Land Board Must Reconsider Haseko Permit, Supreme Court Says
The Supreme Court has rebuked the Board of Land and Natural Resources over the board’s decision to award a permit to dredge a channel across Conservation District land at `Ewa Beach. The permit, granted to Haseko (`Ewa), Inc., is one of several Haseko needs to build a marina and housing development it has planned for leeward O`ahu.
Specifically, the court found that the “BLNR’s findings and conclusions are inadequate to allow a determination as to whether it fulfilled its constitutional obligation to protect customary and traditional rights of native Hawaiians.” The court nullified Haseko’s Conservation District Use Permit and remanded the matter to the board “for the sole and limited purpose of addressing the questions: (1) whether traditional and customary native Hawaiian rights are exercised in the project area; (2) of the extent to which, if such rights exist, they will be affected by the proposed action; and (3) of the feasible action, if any, that should be taken by the BLNR to protect these rights if they are found to exist.”
Ceded Land Issues
Except for this finding, the Supreme Court’s opinion was not favorable to the parties appealing the lower court ruling, which had upheld the Land Board action. Those parties included the Office of Hawaiian Affairs and the Save `Ewa Beach `Ohana.
One point raised on appeal was the claim that the involvement of former BLNR member Libert Landgraf tainted the board’s decision. Well before the board reached its decision, Landgraf had communicated to an attorney representing opponents of Haseko’s marina in the BLNR contested case hearing that she had nothing to worry about, in the mistaken belief that she represented a lawyer for Haseko. Landgraf then recused himself, but OHA asked that the board recuse itself and appoint a hearing master to rehear the case. The board refused to do so. OHA and Save `Ewa Beach `Ohana argued that this created an incurable appearance of impropriety that amounted to a denial of the right to due process. Both the First Circuit Court and the Supreme Court disagreed.
The most far-reaching element of the Supreme Court’s decision may have been its ruling on whether the Land Board violated the ceded lands trust by allowing Haseko to use submerged land, which comes under the purview of section 5(f) of the ceded lands trust. OHA and SEBO claimed that the board was required to make a finding that the primary purpose of Haseko’s use of ceded lands — as an entrance channel and marina — fit “within one of the five enumerated purposes set forth in section 5(f)” of the trust, established under the Admissions Act. In its findings of fact, the board made just such a determination, describing that the entrance channel “is part of a public improvement… which is an enumerated trust purpose.” In addition, the board found “that the use of the 5(f) trust lands is for a public use namely as an aid to navigation, recreation and commerce,” thereby filling another enumerated trust purpose.
Both OHA and the BLNR erred on this point, the Supreme Court found. “The error of the boards’ findings is that it is based on the assumption that any proposed use of ceded lands must comport with one of the five enumerated purposes of section 5(f). Section 5(f) states that the ceded lands, ‘together with the proceeds from the sale or other disposition of any such lands and the income therefrom shall be held by said state as a public trust for [five purposes].’ Therefore, section 5(f) does not limit the use of the ceded lands themselves to the five purposes, so long as the proceeds from the disposition of these lands are held in trust.”
Other cases pending before the Supreme Court argue that the state may not sell ceded lands without violating the trust. In this case, the court appears to foreshadow what its ruling may be in those cases: “The constitution and laws of the state of Hawai`i clearly contemplate the disposition of ceded lands,” the court wrote. (As a footnote to this statement, it cites a 1995 attorney general opinion, 95-03, which “correctly opined that the state has the legal authority to sell or dispose of ceded lands.”) Article XII, Section 6 of the Hawai`i constitution, the court notes, gives OHA power “to manage and administer the proceeds from the sale or disposition of the lands, … including all income and proceeds from that pro rata portion of the ceded lands trust.” HRS Chapter 171 also provides for sale of ceded lands.
Nor does the actual use of ceded lands that are sold have to comport with the enumerated purposes of the trust, the court wrote, “as long as fair compensation for the disposition of these lands is used for trust purposes.”
Although the Admissions Act “does not, by its terms, restrict the sale or other disposition of ceded lands,” the court wrote, “the state’s disposition of ceded lands must promote a valid public purposes.” Thus, for the court, the question became one of whether the use of ceded lands by Haseko did promote such a purpose.
The Supreme Court determined that it did. “The validity of using public trust lands for the improvement of navigation is well established,” the court found. “We decline to adopt OHA’s position that the BLNR must find that the ‘primary purpose’ of the grant is for a public purpose. We agree with the circuit court that the substantial evidence is that there ‘is a major benefit to the public even though a private party may experience similar benefits and the source of funding is private.'”
“The grant of the permit for the dredging of a marina entrance channel has an undisputably public purpose. The fact that Haseko will also benefit does not permit does not defeat the public use of the marina entrance channel. The permit conditions imposed by the BLNR are sufficient to preserve the public nature of the project,” the court held. “Therefore, we hold that the BLNR’s conditional grant of the permit to Haseko did not violate the public trust doctrine and was a proper disposition of public lands.”
According to Aulani Wilhelm, public information officer for the DLNR, no meeting of the BLNR has yet been scheduled to hear the court-ordered reconsideration.
Meanwhile, in late April, the state Commission on Water Resource Management issued its proposed decision and order in its own contested case proceeding on the `Ewa Marina proposal. The proposed decision calls for approval of the project.
Clean Air Violations Hound HELCO, MECO
The state Department of Health has fined HELCO $14,000 for violations racked up over the last five years. The violations, disclosed in February, resulted from operation of a HELCO turbine that exceeded its permitted hourly emission rates over a period of five years. On occasion, the emissions were more than six times the permitted rate.
Meanwhile, Maui Electric Light Co. has agreed to pay $100,000 as a result of violating its clean-air permit. A proposed settlement with the DOH called for the utility to pay the money to the Hawai`i Nature Center, a non-profit organization that educates young children. In return for the funds, the Nature Center is to develop educational displays on the value of clean air.
Not mentioned in the settlement offer is the fact that two board members of MECO’s parent company, Hawai`i Electric Industries, Inc., also are directors of the Hawai`i Nature Center. According to a filing of HEI with the Securities and Exchange Commission, HEI board members Don Carroll and Oswald Stender report they also sit on the board of the Hawai`i Nature Center.
Legislative Auditor Dings DOBOR
Legislative Auditor Marion Higa has released her audit of the Department of Land and Natural Resources’ Division of Boating and Ocean Recreation. Specifically, Higa looked at the division’s management of small boat harbors and boat ramps.
Almost all of DOBOR’s expenses are paid through the Boating Special Fund, which receives revenue from berthing fees, commercial tour operator permit fees, lease rents on property at the state small boat harbors, marine fuel taxes, and vessel registration fees. In the three years examined by the auditor (fiscal year 1994-95 through fiscal year 1996-97), special fund revenues were between $9 million and $10 million a year. Expenses exceeded revenues all three years, by more than $1.33 million in one year (FY 1995-96). At the outset of the period reviewed by the auditor, DOBOR had a balance of $4.8 million on hand. By the end of FY 1996-97, this had been reduced to $1.9 million (the expenses included a $200,000 raid on the special fund by the state, which diverted the money to the general fund).
In 1993, the auditor found “fundamental deficiencies in program management and accounting.” A 1995 follow-up audit determined that the division was making headway in its internal accounting controls, but that the DLNR “still lacked a comprehensive boating program.” In 1997, this lack continued.
No Comprehensive Program
“In 1997, we found little change in the condition of the state’s small boat harbors,” the auditor wrote. “Harbors were unsafe and in need of repair. Boaters failed to receive the services they deserve. The department could not track expenditures by facilities, thus departmental officials were not sure that the fees they charged were sufficient or reasonable. These conditions remained uncorrected and unresolved because the Board of Land and Natural Resources did not establish a comprehensive statewide boating program.”
Without such a program, the report continues, “the Division of Boating and Ocean Recreation lacks a strategy for the proper maintenance and improvement of services and a plan to properly provide the public with ocean-based recreational activities. It has no timetable for improving boating facilities, no clear operational standards, and no set of appropriate measures to monitor program effectiveness.”
Inadequate Controls
DOBOR was also faulted for not having “adequate controls to properly administer the boating program. Operational practices are deficient and the accounting system does not give the division the information it needs to make sound financial decisions.”
DOBOR administrative rules provide some guidance, the auditor noted. “However,” the report continues, the usefulness of these rules “is limited because they are excessive, confusing, and contradictory. They are too long and are difficult to understand.” As early as 1995, the division planned to issue a contract to have the rules overhauled and simplified. But, the audit notes, “we found no evidence that simplified rules have been formalized.”
Debt Service
When DOBOR makes payment on debt incurred for amortized expenses (such as land and major capital improvements), it has no way of knowing what portion of the payment should be attributed to what facility. This, the auditor noted, makes the division unable to know specific facility revenues and facility costs, which, in turn, keeps the division from acquiring the information it needs for “effective administration and operation of small boat harbors and boat ramps.”
Altogether, debt service charges on bonds issued as far back as 1978 amounted to as much as $800,000 in fiscal year 1995-96.
Another anomaly in DOBOR’s accounting systems appears in the auditor’s table showing revenues and expenditures of selected boat harbors for the 1995-96 fiscal year. Income for Kawaihae Harbor is listed as zero, while expenses (not including debt service) are pegged at $71,137. At Keauhou, revenues are given as minus $1,176, while expenses (again, excluding debt service) are listed at $99,456. The auditor mentions that “the department cannot account” for the lack of income, or negative income, at these facilities.
Exactly how the DLNR arrived at a zero figure for Kawaihae or a negative figure for Keauhou is not clear. Since most revenues are in the form of rents or fees, it should be possible to go to the individual accounts of permittees or holders of leases or revocable permits at each of these facilities to track down just how much they paid to the state in a given year. To have negative revenues is simply not possible — unless the state decided it should pay its permittees or lease-holders at Keauhou rather than vice versa.
In light of these findings, the auditor determined that any movement toward privatization or other alternative management system for the state small boat harbors was premature. “The department needs to correct strategic and operational deficiencies before attempting to evaluate alternative management practices,” the auditor wrote.
The DLNR Responds
After reviewing the draft audit report, acting DOBOR administrator Howard Gehring prepared a response for BLNR chairman Mike Wilson’s signature. In general, Gehring conceded the auditor’s findings and agreed with its recommendations.
However, Gehring defended the DLNR’s efforts to pursue alternative management systems. “Although we appreciate your recommendation on this issue,” he wrote, “if we find that an alternative management scheme can correct the noted deficiencies, we intend to recommend that the Board consider implementing that particular management strategy.”
Finally, Gehring mentioned his disappointment that the auditor did not have enough time to provide the department with a more detailed report on his division’s financial status. “We were looking forward to more definitive information on the amount of outstanding debt service attributed to each facility,” Gehring wrote.
In a reply to Gehring, the auditor noted that Gehring’s hopes with respect to the audit’s products were unwarranted. “While we agree with the department on the need for this information if facility-specific budgeting and spending is to occur, we disagree that it was our function to attribute such costs… We cannot create records that do not exist. It is for the executive branch to commit the resources and make the administrative decisions on allocating debt service costs to facilities first. Then we can test those allocations.”
Water Commission Hires Ex-Amfac Lawyer
Tim Johns has been hired by the state Commission on Water Resource Management as the commission’s executive director and deputy director of the Department of Land and Natural Resources. Formerly, Johns was corporation counsel to Amfac/JMB Hawai`i, the corporate parent of Waiahole Irrigation Co., owner and operator of the Waiahole ditch.
With Bert Hatton, Johns becomes the second high-level Amfac employee to obtain a position in state government that bears directly on the state’s dealings with Amfac and WIC. Hatton, who was president of WIC, serves now as executive director of the state Agribusiness Development Corporation. In March, the ADC voted to purchase Waiahole ditch from Amfac, should such a move receive legislative approval.
Johns worked for Amfac since 1990, starting as its senior counsel whose duties include work on “a variety of matters, including real estate development, leasing, financing, environmental and sales transactions,” according to a resume submitted to the Water Commission. From 1994 to 1997, he was vice president and general manager of Amfac’s O`ahu and Kaua`i development division. From 1997 into 1998, he was Amfac’s vice president and general counsel, managing “all real estate development activities on O`ahu and Kaua`i, in addition to supervising all legal matters for the company.”
Volume 8, Number 11 May 1998
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