{"id":13292,"date":"2021-02-01T18:25:25","date_gmt":"2021-02-01T18:25:25","guid":{"rendered":"https:\/\/www.environment-hawaii.org\/?p=13292"},"modified":"2021-02-01T18:44:56","modified_gmt":"2021-02-01T18:44:56","slug":"exactions-in-original-luc-order-hang-up-effort-to-split-maui-project","status":"publish","type":"post","link":"https:\/\/environment-hawaii.org\/?p=13292","title":{"rendered":"Exactions in Original LUC Order Hang Up Effort to Split Maui Project"},"content":{"rendered":"\n
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In this photo submitted to the LUC by the Maui County Planning Department, dozens of abandoned vehicles are visible on the Pi\u2018ihana property.<\/sub><\/figcaption><\/figure>\n\n\n\n

On December 30, the members of the state Land Use Commission gathered, via Zoom, for what was expected to be a fairly brief hearing to review and approve an agreement among Maui County, property owners, and the state Office of Planning concerning the future of a development proposal approved by the LUC three decades ago.<\/p>\n\n\n\n

Oh, how wrong those expectations were.<\/p>\n\n\n\n

Time and again, commissioners expressed their dismay over statements made by the attorney for one of the landowners.<\/p>\n\n\n\n

\u201cFor once in my life, I\u2019m a little bit speechless,\u201d said commissioner Gary Okuda following the admission by attorney Jason McFarlin that his client, Wailuku Plantation, LLC, and its owner, Vernon Lindsey, lacked the financial ability to carry out the project anticipated in the stipulation signed barely two weeks earlier, on December 14.<\/p>\n\n\n\n

\u201cI don\u2019t know what to say. I don\u2019t know what to ask. I will stop here.\u201d That was commissioner Lee Ohigashi, following McFarlin\u2019s disclosure that Lindsey would be petitioning the LUC to revert about 79 acres owned by Wailuku Plantation from the Urban land use district back to the Agricultural district.<\/p>\n\n\n\n

Commissioner Arnold Wong at one point was obviously angered by what he saw as McFarlin\u2019s dissembling. <\/p>\n\n\n\n

McFarlin attempted to explain: \u201cI\u2019m trying to be up front about absolutely everything here\u2026 I just want you guys to keep in mind I\u2019m dealing with a very indecisive and difficult client here and I am trying to provide you with the best information I can. \u2026 I really take great offense that I would be alleged to be a liar because I\u2019ve \u2013 uh, you know there aren\u2019t any good answers to these questions. There just aren\u2019t.\u201d<\/p>\n\n\n\n

Wong then offered an apology of sorts. \u201cI was taken aback,\u201d he said, \u201cbecause it seemed there were some misrepresentations\u2026 I was thrown off my chair by what I heard.\u201d<\/p>\n\n\n\n

Bifurcation<\/em><\/strong><\/p>\n\n\n\n

What the commission was being asked to do was approve a request that McFarlin filed on August 20, seeking to bifurcate the responsibilities and obligations imposed on C. Brewer Properties, Inc., in 1990, when the LUC approved its petition to place into the Urban district two widely separated tracts of land near Wailuku, Maui. The stipulated agreement set forth mechanics to effect that bifurcation.<\/p>\n\n\n\n

The larger of those two tracts, just mauka of Wailuku town and referred to as the Wailuku development in the decision and order, consists of 545 acres, and in the 30 years since the LUC approved the boundary amendment request, it has been substantially developed as the Kehalani master planned community.<\/p>\n\n\n\n

The smaller tract, consisting of 79 acres arranged in a narrow, irregularly shaped parcel, runs along the eastern side of Kahekili Highway north from its intersection with Pi\u02bbihana Road, near Iao Stream, nearly to its intersection with Waiehu Beach Road. It has seen no permitted development whatsoever.<\/p>\n\n\n\n

Within a few years of the LUC\u2019s approval, C. Brewer ceased most of its agricultural operations and set up a new entity, Hawai\u02bbi Land & Farming, to take over its real estate operations. Eventually, that, too, foundered and developer Stanford Carr ended up owning both tracts.<\/p>\n\n\n\n

In January 2013, Kehalani Holdings Company, LLC, which had acquired the land through a process called deed in lieu of foreclosure, divided ownership. RCFC Keahalani, LLC, was the new owner of the mauka tract, while RCFC Pi\u02bbihana, LLC, took title to the smaller, 79-acre tract. RCFC Kehalani continues to hold title to about 50 acres in the mauka development. RCFC Pi\u02bbihana, on the other hand, sold its holdings to Lindsey\u2019s company in a series of transactions from August 2017 through April 2019. According to property tax records maintained by Maui County, Lindsey paid around $2 million for the land.<\/p>\n\n\n\n

The obligations imposed by the conditions of the LUC redistricting back in 1990 run with the land. In the case of the Pi\u02bbihana tract, those conditions include building a bridge across Iao Stream and developing the infrastructure for some 600 homes that were to be affordable to households earning between 80 percent and 140 percent of the average median income of Maui.<\/p>\n\n\n\n

As Lindsey took over the land, RCFC Pi\u02bbihana sloughed off those obligations, which, in 1990, were estimated to cost nearly $13 million. (In today\u2019s dollars, that would be around $26 million.)<\/p>\n\n\n\n

But unless and until the LUC bifurcates the docket, its affiliated company, RCFC Kehalani, remains potentially liable for them.<\/p>\n\n\n\n

That point came up early in the LUC\u2019s discussion. Commissioner Gary Okuda asked McFarlin: \u201cYou do agree that there is an argument that because your clients are successors in interest to the original order that C. Brewer and Co. obtained, that your respective clients might have obligations with respect to each other\u2019s development. I mean, there\u2019s at least that argument, correct?\u201d<\/p>\n\n\n\n

McFarlin: \u201cAh, yes. Yes, there is that argument.\u201d<\/p>\n\n\n\n

Okuda: \u201cAnd in fact that\u2019s one of the reasons why at least your client is asking for this bifurcation so going forward there\u2019s not going to be any responsibility for what\u2019s happening at the other project, correct?\u201d<\/p>\n\n\n\n

McFarlin agreed.<\/p>\n\n\n\n

In fact, there\u2019s virtually no chance that McFarlin\u2019s clients \u2013 Vernon Lindsey and the handful of other owners of the Pi\u02bbihana land who have purchased small parcels over the last couple of years \u2013 face any real risk of being held liable for fulfilling the as-yet unfulfilled obligations associated with the Kehalani development. Of the two largest landowners \u2013 Lindsey\u2019s Wailuku Plantation and RCFC Kehalani \u2013 Lindsey has, by far, the shallower pockets. Should bifurcation occur, it would be RCFC Kehalani who would be relieved of the greater burden.<\/p>\n\n\n\n

Joint and Several<\/em><\/strong><\/p>\n\n\n\n

Commissioner Dawn Chang pressed the same question with Randall Sakumoto, of Honolulu\u2019s McCorriston Miller law firm, representing RCFC Kehalani.<\/p>\n\n\n\n

\u201cCurrently, both parties \u2013 your client and Mr. McFarlin\u2019s client \u2013 are responsible to fulfill responsibilities under the D&O [the LUC\u2019s 1990 decision and order]. Jointly and individually responsible for fulfilling those obligations,\u201d Chang stated.<\/p>\n\n\n\n

\u201cI don\u2019t know that I agree with that,\u201d Sakumoto replied. \u201cWe have always been responsible for the Wailuku project district. There\u2019s never been any sense that we were also obliged to perform conditions as they relate to unrelated property. There\u2019s no feasible means of doing that. It\u2019s hard to imagine a scenario where that could actually be done.\u201d<\/p>\n\n\n\n

\u201cHumor me,\u201d Chang continued. \u201cIf we bifurcated the docket, \u2026 would you agree that the Land Use Commission and the public would not have the ability to hold both parties responsible to fulfill all the obligations under the D&O? \u2026 Once we bifurcate, we are essentially separating the responsibilities of both parties.\u201d<\/p>\n\n\n\n

\u201cThat\u2019s our objective,\u201d Sakumoto replied, describing the existing state of affairs as \u201cclouding the title\u201d and an \u201cambiguity we would like you to resolve.\u201d<\/p>\n\n\n\n

\u201cWe don\u2019t think as a practical matter there\u2019s any real change,\u201d he added. \u201cMy client has no \u2026 business with respect to [the Pi\u02bbihana] property.\u201d<\/p>\n\n\n\n

Chang: \u201cYou would agree, the benefit is really to your clients? At this time, clearing the cloud is to the benefit of your clients.\u201d She agreed that the conditions that apply strictly to the Pi\u02bbihana project should be borne by Wailuku Plantation, but, she went on to say, \u201cI\u2019m more concerned about infrastructure requirements \u2013 the roadways, the bridge \u2013 those kinds of major infrastructure requirements that were placed in the LUC\u2019s conditions, where there is an argument that, to a certain extent, both parties are obligated to fulfill those obligations.\u201d<\/p>\n\n\n\n

If the LUC were to agree to the bifurcation, as laid out in the proposed stipulation, Chang said, \u201cwe would no longer be able to ask your client to fulfill those obligations.\u201d<\/p>\n\n\n\n

Affordable Housing<\/em><\/strong><\/p>\n\n\n\n

Apart from the roadway and bridge obligations, the 1990 D&O required some of the housing to be affordable. In the case of the Pi\u02bbihana development, all 600 of the housing units proposed were to be affordable \u2013 with 40 percent (240 units) affordable to families with 80 percent of the county\u2019s median income levels, 180 affordable to those at the 80 to 120 percent income level, and 30 percent affordable to those in the 120 to 140 percent range.<\/p>\n\n\n\n

In the case of the Kehalani development, 37.5 percent were to be affordable (for a total of 900 units) within those same ranges. Altogether, of the 3,000 total units planned (600 in Pi\u02bbihana, 2,400 in Kehalani), fully half were meant to be affordable with those ranges.<\/p>\n\n\n\n

Commission chair Jonathan Scheuer pressed Sakumoto on this issue. \u201cWhere does your proposed bifurcation leave this condition?\u201d he asked. \u201cMy concern is, the LUC approved a docket with two project districts and tied project conditions to both\u2026. It appears there\u2019s no financial ability or intent of the current owner of the Pi\u02bbihana project district, which was sold the land by your client, to fulfill any of these conditions. So we, the people of Hawai\u02bbi, the people of Maui, are out 600 units of affordable housing. And I don\u2019t want to be out 600 units of affordable housing\u2026.<\/p>\n\n\n\n

\u201cIf we have any hope of seeing affordable housing in the Pi\u02bbihana project developed, what\u2019s our path forward?\u201d<\/p>\n\n\n\n

\u201cI can only answer for the Wailuku project district,\u201d Sakumoto answered. \u201cWe will continue to do what we can\u2026 The history of this is, before the lender foreclosed, my client inquired with the county Department of Housing and Human Concerns, what was the status of the affordable housing requirements. Since then, they have been reporting annually to the county.\u201d<\/p>\n\n\n\n

Okuda picked up the questioning. When Sakumoto\u2019s client acquired the Kehalani property by means of a deed in lieu of foreclosure, Okuda said, \u201cbottom line is that the new owner steps in the shoes of the prior owner\u2026 So whatever obligations the prior owner had\u2026 foreclosure doesn\u2019t cut off those obligations. And whoever takes a deed in lieu knows or should know that fact. If you take that deed in lieu, or you\u2019re a successor to someone who took that deed in lieu, you\u2019re assuming underlying obligations, encumbrances, and orders that run with the land.\u201d<\/p>\n\n\n\n

Sakumoto agreed.<\/p>\n\n\n\n

A \u2018Twofer\u2019<\/em><\/strong><\/p>\n\n\n\n

Commission chair Scheuer doubled back to the question of the benefits to Sakumoto\u2019s clients should the stipulation and bifurcation be approved.<\/p>\n\n\n\n

\u201cRCFC Pi\u02bbihana and RCFC Kehalani, were they owned by the same parent?\u201d he asked.<\/p>\n\n\n\n

Sakumoto said he didn\u2019t honestly know, but, \u201cthe fact that RCFC is in both names, I guess there\u2019s a commonality.\u201d <\/p>\n\n\n\n

(Both RCFC Kehalani and RCFC Piihalani are registered as foreign LLCs in Hawai\u02bbi and both have the same mailing address on Santa Monica Boulevard in Los Angeles.)<\/p>\n\n\n\n

\u201cIf the same entity owned both, they got a twofer on the transaction,\u201d Scheuer continued. \u201cFirst, they got paid for the land, and then they got to foist the obligations onto an unsuspecting new owner.\u201d<\/p>\n\n\n\n

Sakumoto: \u201cLike any real estate transaction, you buy the benefit and the burden. I don\u2019t know there was any foisting of anything.\u201d<\/p>\n\n\n\n

Whether Vernon Lindsey, the sole member of Wailuku Plantation, LLC, was unsuspecting can\u2019t be known; he was not present at the meeting. However, Lindsey does have a history as a failed developer. More than a decade ago, he purchased a number of distressed properties in Hilo, including the former Western Auto store downtown and the complex known as Waiakea Villas. While he may have had good intentions, in the end, he was unable to move forward with his planned projects. His interest in Waiakea Villas was auctioned off when the bank foreclosed. His efforts to develop the old Western Auto building ran afoul of the county, which ultimately found it to be so unsafe as to be uninhabitable. (The building was eventually demolished and a new McDonald\u2019s restaurant and parking lot now occupy the site.) Even before that, in the mid-1990s, Lindsey and his wife, Noenoe, attempted to redevelop the Old Haiku Cannery on Maui \u2013 an effort that also ended in foreclosure.<\/p>\n\n\n\n

Enforcement<\/em><\/strong><\/p>\n\n\n\n

How did it get to this point? <\/p>\n\n\n\n

As was noted many times over the course of the hearing, under rulings from the Hawai\u02bbi Supreme Court, the Land Use Commission is helpless to enforce conditions it attaches to redistricting amendments once there is \u201csubstantial commencement\u201d of work. <\/p>\n\n\n\n

In this case, with hundreds of housing units developed in the Kehalani project area, the LUC has its hands tied. Enforcement of conditions fell to the county years ago.<\/p>\n\n\n\n

Maui County deputy corporation counsel Michael Hopper was grilled on the county\u2019s efforts to hold both the Pi\u02bbihana and Kehalani developers to the promises that C. Brewer made \u2013 and which they assumed when they acquired the land.<\/p>\n\n\n\n

Okuda pressed Hopper on why the county would go along with the proposed stipulation when, in effect, it would give the county little recourse to force development of the promised 600 affordable housing units in the Pi\u02bbihana area.<\/p>\n\n\n\n

\u201cYou know, the fact that a landowner or somebody who has an obligation gets rid of an asset doesn\u2019t necessarily absolve that person from obligations to perform on the obligations they should\u2019ve performed,\u201d Okuda noted. \u201cIf you own a corporation and you know the corporation has obligations and you intentionally don\u2019t perform on those obligations and you drain the corporation of its profits, there still might be personal liability against the corporate owner.\u201d<\/p>\n\n\n\n

He continued: \u201cI\u2019m thinking, if there\u2019s no bifurcation, at least not right now, or if there\u2019s a deferral, this actually gives the county of Maui more tools in its toolbox on whatever type of enforcement action the county wants to take. I\u2019m not proposing that people be held hostage here, but sometimes, if there\u2019s no quid  pro quo back to the community, a clear community benefit \u2013 what is the community getting in return?\u201d<\/p>\n\n\n\n

Hopper acknowledged that that \u201cis a grave concern of ours.\u201d<\/p>\n\n\n\n

\u201cI understand, technically, yeah, maybe the county could issue a notice of violation against Kehalani only, the developer only, or the homeowners, to fix the situation in Pi\u02bbihana. We could try. Not sure it would be successful. But I don\u2019t see that concern as a basis to justify continued opposition to bifurcation,\u201d which, he said, was the appropriate means of making the obligations of all parties clear.<\/p>\n\n\n\n

Lee Ohigashi, the commissioner from Maui County, was angry. \u201cWe\u2019re asking you, is it the policy of the county of Maui \u2026 to ignore that provision and say we\u2019re not going to try to enforce it? \u2018We\u2019re not concerned about having an additional 600 units.\u2019\u201d<\/p>\n\n\n\n

Commissioner Dan Giovanni was also concerned about the county walking away from the developers\u2019 obligations to provide affordable housing on the Pi\u02bbihana tract. \u201cWould you take the position that if the bifurcation goes forward, there\u2019s no recourse for holding Kehalani responsible for any of the conditions that might be judged to apply to Pi\u02bbihana?\u201d<\/p>\n\n\n\n

Hopper agreed.<\/p>\n\n\n\n

Giovanni: \u201cAnd if we do not bifurcate, the opposite would be true?\u201d<\/p>\n\n\n\n

\u201cTechnically true,\u201d Hopper replied, going on to mention his \u201clegal concern about forcing Kehalani to build housing on Pi\u02bbihana\u201d land.<\/p>\n\n\n\n

It was left to commission chair Scheuer to point out that there are other ways to satisfy the affordable housing condition apart from erecting buildings on the Pi\u02bbihana property.<\/p>\n\n\n\n

\u201cDoes condition 1 [in the Decision and Order] specify that the physical building of units on that property is the only way to fulfill those conditions?\u201d Scheuer asked Hopper.<\/p>\n\n\n\n

\u201cNo, there\u2019s other ways,\u201d Hopper replied. <\/p>\n\n\n\n

Scheuer then noted that the original D&O stated that the affordable units could be built in any distribution the developer desired or could produce units affordable to a larger percentage of low-income families and receive more credits against the affordable housing requirement.<\/p>\n\n\n\n

Backing Off<\/em><\/strong><\/p>\n\n\n\n

Dawn Apuna, the deputy attorney general representing the Office of Planning, a signatory to the stipulated agreement, announced that, \u201cwith the new information provided by Mr. McFarlin, we cannot in good conscience continue to support the stipulation.\u201d<\/p>\n\n\n\n

\u201cI think the [Office of Planning] understands the frustration the commission feels on behalf of the community, on behalf of whatever conditions were made in the original order. I also understand what Mr. Hopper is saying about the legal ability to force developers to make sure they build affordable housing.<\/p>\n\n\n\n

\u201cI would offer, maybe what the commission can do, any new [district boundary amendments] that come through, there be more stringent timelines to make sure developers are doing these things in timely fashion. Bond requirements, maybe other ways to require the original developers to perform as represented.\u201d<\/p>\n\n\n\n

Apuna\u2019s retreat from the stipulation pushed the commission to finally wrap up its deliberations.<\/p>\n\n\n\n

Okuda weighed in with his thoughts on the issue. \u201cWe come across these dockets where the easy money is made by the developer and the stuff that is not easy money, oftentimes affordable housing, it\u2019s just left undone, and other infrastructure promises. And then, when 25, 30 years pass, people come and petition us and say changed circumstances, a lot of time has passed. Relieve us of these obligations.<\/p>\n\n\n\n

\u201cIsn\u2019t there a public policy reason why the LUC should start taking a harder line and say, yeah, I guess somebody\u2019s going to suffer, maybe the successor in interest to the original petitioner, but promises made \u2026 have to be kept.\u201d<\/p>\n\n\n\n

In the end, the commissioners approved a motion to reject the stipulation and order the parties to \u201ccontinue discussions on this matter and not to return to the commission until evidence of (1) financial capability is filed with the commission; and (2) the responsibility for various conditions and requirements is resolved given the information received at this hearing.\u201d<\/p>\n\n\n\n

— Patricia Tummons<\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

On December 30, the members of the state Land Use Commission gathered, via Zoom, for what was expected to be a fairly brief hearing to review and approve an agreement among Maui County, property owners, and the state Office of … Continued<\/a><\/p>\n","protected":false},"author":1,"featured_media":13296,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[479],"tags":[7],"class_list":["post-13292","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-february-2021","tag-patricia-tummons"],"_links":{"self":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/posts\/13292","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=13292"}],"version-history":[{"count":0,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/posts\/13292\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/media\/13296"}],"wp:attachment":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=13292"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=13292"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=13292"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}