Developers of Coco Palms Site Face Violation Allegations, Injunction Lawsuit

_{Above photo: A drone shot of unauthorized work on Conservation District lands owned by RP21. CREDIT: GARY HOOSER.}

The companies working to redevelop the former Coco Palms resort properties on Kauaʻi have a lot to answer for if they want to use state lands for parking, access, and a restaurant, as envisioned in building permits secured by project architect Ron Agor in 2019.

Last October, the state Board of Land and Natural Resources approved the annual renewal of three revocable permits covering those lands. Together, they total a little less than an acre but they adjoin the larger, privately owned hotel parcel. 

But there’s a problem: The company whose name is on the permits — Coco Palms Ventures, LLC — ceased to exist years ago.

The board knew this when they approved the revocable permits over objections from members of the public opposed to the hotel redevelopment. So as part of its approval, the board asked that the Department of Land and Natural Resources’ Land Division return in March with a status report and recommendations on whether to discontinue the permits or take some other course of action.

It wasn’t until the board’s April 14 meeting that the Land Division reported back to the board. Kauaʻi district land agent Alison Neustein stated in her submittal that continuing the permits was “in the best interests of the state and is the most prudent course of action at this time.”

She noted that the owners and managers of the private property — Reef Capital Partners, RP21CP (a Reef subsidiary), and, formerly, Stillwater Equity Group (another Reef subsidiary) — had been paying the rent, providing liability insurance and maintaining the state lands. “The hotel properties (both private and state owned) have at times been a hotspot for homeless camps,” she added.

She stated that her office planned to ask the Land Board to issue new permits for the three state parcels to RP2lCP. For the two smaller parcels, she also recommended that they eventually be converted to long-term easements to RP21CP. For the largest parcel of 0.855 acres, she recommended that a permit to RP21CP continue until staff can sell a long-term lease for the land at public auction, “since there has been interest from other parties, besides [the non-profit community group I Ola Wailuanui] and RP21CP.”

Standing in the way of any of that occurring are a couple of things, if not more: 1) possible Conservation District violations that appear to have occurred on RP21CP’s private lands, and 2) a lawsuit brought by I Ola Wailuanui seeking to enjoin further activities on the lands until a review of environmental impacts is completed.

Coconut Trees

At the Land Board’s April 14 meeting, as representatives of Reef Capital, RP21CP, and their local contractor were professing their desire to be good stewards of the culturally significant area, Stillwater received a notice of alleged violation and order from board chair Dawn Chang regarding what appeared to be unauthorized clearing, grading, and grubbing on lands in the Protective subzone of the Conservation District.

Days earlier, I Ola Wailuanui board member Gary Hooser had sent the DLNR’s Office of Conservation and Coastal Lands a drone video taken on April 7 showing “machinery moving debris and grubbing, and dumping debris into what appears to be a wetland.” The video showed scattered piles of dozens, if not more, felled coconut trees.

A follow-up inspection by DLNR staff on April 13 showed that the Conservation District parcel, owned by RP21CP, had, in fact, been cleared, vegetation piled up, and a dirt road graded. 

Chang recommended that the landowners stop all work and respond to the allegations within 30 days. She also noted that the Land Board might impose fines of up to $15,000 per violation plus administrative and restoration costs.

When asked last month whether the department had received a response to the notice of violation, a DLNR representative stated that it could not comment because the investigation into the alleged violations is ongoing.

Whatever the ultimate findings are in the case, at least one Land Board member made it clear at the board meeting how he felt about the company’s decision to cut coconut trees in the area.

After ecologist Carl Berg testified that live coconut trees were being cut on Conservation District lands in the area, board member Kaiwi Yoon noted that in the Hawaiian culture, cutting coconut trees is considered an act of war. 

The developer’s contractor, John Gibb, responded that his crew had cut coconut trees that were rotting and posed a danger, or were in an area that the Fire Department had asked to be cleared to provide better access.

Gibb suggested that only 15 trees had been cut.

“Nobody said, ‘Hey, we’re going to clear this out per what the Fire Department requested in an act of war. … I understand where you’re coming from. … By no means am I looking for an act of war,” he said.

Later in the meeting, Hooser shots from showed the drone footage he had taken.

“There’s hundreds of trees. Not 15. Not five,” he told the board.

When the board members asked Land Division administrator Russell Tsuji whether Conservation District violations on RP21CP’s private lands would affect the company’s ability to obtain or retain a lease or permits for the state lands, Tsuji said he didn’t think so.

“We’ve never interpreted a violation on private land to affect a state lease,” he said.

DLNR permits and leases usually contain general conditions requiring that the holder comply with federal, state, and county laws, and some testifiers suggested that failing to keep current on property taxes or violating Conservation District rules could be seen as a violation of a DLNR permit or lease.

The specific lease for the coconut grove section of the Coco Palms Resort area, however, seems to limit that to laws “pertaining to the said premises.” However, it also prohibits any tree-cutting without permission from the DLNR first.

It’s not clear who cut all of the felled trees shown in the drone footage, or where those trees were cut from. In any case, to say that Yoon looked unfavorably on any of the coconut tree-cutting in the area would be an understatement.

“When I saw [Hooser’s] picture, I almost fell out of my chair. The reason why the trees are so important is because Kapuaiwa, we all know him as Kamehameha V, was the one who planted 1,000 of them. Why? To commemorate his warriors,” he said, noting that there appeared to be only 100 of those trees remaining. “If we continue cutting these trees, what are we saying about the monarchy and the people before that? … I hurt when I saw that picture. And we can do better,” he said.

Follow-Up

“The board has been put on notice the department needs … some additional information,” board chair Chang said after hearing all of the public testimony. 

In addition to the alleged violations in the Conservation District, testifiers suggested that the developers were not following a 2013 archeological monitoring plan for the area that had been approved by the State Historic Preservation Division.

Because of the high likelihood that ancient burials may be found on the properties (they’ve been unearthed before), the plan requires all ground-disturbing activities to be monitored by an archaeologist and perhaps limited to hand clearing.

A photo provided by Hooser shows a backhoe operator digging a hole along a fence near the coconut grove. It’s unclear whether anyone else is present, but Hooser says that there wasn’t.

“To my knowledge, we’ve had an archaeologist onsite for all digging operations,” Reef’s Chad DeCoursey told the board in response to the allegations.

Other testifiers alleged that an ancient fishpond had been filled in. DeCoursey, who is based in Utah, said he was not sure that that had actually occurred.

Carl Berg, an ecologist who testified that he had been hired to advise workers doing road construction in the area on where to avoid protected bird species, told the board that a number of endangered waterbirds are there.

“They specifically asked me to find all the endangered species of birds and to tell them where they should go and I had the authority to say, ‘You can’t go here. You can’t go there if birds are there.’ Nene (Hawaiian goose) is there. Koloa (Hawaiian duck) is there. Aeʻo (Hawaiian stilt),” he told the board.

Back in March 2018, when the land was under different ownership, Dave Smith, administrator for the DLNR’s Division of Forestry and Wildlife, recommended that any activity on the site “should take into account the presence of endangered species that may be in the area and proceed accordingly to avoid take of listed species.”

Also, in the past few years, the Coco Palms Resort area was listed on both the state and national registers of historic places. Chapter 6E of Hawaiʻi Revised Statutes requires projects on listed properties to obtain a concurrence letter from SHPD before commencement.

By all accounts, work by the current owners has commenced. 

“We have been to a number of meetings with SHPD,” DeCoursey said, but added, “We would have to check our files,” on whether his company had received a concurrence letter.

“Have they filled the fishpond? Have they complied with SHPD? Do they have a 6E concurrence letter?” Chang wanted to know. What’s more, because the developers were clearly not the holders of the current revocable permits, “If anything happened on the three RPs today, if someone got hurt, the state of Hawaiʻi would be responsible. … We do have an obligation to follow up,” she said.

Litigation

The Land Board is expected to meet again soon to revoke the permits issued last year and to issue new ones to the current project developers. Attorney Bianca Isaki, who is representing I Ola Wailuanui in the litigation over the board’s permit approval last October, told Environment Hawaiʻi that even if that happens, her clients would still want to follow through with their efforts to have the potential impacts of the full hotel redevelopment analyzed in accordance with the state’s environmental review law, Chapter 343 of Hawaiʻi Revised Statutes.

A hearing on I Ola Wailuanui’s motion for summary judgment on the complaint it filed last December is scheduled for May 23 in 1st Circuit Court. Among other things, the group seeks a declaration that the Land Board violated Chapter 343 when it exempted the permit renewals from any analyses of environmental impacts.

The group does not ask that the permits be declared void. Rather, it asks that the court enjoin the Land Board and various Doe entities, “and their employees, agents, servants, and representatives, and any other persons acting in concert with it, under its authority, or with its approval, from taking further action on the basis of the Coco Palms RPs until defendants fully comply with HRS chapter 343, §171-55 (which governs use of state land), and article XI, §§1, 7, and 9 of the Hawai‘i Constitution.”

Isaki said the state’s attorneys have said they may ask for a continuance of the MSJ hearing to allow the Land Board to revoke the old permits and moot the case.

Isaki noted a case that appears to be moot may continue if a ruling would serve the public interest. In this case, she said her clients would not want permits to be issued to the current developers without an environmental assessment being done first.

Segmentation

Under state law, a developer cannot avoid the requirement to do an environmental review by breaking its project up into smaller, less impactful pieces. In the case of the former Coco Palms Resort site, it spans 32 acres. About 12 are privately owned. The rest is owned by the state.

DeCoursey told the board has his company purchased at foreclosure its predecessor’s interest in the state lease for the coconut grove area. That lease, for “landscaping and maintenance of premises for aesthetic, park and recreation purposes,” expires in 2048.

The lease allows the Land Board to approve the transfer assignment of the lease to the “corporate successor of the Lessee.” The Land Division has not yet brought that matter to the board.

As for the revocable permits, they cannot be transferred. The Land Division has described the areas they cover as ancillary to the hotel redevelopment on the private lands. And in its October 2022 recommendation to renew them, it determined that they were exempt from the need to do an environmental review under Ch. 343. (Rules for the department allow exemptions for permits “that are routine in nature, involving negligible impacts beyond that previously existing.”)

And while they cover a small part of the overall project, the Land Division’s report to the board notes that Archie McDonnell of Reef Capital Partners thought they were important to retain. McDonnell told the division in March that if the board cancelled the revocable permits, “the developer would sue the state since the cancellation of the Coco Palms RPs may affect the developer’s permits and the developer would suffer monetarily.”

  While an attorney for Kauaʻi County informed the division that none of the resort parcel’s entitlements would be affected if the permits were cancelled, she said that access, which at least one of the RPs provides, might be an issue.

In I Ola’s motion for summary judgment, filed on March 17, Isaki and co-counsel Christina Lizzi and Ryan Hurley argued, “The Board’s Wailuanui RPs and other Coco Palms land dispositions are increments of a larger total program of hotel redevelopment. Easements for sewer, access, parking, restaurants, and other hotel infrastructure are necessary for the larger action of hotel redevelopment. And, a single environmental disclosure document could address the Board’s apparent endorsements of Developer’s hotel redevelopment project as a whole. The Board incorrectly segmented its Wailuanui RPs from the larger total program of permitting Developer’s hotel redevelopment through multiple leases, easements, and permit actions, all of which should have been considered together in their October 28, 2022 decision.”

They continued, “Permitting, leasing, and granting easements to the adjacent Developer and Coco Palms Ventures, LLC are part of plan to construct a hotel resort, including three swimming pools, a lagoon, several restaurants, an audience hall, walkways, parking lots, rows of cottages, wings of hotel rooms, and other hardscaped construction. The cumulative impacts of such development is significant and therefore ineligible for exemption from HRS §343-5 environmental document requirements.”

In cases where cumulative impacts may be significant in a particularly sensitive environment, exemptions do not apply, they noted. “Neither the Board nor its staff conducted an analysis to determine whether exemptions could be applied to the Wailuanui RP lands,” they wrote.

Attorneys for the state had not yet filed their response to the motion by press time.

Another Option

While a court ruling that an EA or environmental impact statement needs to be done for revocable permits would be a victory for I Ola Wailuanui, the group would much rather see the whole project go away.

The group has its own vision to create a Hawaiian cultural center on the properties. According to its website, the center might include a community gathering space, agricultural restoration and food production, lāʻau lapaʻau medicinal and native Hawaiian gardens, fishpond restoration, museum, musical amphitheatre, hula mound and more.

The group has offered to buy the private lands and asked the DLNR in February about the possibility of it obtaining the RPs and the coconut grove lease.

In its April report to the Land Board, the Land Division rejected the idea, noting that the lease for the grove does not expire until August 2048 “and cannot be arbitrarily cancelled.”

The report adds that the Land Board cannot compel the lease’s assignment and the uses allowed under the lease do not align with the groups’ vision. (The lease does allow the Land Board to withdraw portions of the lease area for public uses or purposes.)

“[S]taff feels that the RPs on their own are not suited for IOW’s suggested use due to size and location. Therefore, the IOW’s proposed project is not feasible with just the Coco Palms RP areas only,” the report states. (The group has also suggested that the smaller RP parcels be dedicated for public beach parking, as erosion has eaten away previously used areas.)

Reef Capital announced after the board meeting that it was committed to demolishing the old hotel to make way for a new 350-unit hotel. As DeCoursey told the board, “We want to be good stewards… We spent just over three quarters of a million dollars in the last six months on this site. … Those are numbers no one in the community has been willing or able to produce.”

Even so, the company’s path is far from clear. 

In January, it survived an attempt by I Ola Wailuanui to get the county Planning Commission to find that building permits issued for the project years ago had lapsed. However, the lawsuit in state court is still alive.

Also, in written testimony to the Land Board, attorney Teresa Tico, who also represents I Ola Wailuanui, stated that the group was challenging an expired determination by the U.S. Army Corps of Engineers that the resort development is not in a wetland and, therefore, does not need a federal permit.

“Based on historical data, the entire Wailuanui area is a wetland. The Army Corps jurisdictional determination (JD) and that no federal permit is required EXPIRED and has not been renewed. … The JD is in limbo inasmuch as it is EXPIRED and we have historical data that the entire area is a wetland, requiring Army Corps permitting. We are requesting Army Corps issue a Cease and Desist Order until a determination is made,” she wrote.

In addition to the challenges raised by I Ola Wailuanui, Coco Palms Hui LLC, the company that owned the private lands and interests in the state lands, has challenged the claim of title made by Reef Capital. That appeal could hamper efforts by Reef Capital to secure funding, to sell the property, or to even get the Land Board to approve permits or a lease transfer.

— Teresa Dawson