The third time might prove to be the charm for Young Brothers Ltd., Hawaii’s monopoly interisland cargo shipper that’s been seeking financial relief to cover costs of shipping between the islands.
On Wednesday Hawaii Rep. Sylvia Luke, who chairs the House Finance Committee, said lawmakers will entertain Young Brothers’ request for $25 million from the Legislature to help cover operating losses through 2020.
Tugboats guide a large Young Brothers barge inside Honolulu Harbor. The interisland shipper has been trying to get financial help to cover its operating costs and might now be able to get federal stimulus money.
Cory Lum/Civil Beat
Typically a budget hawk loath to dole out public money to private firms, Luke said the Young Brothers request could be an exception.
“Because they are basically the lifeline for the islands, we’ll take a look at it,” said Luke, who as the Finance Committee chair is in charge of determining how to prioritize some $650 million in money directed to Hawaii under the U.S. Coronavirus Aid, Relief and Economic Security Act.
Young Brothers’ request, which the company made public Tuesday in a news release, marks the third attempt the shipping company has made recently to get public help for what it says are escalating costs of serving neighbor islands, including Molokai and Lanai. A bill proposed by Molokai Rep. Lynn DeCoite during the legislative session would have steered money from a harbor users’ special fund to help cover expenses. But that bill stalled when worries over the coronavirus sent the Legislature into an extended recess.
Meanwhile, the company also is asking the Hawaii Public Utilities Commission for permission to raise shipping rates. Because it’s the state’s only interisland cargo shipper, Young Brothers is regulated like other monopolies and needs permission to increase rates.
Young Brothers executives told the PUC that the rate increase would boost its annual revenue by $27 million, which they said is necessary to offset increased operating costs and ensure reasonable profits. Deliveries to smaller islands like Molokai and Lanai are especially expensive because they often include parcels smaller than a whole container load of cargo, which take a lot more work – and expense — to handle and track.
Rep. Sylvia Luke said lawmakers must take a hard look at Young Brothers finances before doling out money.
Cory Lum/Civil Beat
But with the legislative request and rate increase both stalled due to the COVID-19 crisis, the company has turned to the Legislature with a different request: for $25 million from the state’s CARES Act funding from Congress.
Things have gotten worse for Young Brothers during the COVID-19 pandemic, the company said in a statement Tuesday. Cargo volumes have dropped 30%, and the company said it has responded by taking steps to lower costs. For instance, reducing sailing schedules for Maui and Hawaii counties reflecting the decline in volume to Kahului and Hilo saved $6 million, the company said.
Young Brothers said its parent company, Seattle-based Saltchuk, has covered over $21 million in losses from 2018 and 2019 as it has sought the PUC’s permission to increase rates.
But Jay Ana, Young Brothers president, said Saltchuk won’t do that anymore.
“They are not in a position to continue covering the staggering COVID losses and have told us that we must now find other solutions,” Ana said in the news release.
While Luke said she was open to bailing out Young Brothers, she also said lawmakers need to know much more about what’s going on with it and Saltchuk.
“There’s a lot more fact-finding and investigation that we’ll have to do,” she said.
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