Board Talk

State To Exchange Lands With Kapalua Developer

Does an exchange of 226.545 acres of ceded ag land in Lahaina for 1.432 acres of private land at a Waikele industrial park sound fair?

To the state Office of Hawaiian Affairs, it doesn’t, especially when the exchange is being made to accommodate the Maui Land and Pineapple Co., Inc., residential development, Kapalua Mauka. But to the state Department of Land and Natural Resources, and its board, it does, considering that the state land is “basically a gulch,” as one board member puts it, and the industrial land could generate ten times the annual revenue the state had received for the ag parcel.

The Board of Land and Natural Resources, which approved the concept of the exchange last October, gave its final blessing at its December meeting.

Maui Land and Pineapple which owns most of the land where the 925-acre development is planned, initiated the exchange. MLP was at one time leasing the long, narrow strip of state land for agriculture, but later proposed to acquire the lands, about 60 acres of which will be included in Kapalua Mauka, which is part of MLP’s master-planned Kapalua Resort. The remaining 170 acres will remain in open space.

Land Division staff had initially asked MLP representatives if they would be open to leasing and developing the state property, but their response, according to staff, was an emphatic no.

“MLP will build houses on the state lands and they do not want to offer leasehold properties to new buyers. If MLP could not acquire the fee, the state lands would be excluded from its development. As a result, as mentioned, the state-owned land would become an isolated strip of land between a residential development and a gulch with little use potential,” wrote acting assistant land administrator Charlene Unoki in an October report to the Land Board.

In exchange for the state lands, MLP first offered a 54.5-acre agricultural parcel in Mahinahina, appraised at $2.75 million, which the state could lease back to MLP . The Land Division, instead, asked for an income producing property. MLP then proposed a vacant lot in the Maui Research and Technology Park and a lot in either the Lahaina Business Park or the Maui Business Park. But requirements for capital improvements and maintenance charges prevented DLNR staff from accepting the parcels.

Staff finally accepted an offer for three vacant lots in the Mill Town Center industrial park on O’ahu. The lots had been valued at $1,640,000 (compared to $1,510,000 for the state lands). At the December Land Board meeting, Land Division administrator Dierdre Mamiya noted that MLP had a buyer for one of the subject Mill Town lots, so it substituted that one (lot 4) with one of its larger ones. The total value for the current lots is probably higher than the appraised value, she said.

Staff estimates the state could generate annual rent of $98,400 to $131,200 from the Mill Town lots, “versus the $6,060 annual rent received for the state’s agricultural property.”

OHA disputes this assessment. When the board was entertaining final approval for the exchange at its December meeting, OHA’s Lance Foster argued that the appraisal of the state lands should have valued them as urban, not agricultural, since they are intended to be part of an urban subdivision. He added that the state was breaching its trust duties by not assessing the impacts of this larger development.

Ernest Kimoto, senior OHA staff attorney told the board that OHA would likely request a contested case hearing on the matter. However, Deputy Attorney General Linda Chow advised the board that state law does not allow contested cases on land dispositions.

Na Pali Zodiac, Kaua’i Sea Tours, and Lady Ann Cruises, Inc., are the only commercial boaters with special use permits to land at Na Pali Coast State Park. Their permits were to have expired on December 31, 2003 and State Parks, instead of extending them as it had in the past, planned to let them expire and open the permitting process up to other interested boaters.

That process, however, has not yet been ironed out, according to parks administrator Dan Quinn.

At the Land Board’s December meeting, representatives from all three permit-holding companies testified against the proposal. All already had commitments, reservations or contracts in place that extended beyond December 31. Also, representatives from Na Pali Zodiac and Kaua’i Sea Tours argued a public auction-type process would kill them since they were small businesses that could not possibly win in a bidding situation.

Land Board chair Peter Young explained that the department’s “public process” should not be confused with a regular auction and that it may not be the highest bidders who get the permits. He added that the DLNR is looking at creating an equitable and fair process to regulate commercial boating statewide, not just at Na Pali.

Recognizing that the boaters were not notified of the impending change soon enough and had financial commitments, the Land Board decided to give the boaters time to prepare for the possible loss of their permits by extending them for one more year. In the meantime, State Parks will devise a selection process, which the Land Board will vote on by September.

At its March 14, 2003 meeting, the Land Board approved rules establishing the Wai’opae tidepools Marine Life Conservation District in Kapoho on the Big Island. That day, a lone commercial snorkel tour operator and the Kapoho resident whose house he used to park his shuttles objected to the rule that banned commercial use in the MLCD.

While the Land Board approved the rules as proposed, it asked the Division of Aquatic Resources to investigate the possibility of limited commercial use at Wai’opae. In the meantime, the commercial operator (Mark Wellman of Planet Ocean Water Sports) sued in Third Circuit Court some of the state employees involved in creating the MLCD, complained to the state Small Business Regulatory Review Board, and filed a petition to change the rules to allow commercial activity.

At its December meeting, DAR presented its assessment on limited commercial use at Wai’opae. In short, it had determined that Wai’opae’s “luxuriant coral growth” and importance as a habitat for juvenile fishes were reason enough to shield it as much as possible from potentially harmful human activities. Furthermore, county zoning regulations for the residential area mauka of Wai’opae do not allow commercial activity.

Despite objections from Planet Ocean representatives, who asked the Land Board for some “interim relief” from the commercial use ban while its petition to change the rules was pending, the board accepted DAR’s recommendation to uphold its decision to “support the rule as was originally promulgated.”

At its December meeting, the Land Board held five executive sessions, of which two are worth noting for their impropriety:

After the Land Board had adjourned its meeting, DLNR staff and a deputy attorney general gave the board an “executive session” briefing on contested cases involving damage to marine resources at Pila’a, Kaua’i, and a Conservation District Use Application for a single-family-residence from Richard and Vicky McCarty. Unlike the executive session held earlier that day on residence leases at Koke’e State Park, the afternoon executive session was not publicly noticed and no motion to go into executive session was publicly made.

Also during the December meeting, the board voted to go into executive session to discuss legal issues surrounding grading and tree dumping violations in Hamakua by Alfred Andrade and/or the Alfred J. Andrade Limited Partnership. While executive sessions are meant to allow the board to consult with its attorney on legal issues in private, DLNR staff often participates. In this instance, however, John Carroll, the attorney representing the Andrade Partnership, joined the board and staff in its executive session behind closed doors.

At the Land Board’s November meeting, Black Pearls Inc., doing business as Kona Blue Water Farms, was awarded a 20-year lease for 90 acres of deep ocean for a fish farm off Kalaoa, Kona. In its six submerged cages, Kona Blue Water plans to cultivate kahala, ulua, and mahimahi. Rent for the first year will be waived, with the annual fixed and percentage rents for the first 10 years to be determined by appraisal. Kona Blue now holds the second only lease for open-ocean aquaculture in the state, the first being Cates International on O’ahu.

— Teresa Dawson

Volume 14, Number 7 January 2004