii's rock bottom seniority in the US House) will infuse sanity and restraint into the brains of local decision makers.

Cuts are painful, but cutting wasteful projects* is productive and necessary to avoid a nosedive.

(*) The rail, transit oriented development, wind farms, limitless solar subsidies, inter-island cable, government solar farms, cookie-cutter housing on prime agricultural land, North Shore mega-developments along a single, jammed 2-lane country road, ...

The World in 2030: World Preeminence for China, Energy Independence for USA

The Verge: The US National Intelligence Council, representing the 17 intelligence agencies of the US government, says that "we are at a critical juncture in human history" in its fifth Global Trends report. The report details the challenges facing the species in the coming decades; the council says that many positive developments in health, education, and governance will propel human civilization, but that the threat of conflict could emerge as supplies of food and water become more scarce.

The Diplomatic News: The American Century is drawing to a close, and the US Defense Department will have to be more flexible in dealing with a faster-paced multipolar world, according to the Global Trends 2030 report

NY Times: A new intelligence assessment of global trends projects that China will outstrip the United States as the leading economic power before 2030, but that America will remain an indispensable world leader, bolstered in part by an era of energy independence.

London Financial Times:

• Pax Americana ‘winding down’
• China will be the world’s largest economy by 2030 but the US will still remain “first among equals” in the international system
• Europe, Japan and Russia will continue to experience relative decline
• Asia will come to dwarf the rest of the world in terms of its economic and military power
• The wave of Islamist terrorism is likely to have ended by 2030
• The US will be energy independent and could be a significant exporter of energy
• Advances in manufacturing technologies could reduce the need for outsourcing

Here is what the report says about renewable energy. It makes Hawaii look like a fool by wasting millions of taxpayer dollars to produce Kilo-Watts instead of Mega-Watts (1 MW = 1,000 KW):

"With shale gas, the US will have sufficient natural gas to meet domestic needs and generate potential global exports for decades to come. Increased oil production from difficult-to-access oil deposits would result in a substantial reduction in the US net trade balance and faster economic expansion. Global spare capacity may exceed over 8 million barrels, at which point OPEC would lose price control and crude oil prices would collapse, causing a major negative impact on oil-export economies."

"The IEA’s baseline scenario shows the share of renewables rising just 4 percent during the 2007-2050 period. Hydropower accounts for the overwhelming majority of renewables in this scenario, with wind and solar energy providing 5 and 2 percent contributions in 2050 respectively. Their contributions in 2030 would be even less."The 170 page report can be downloaded here: National Intelligence Council, Global Trends 2030