Altogether, about 1,400 residential units (not including hotels or retreat resorts) are planned in the Kukuihaele area development. Not one of these units, however, is intended to be sold at what are termed “affordable” rates by county and state planners (“Affordable” housing is that priced so as to be within reach of purchasers whose annual earnings equal 120 percent of the median income of the county’s population. Put another way, “affordable” housing, by this standard, is housing that more than half the resident population cannot afford.)
Promises, Promises
From the very beginning, sugar plantations in Hawai’i have provided worker housing. But of late, several factors have combined to reduce worker dependence on plantation housing. Among those are the frequently substandard housing stock found in plantation camps, the fact that such camps tend to be remote from schools, shops and other community services, and the growth of two-income families that, first, allows people to afford to move into better housing, and, second, encourages plantation workers to seek housing more convenient to employment opportunities for spouses.
Nevertheless, over the last two decades Hamakua Sugar Company and its predecessors have regularly appeared before the state Land Use Commission with requests to have plantation land placed in the urban land use district. Forming the common ground of all their pleadings is the need to provide better housing for plantation workers.
Among the earliest pleadings was one made in 1974, when Honoka’a Sugar Company (later merged into Hamakua Sugar Company) sought to have 238 acres of its land lying between the Honoka’a-Waipio road and the old Mamalahoa Highway removed from the agriculture district and placed into the urban district. In this LUC Docket, No 74-I, Honoka’a Sugar proposed that the land makai of the new Belt Highway (which bisects the area) be subdivided into approximately 250 residential lots, most of which would be sold to employees living at the time in plantation camp houses. The land mauka of the Belt Highway would be subdivided into multi-acre lots, which would be exchanged with independent cane growers in the Hamakua area who would otherwise be selling their cane lands to developers. Honoka’a Sugar told the LUC that its plan, including the cultivation of land occupied by the to-be-vacated plantation camps, “would result in the retention of over 1,800 acres of land in cane production.”
The LUC reclassified 65 acres of the makai land. However, it expressly denied the sugar company’s proposal to exchange urbanized multi-acre lots for lands owned by independent cane growers, stating that such an exchange is “not a basis for reclassification to an Urban designation.”
Despite this determination, on July 3, 1980, Theo. H. Davies & Co. Ltd, owner of Hamakua Sugar Company (the successor to Honoka’a Sugar) reported to the Land Use Commission that “a land exchange has been negotiated with Mr. Ernest Texeira wherein a parcel in the Hilo-mauka corner of the area in Docket 74-I (makai of the Belt Highway) will be conveyed in exchange for the cane lands of Mr. Texeira.” (On the land acquired in this swap, Texeira was to build Tex’s Drive-In, something of a landmark in the area.)
In the July 1980 letter to the LUC, E.M. Bush, land administrator for Davies, went on to say that the company continues to work with the County of Hawai’i in developing acceptable plans for employee houselots in the remainder of the reclassified parcel.”
County records do not bear out that claim. The first proposal to subdivide most of the remaining acreage upzoned in Docket 74-I was not made to the Planning Department until July of 1991. Making the application was Pheasant Ridge Corporation, an entity beaded by developer Sheldon Zane. Plans submitted by Pheasant Ridge propose subdividing an area of almost 60 acres into 99 house lots of at least 10,000 square feet, in a development to be called Honoka’a Knolls (Pheasant Ridge purchased the land from Hamakua Sugar Company in November 1989 fist $337,500, or slightly more than $5,600 an acre.)
Setting Conditions
In 1975, Honoka’a Sugar Company again went before the state Land Use Commission with a request to have the LUC place into the urban district about 50 acres of the land whose urbanization the LUC had rejected the previous year. As before, Honoka’a Sugar proposed using some of the land available for trade to independent growers wanting to get out of the business. The primary purpose of the redistricting, however, according to the testimony of Bush and other Honoka’a Sugar Company officials, was to “develop the subject lands into residential lots for sale …to its current and future employees and pensioners.”
The LUC granted the requested upzoning in what was known as Docket No. A75-404, but attached several conditions. One was that the “proposed development of the subject land and exchange of lands with independent growers will be accomplished within five years from the date of approval of this petition” (May 3, 1976). Another was that annual reports be submitted by the sugar company, informing the LUC of what progress the company had made toward the objectives set forth in the petition for redistricting, until such time as all of the subdivided lots bad been sold or exchanged.
Subdivide and Conquer
In 1979, Theo H. Davies & Co. Ltd. submitted the first progress report on Docket A75-404. In it, Bush notified the LUC that “the subdivision to residential lots has not been concluded with the County of Hawai’i” (actually, it bad not even been initiated). But, Bush wrote, “we anticipate that the first phase of development will take place in the summer of 1979.” As to the exchange of residential land for cane land, Bush informed the LUC that “approximately 8 acres of undeveloped gross acres in the subdivision have been spoken for by one independent cane grower” in return for “our acquiring approximately 17 acres of cane land that would otherwise have been sold.”
No further reports were filed with the Land Use Commission for more than a decade. The land, however, continued to be developed during that period, although not in the manner anticipated by Honoka’a Sugar in its original petition. Records at the Hawai’i County Planning Department disclose that starting in 1985, Hamakua Sugar Company (now under the ownership of Francis Morgan) requested subdivision of the upzoned parcel – not into residential lots, but rather into a handful of multi-acre lots. Those lots, in turn, were sold or exchanged to parties who then brought their own requests for subdivision into house lots to the county Planning Department.
Breaking Faith
A significant obstacle stood in the way of approvals for the houselot subdivisions: the conditions imposed by the Land Use Commission when the land was placed into the urban district. First and foremost, the LUC stipulated that Honoka’a Sugar Company was to be the sole developer of the property. Clearly, with the land having been conveyed to private developers, Honoka’a Sugar or its successor, Hamakua Sugar, was in no position to live up to this LUC condition.
And so, in October 1989, the Land Use Commission received a request from Hamakua Sugar to delete this condition and three more that were attached to the land reclassification in Docket A75-404. (The remaining three conditions were that preference be given in the sale of lots to plantation employees; that development occur in a mauka to makai direction; and that all plantation camp lands that were to be vacated when employees relocated to the new residential area would be converted to agricultural use, and until such time as that occurred, annual progress reports were to be made to the LUC.)
The Office of State Planning initially opposed the petition to delete conditions. It noted that the petition was accompanied by a “paucity of information.” “Furthermore,” the OSP stated, “complete removal of the conditions at this time would not only relieve petitioner of any affordable housing obligations for its own employees, but in fact would relieve it of any affordable housing obligations at all, even to the resort industry employees it cites as beneficiaries of the removed conditions.”
On similar grounds, Duane Kanuha, then the planning director for the County of Hawai’i, also opposed the removal of conditions. “Based on the reasons presented in the petition,” Kanuha wrote, “it appears that the primary reason for the deletion of the conditions is because the affected 42 acres of land are no longer under the petitioner’s sole ownership.”
“However,” Kanuha continued, “this assumption cannot be verified since the County of Hawai’i Planning Department has not received any annual progress report from the petition as required by Condition No.4.”
Following those objections, Hamakua Sugar Company filed a long-overdue progress report, dated Match 15, 1990. That report shows that Hamakua Sugar had sold the entire area placed into the urban district by the LUC and provides a summary of the land exchanges that led up to this situation.
The report stated that “upon commencing its detailed development and infrastructure planning, Honoka’a Sugar Company and its successors in interest encountered engineering and infrastucture requirements imposed by governmental regulations such as sewage and drainage costs due to the topography of the area which severely increased the development costs to the Petitioner.”
The report concludes by stating that the land exchange agreements did occur “as contemplated by the Land Use Commission at the time of the original bearing.” Those exchanges “have served the desired objective of preserving the productive agricultural lands for sugar cane cultivation.”
Pie in the Sky?
On June 28, 1990, the Land Use Commission considered the request to delete the existing conditions. Francis Morgan appeared before the commission and offered the following testimony:
“I am very desirous of making housing available to our employees and pensioners. I do have a very major debt on the property which I incurred when I purchased the property in 1984. And my main reason for purchasing it was to preserve the operation, the livelihood of the people there, the lifestyle, the support for the community… So I do wish to make housing available. Housing is a problem in that area. And making affordable housing to our employees is one of my other major objectives. And I plan to do that as soon as the land is freed up and I can do it.”
The LUC approved deleting the existing conditions. A new condition, drafted by Hamakua Sugar’s attorneys, was imposed on the company – namely, that “within two years of the release of the existing mortgage and forbearance agreements which cover the real property owned by Hamakua Sugar Company… [it] shall provide housing opportunities to the current employees and pensioners… by offering for sale or rent a minimum of 100 lots or units, or a combination thereof.” Of those 100 units, 30 percent would be “at prices which families with an income range of up to 120 percent of the county of Hawai’i’s median income can afford, and 70 percent … at prices which families with an income range of 120 to 140 percent of the county of Hawai’i’s median income can afford.”
When conditions run with the land and are binding on its owner, there might be a reasonable hope of obtaining compliance. In the case of the new condition imposed upon Hamakua Sugar Company, there would seem to be no enforceable encumbrance on any property.
Lands in Limbo
Yet another area in Honoka’a was placed into the Urban land use district as a result of a petition by Hamakua Sugar Company. That land consists of about 43 acres makai of the main road through Honoka’a, in an area still in active cane cultivation. In 1982, however, Hamakua Sugar proposed subdividing the area into house lots that would be sold exclusively to its employees. Old plantation camp houses would be moved onto some of the new lots; these (house and lot) would be sold for $37,000, Hamakua Sugar Company stated. Lots with new houses would sell for $70,000.
The county thought this was too good to be true, even a decade ago. Scott Leithead, who was then the administrator of the county’s Office of Housing and Community Development, addressed this point in comments dated September 3, 1982: “Davies Hamakua is suggesting that they will be offering new residential units for sale at a price of $70,000. We not only question their ability to deliver units at this price, we are extremely skeptical of the ability of the employees to afford the monthly payments for these units, even if subsidized financing such as FmHA or Hula Mae funds are used.”
The LUC denied part of Hamakua Sugar’s request, but granted upzoning into urban for a total of about 70 acres, of which the largest by far was the Honoka’a parcel.
Cane still grows on the Honoka’a parcel. Ownership has changed, however. Holding title to the property now is the Pheasant Ridge Corporation. In February 1990, it purchased a partial undivided interest in a much larger lot owned by Hamakua Sugar Company, with the understanding that the lot would be later partitioned, giving Pheasant Ridge clear title to the mauka land (including the acreage in the urban district). The purchase price for Pheasant Ridges portion, as recorded at the Bureau of Conveyances, is in excess of $2 million (or about $15,000 an acre).
Once more, in October 1989, Hamakua Sugar Company went to the Land Use Commission, seeking to have it excused from the conditions placed upon the urbanization approved in Docket 82-531.
Shortly afterward, Pheasant Ridge intervened, asking that the LUC delay any action on the Hamakua Sugar request. In a letter to the LUC dared December 7, 1989, Sheldon Zane, corporation president, wrote “Pheasant Ridge Corporation is presently preparing its own plans for the 44 acres … After our master plan for the property is finalized and the purchase of the property is completed, we intend to file an appropriate motion to modify the conditions imposed.” Hamakua Sugar then withdrew its request for deletion.
No further action has been requested with respect to this parcel. According to a lawyer for Hamakua Sugar, the deal with Pheasant Ridge for this particular area has fallen through. Hamakua Sugar intends to keep the land in cane, he said.
Plans and More Plans
Last fall, when the County Council was considering the bills required as a prerequisite to construction of the Kukuihaele resort proposals, Hamakua Sugar Company presented it with a “Kukuihaele Land Use Public Benefits Proposal.” (This is discussed at greater length elsewhere in this issue.) One of the benefits promised was the development of “Affordable/Resort Employee Housing” in Honoka’a. The proposal places a dollar value on this promised benefit. Hamakua Sugar would contribute 70 acres of land for “200+” units, and, with each acre being worth $20,000 (according to Hamakua’s figuring), that amounts to a benefit valued at $1.4 million.
Hamakua’s out-of-pocket cost for the land was roughly $2,500 an acre. There is nothing said in this benefits proposal about Hamakua providing the infrastructure (roads, sewers, water and the like) that would be a prerequisite to the land being used for housing. It is not clear how this housing would be developed after Hamakua’s donation of the land.
Finally, beyond the vague identification of the area to be developed being in Honoka’a, there is no specific site proffered. This means that Hamakua will either be developing the remaining land it has in Honoka’a that is in the urban land use district (the parcel sold to Pheasant Ridge, as described above), or it will have to go before the Land Use Commission with a petition for the reclassification of a 70-acre parcel. (There is yet a third route: it could start the LUC by asking the County Council to approve the reclassification of five or more separate parcels, each under 15 acres, In the manner by which Hamakua detoured around the LUC for its Kukuihaele resort.)
Camp Housing
Not to be overlooked are the 400 or so plantation camp houses that continue to be occupied by Hamakua Sugar Company’s employees and pensioners. According to Gary Grimmer, an attorney for the company, “title to the land on which any employees or former employees reside (and for which they pay rent, by the way) will be placed in escrow for ten years. If the plantation is still in operation in ten years, the title will be taken out of escrow. If the plantation fails between now and then, the title will be conveyed to a non-profit corporation that will make sure that housing is provided for those employees presently using plantation housing.” (The quotation is from a letter November 26, 1991, to parties bringing suit against Hamakua Sugar Company’s development plans.)
Promises such as this have been made before. In fact, on January 26, 1984, barely a week after title to most of the Hamakua Sugar Company land had been shifted to Morgan, Morgan and two other executives with Theo Davies (W. Garvie Hall and E. M. Bush) established a non-profit corporation whose stated purpose was to acquire residential housing camps and communities presently owned by Theo. H. Davies & Co., Ltd., rehabilitate and sell homes and organize and undertake community development activities.
If this organization, called the Hamakua Neighborhood Community Corporation, ever did anything, no record of it can be found today. The Department of Commerce and Consumer Affairs dissolved the corporation in 1990 after three years passed in which the corporation filed no annual reports as required by the state.
Volume 2, Number 11 May 1992
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