Boating Division Can’t Keep Track Of Accounts, It Admits to Land Board
The Board of Land and Natural Resources has ordered its Division of Boating and Ocean Recreation to prepare a report on the problems the division is having in keeping its accounts current. The order, issued at the board’s meeting of July 12, came after the division’s property manager, Larry Cobb, acknowledged to the board that it is incapable of billing its tenants and has no clear idea of the status of its tenants’ accounts.
“The fiscal office for our division is in upheaval,” Cobb said. “All of our tenants haven’t been receiving statements for a couple of years,” he added, referring to the Big Island district. However, he said, similar problems exist in other DOBOR districts.
Board members were disbelieving. One after another expressed amazement at the disclosure. Chris Yuen, member from the Big Island, finally moved to order the division to report back to the board “within 60 days” of the July 12 meeting on the financial management at DOBOR. The report is to include a list of the problems the division is having as well as what is being done to correct them. The motion was unanimously approved. If the 60-day deadline holds, the report will have to be on the board’s meeting agenda by September 6.
Cobb’s disclosure came as he was trying to explain problems that the division was having in collecting payment from a tenant at Honokohau Harbor. That incident, however, was merely the most recent of several appearances DOBOR has made before the board this year that focused on its inability to bring tenants up to date with their accounts. Earlier in the year, most of the problems centered on past-due rent at Ke`ehi Lagoon, where the holder of a large lease and revocable permit, Ke`ehi Marine, has for years been several hundreds of thousands of dollars in arrears.
However, the fact that the boating division is incapable of handling its tenants’ accounts should come as no surprise. In April 1995, Stephen Thompson, DOBOR’s O`ahu manager, told Environment Hawai`i that the division had not notified any of its tenants of delinquencies for a period of approximately two years. Thompson’s admission was noted in our May 1995 issue, where we reported extensively on the Ke`ehi Marine lease as well as the Honokohau Harbor lease. Here is a brief update on what has — and has not — happened in the intervening year.
Ke`ehi Marine
In May 1995, Ke`ehi Marine owed the state more than $300,000 in back rent. In June 1996, the balance was pretty much the same.
In 1995, Ke`ehi Marine had told the board that it was unable to pay the balance without obtaining a loan — and could not obtain a loan unless the amount of lease rent to be paid after February 1996 was a known quantity. (Rent on the lease, which expires in the year 2016, was to be renegotiated in 10-year phases.) In other words, Ke`ehi Marine was insisting that the lease rent be renegotiated and settled upon before it would be able to pay the balance owed. Last year, the board went along with that idea and instructed the Division of Boating to move forward with an appraisal of the leased premises.
The appraisal came in last July at $1.2 million. According to Cobb, the division itself rejected this report and asked the appraiser to respond to several specific concerns. The appraisal came in again in September, at around $800,000.
Ke`ehi Marine, Cobb said, then hired its own appraiser, which, he added, had only recently come in with its report. Cobb had not seen it, nor had it been shown to anyone at the Division of Boating by (Cobb still had not seen it at the June 14 Land Board meeting.) According to Cobb and to Ke`ehi Marine’s attorney, Charles McKay, Ke`ehi Marine’s appraiser came up with a substantially lower value to the property.
The lease provides for an arbitration process to kick in, with the state and the lessee to pay equal amounts. However, Cobb told the board, only in March had he initiated the request for governor’s approval of spending $12,000 as the state’s share of the arbitration fee. He received the green light in May, he said, adding: “I was prepared to initiate arbitration — reluctantly, I might add, and I communicated that to the lessee, and they indicated they were going to present some other proposal for negotiating the rental reopening.” Cobb’s hesitancy, he explained, was “because it involved the expenditure of an additional $12,000 in state funds in addition to $12,000 of funds of the lessee.”
As it turns out, Ke`ehi Marine’s appraiser had not completed his report by the June meeting. Nor, according to letters on file at the Division of Boating, was the report completed by July 18. On that date, Koichi Isayama, representing Ke`ehi Marine, informed the DLNR by letter that the appraisal report was not yet completed. However, Isayama offered to settle the dispute over future rent by setting the annual rental rate at $210,000 per year — roughly a 30 percent increase over the present rental of $162,500 a year. He also informed DLNR that the gross income from marina operations last year came to $1,498.959, adding, “We barely broke even after all expenses. The cash flow is positive, partially because the stockholders have been allowing the marina to defer the interest on a loan” — suggesting that stockholders are also lenders to the corporation in addition to equity owners.
The arbitration process has not yet begun. According to Cobb, in late July, he was still awaiting review of the arbitrator’s contract by the Attorney General’s office.
In addition to the $162,500 current rental on the lease, Ke`ehi Marine has a revocable permit on adjoining submerged land, which is used for mooring and berthing of boats. Rent on the permit is approximately $5,000 a month.
Honokohau Harbor
In May 1995, Environment Hawai`i reported that the state had failed for years to collect rent from Kona Fuel & Marine, at Honokohau Harbor. When the then owner, Jimmy Dahlberg, went into default on loans to its private creditors as well, including the former lease holder, the former lessee, Jack Hall, took over operations to protect his own interest, rather than risking losing it all through bank foreclosure.
Hall agreed to pay what Dahlberg owed to the state, which came to $161,594.87, but informed the board at that time that he could not obtain from the Division of Boating any clear idea of what was owed in penalties and interest. (In light of Cobb’s admission, Hall’s statement gains credibility.) The board in April 1995 approved transferring the lease from Dahlberg back to Hall, on condition that the full arrearage (including penalties and interest) be paid within a year of the transfer. At that time, the Division of Boating pegged the total delinquency at $212,490.57.
The transfer was completed in November 1995. Hall informed the Division of Boating he would make payments as soon as the division presented him with a firm number on the arrearage, but that he was unwilling to make any payment until he knew exactly the balance owed.
By June 1996, DOBOR had not received any payment. Hall insisted he had not been presented with a full accounting of the arrearage before paying the first dollar. DOBOR then proceeded to prepare for submittal to the Land Board a request not to cancel the lease, but to return the lease to the former lessee, Dahlberg — the same one whose default had prompted the problems in the first place. Cobb still could not provide Dahlberg with a statement of the precise amount owed. On July 11, 1996, West Hawai`i Today quoted Cobb as having told its reporter, “we are in the process of reconstructing the numbers,” referring to the Kona Fuel & Marine balance on account.
On July 12, when the board met in Hilo, Dahlberg made the down payment of $50,000. DOBOR changed its recommendation to allow Hall to keep the lease. The board agreed, and fixed the total amount owed at the time of assumption of the lease at the $212,490.57 mentioned in the April 1995 board submittal.
Hall’s complaints over DOBOR’s accounting were only the tip of the iceberg. Among other things, he informed the board that while he is supposed to have an exclusive concession to sell fuel to the public, another tenant at Honokohau, Gentry, is also undertaking such sales. Dawn Chang, the deputy attorney general attending the board meeting, agreed with Hall that Gentry was not supposed to sell fuel to the public. Yet no one disputed that Gentry was, indeed, selling fuel to the public. In fact, Hall’s attorney, Colin Love, informed the Land Board by letter dated July 11, 1996, that this past May, Larry Cobb had been working with Gentry Properties “to move [Gentry’s] unauthorized fueling facility from the back of the Gentry lease to a location where it would be more accessible to the public, and therefore more profitable for Gentry. The change would have been made had Jack Hall not found out about it and objected.”
Love continued: “After 13 years the state still has not provided that which its lease promises. This default by the state has cost the lessees hundreds of thousands of dollars over the years. The state’s cavalier lack of concern about its obligations under the lease has cost the state tens of thousands of dollars. Had the fuel sold from the Gentry lease been sold from the authorized facility, the state would have received 5 percent of the lessees’ gross receipts. The Gentry lease is a flat-rate lease.”
$1 a Page New Rate For Copies at DOBOR
On July 25, Environment Hawai`i apparently became the first party to experience new copying charges at the Division of Boating and Ocean Recreation. Larry Cobb, property manager, charged $1 a page for copies eight pages of assorted correspondence relating to management of the Ke`ehi Marine lease.
When pressed for an explanation, Cobb initially said that the increased charges — E.H. had paid 25 cents a page until July — were in response to instructions from the Office of Information Practices. When asked if he had a memo of these instructions, Cobb demurred, saying rather that it was part of a department-wide effort to “standardize” charges in each division of the DLNR. When asked, once more, if there were any memo from the chairman’s office issuing such instructions, Cobb said there had not been. Rather, he said, he made the change when he discovered that “what I was charging wasn’t consistent” with fees leveled by other divisions.
Cobb was then asked what other divisions within the DLNR charged $1 a page. He acknowledged that he had not checked with any other departmental division, but had decided that, when all aspects of copying were figured in, the cost to his division came to about $1 a page. He then added: “Juliet was here for nearly an hour,” referring to Juliet Begley, research assistant for Environment Hawai`i, who had looked at the Ke`ehi Marine file.
Cobb was reminded that had Begley not requested any copies, his office would still be obligated to provide the same service to any member of the public. Therefore, we suggested, it appeared as though Cobb were trying to recoup the normal costs associated with serving the public through increased — and extortionate — copying charges.
Cobb denied the suggestion. “It was only eight dollars,” he told Environment Hawai`i.
A spokesperson for Mike Wilson, head of the Department of Land and Natural Resources, said: “Traditionally, every division sets its own fees based on staff time, kinds of files, all of that. That’s how it’s been going up to now.
“Apparently, when OIP sent out draft rules, DOBOR had a district managers meeting to poll everybody on what each individual section was charging. Larry found out that his section, property management, is the only section not charging a dollar. At that time, prompted by these draft rules, they all came into uniform practice, agreeing to charge everybody $1 a page, except for certain documents, like public auction documents.
“We still leave it up to the division to set their fees. We’re waiting to see what OIP comes up with in their final recommendations for statewide fees and practices.”
New Land Board Member Is Property Manager
Lynn McCrory joined the state Board of Land and Natural Resources in July. She fills the Kaua`i membership slot, vacated when Herb Apaka’s second term ended on June 30.
According to public records at the Department of Commerce and Consumer Affairs as well as information McCrory provided to the governor’s office, she is a property manager and caterer, based in Hanalei and Princeville. She is a registered Democrat and was educated in economics at the University of Michigan.
McCrory is president of Pahio Management, Inc., a post she says she has held since 1989. In addition, she is vice president of Pahio Time Share Owners Association and vice chair of the Kaua`i North Shore Business Council, a nonprofit promotional organization formerly known as the Princeville Resort Operators Association, Inc.
McCrory is a member also of the American Resort Development Association and the Kaua`i Economic Development Board. She also sits on the Hawai`i Hurricane Relief Fund Board; her term there expires in 1999.
She becomes only the second woman member in the 34-year history of the Land Board.
Other current board members are: William Kennison (an ILWU executive on Maui); Christopher Yuen (a lawyer practicing in Hilo); Mike Nekoba (businessman on O`ahu); Colbert Matsumoto (a lawyer in Honolulu); and chairman, Mike Wilson (a lawyer who heads the state Department of Land and Natural Resources).
Closely Watched Planes
The state Department of Transportation, in cooperation with the Federal Aviation Administration, released in April its five-volume draft environmental impact statement for expansion of the state airport at Kahului, Maui. At the heart of the plans is a proposal to lengthen the runway to 9,600 feet, which would allow takeoffs of fully loaded trans-oceanic aircraft. This would allow for direct overseas flights to and from Maui to cities in the U.S. midwest as well as Asia.
The planned expansion was the subject of a draft EIS in 1991. That document, challenged in court, was deemed to be insufficient. The most recent EIS was written to address deficiencies in the first one, although critics say it fails to do this. Many of those critics attended a hearing May 8 in Kahului, where opponents outnumbered proponents twenty-to-one.
But at Ke`ahole airport in Kona, on the western coast of the Big Island, the state has managed to lengthen the runway to 11,000 feet and expand the airport facilities to accommodate trans-oceanic flights — all on the basis of a 1988 environmental impact statement that is not as long as even one of the five volumes that make up the Maui airport EIS. On June 3, the first direct, scheduled international commercial flight arrived at Ke`ahole.
Aquaria Mania Hits Islands
Four new aquarium-type facilities are either under construction or in the planning stages for Hawai`i. At Ma`alaea, the $20 million Maui Ocean Center is scheduled for opening later this year. Among its prime attractions will be an acrylic tube that will let visitors walk through the underwater exhibits. The Maui aquarium will be the sixth developed by an Israel-based company, Coral World International.
On O`ahu, another aquarium is planned to be built in the lagoon fronting the Hilton Hawaiian Village resort. Developer of this facility, projected to cost $20 million, is the EnterOcean Group. Most permits have been obtained. However, the developer must still obtain a Conservation District Use Permit and a lease from the state Board of Land and Natural Resources for use of that part of the lagoon owned by the state. A hearing on the matter was held in May; no decision has been made yet. One of the features of this facility, developers say, will be a network of “underwater nature trails.” Visitors will hook up to a sort of “snuba” breathing device and be pulled slowly by a tow vehicle through the trails at about six inches a second. Projected cost for a half-hour tour: $45.
In June, Governor Ben Cayetano announced that his office had been approached by a Japanese firm — Kajima International, Inc. (the same that is involved in the Ka`upulehu resort) — interested in developing an aquarium in Kaka`ako. Kajima has built an aquarium in Tampa, Florida and is involved in building another at Long Beach, California.
Just days after news of the Kaka`ako proposal surfaced came reports of yet another aquarium — this one being planned for the Dole Cannery area. According to an article in Pacific Business News, Horizon Group, Inc., the company that manages Dole Cannery, signed an agreement with Underwater World to develop a $40 million aquarium adjacent to the cannery in Iwilei. The PBN report said visitors would experience a “simulated dive” on a walkway moving through an acrylic tunnel. Underwater World, PBN states, is a subsidiary of Tarlton Aquastar Ltd., based in Irving, Texas.
All this comes in addition to Sea Life Park in Waimanalo and the newly refurbished Waikiki Aquarium.
Toll-Free Numbers To State Government
The state government’s toll-free number to Honolulu offices has changed. As of July 1, a new system is in place. Instead of calling an 800 number, residents of Kaua`i, Maui, and Hawai`i will make local calls instead. After hearing a recorded message, callers will be prompted to dial or punch in the last five digits of the number they want to reach in Honolulu.
In recent months, it has been nearly impossible for members of the public living on neighbor islands to reach Honolulu offices using the old toll-free 800 number. A statement from the governor’s office attributed this to increased use.
The numbers to call are as follows:
Kaua`i: 274-3141;
Maui: 984-2400;
Hawai`i island: 974-4000.
People on Moloka`i and Lana`i will continue to use the old 800 number: 1 800 468-4644.
Volume 7, Number 2 August 1996