{"id":7068,"date":"2015-01-30T01:40:59","date_gmt":"2015-01-30T01:40:59","guid":{"rendered":"http:\/\/localhost:8888\/wordpress\/?p=7068"},"modified":"2015-01-30T01:40:59","modified_gmt":"2015-01-30T01:40:59","slug":"senators-grill-hhfdc-on-kona-project","status":"publish","type":"post","link":"https:\/\/environment-hawaii.org\/?p=7068","title":{"rendered":"Senators Grill HHFDC on Kona Project"},"content":{"rendered":"

Posted<\/strong>\u00a012\/01\/2010\u00a0<\/b><\/b><\/p>\n

\u201cSo, I\u2019m a little perplexed,\u201d said Donna Mercado Kim, chair of the Senate Committee on Ways and Means after a lengthy interrogation of Karen Seddon, head of the Hawai`i Housing Finance and Development Corporation over terms of the agency\u2019s agreement with Forest City to develop Kamakana Villages in Kona under section 201H of Hawai`i Revised Statutes, intended to spur development of affordable housing.<\/p>\n

\u201cWe enter into this agreement. We give a $25 million loan for 15 years at no interest. We don\u2019t know breakdown of units, don\u2019t know what kind of units, and they can walk from the project \u2013 there\u2019s no guarantee they\u2019re going to finish it\u2026 There\u2019s no penalty, and if they walk away, then it will be a challenge for us to find somebody else to finish it.\u201d<\/p>\n

\u201cI wouldn\u2019t quite characterize it that way \u2013 but yes,\u201d Seddon replied.<\/p>\n

\u201cI can see now why there are concerns about this,\u201d Kim said.<\/p>\n

An Obvious Disconnect<\/b><\/p>\n

The exchange came in a November 3 hearing called by Kim, the day before the Land Use Commission was holding its final hearing on the same project. Kim and fellow senators, including Josh Green, from Kona, wanted to know how a capital improvement project for the acquisition of land for a university campus, regional sports complex, and affordable housing had morphed into what is now a high-density residential and commercial center, where no more than 50 percent plus 1 of the dwelling units are to be aimed at families earning up to 140 percent of Hawai`i County\u2019s adjusted median income.<\/p>\n

Both Seddon and Dan Davidson, Seddon\u2019s predecessor at the agency (and now director of the LUC), said they were unaware of the representations that had been made to the Legislature more than two decades ago, at the time the CIP appropriation was made.<\/p>\n

Seddon attempted to explain that lack of information by noting that the appropriation was made to the Department of Land and Natural Resources.<\/p>\n

\u201cThere was obviously a disconnect,\u201d she said.<\/p>\n

\u201cWhat is the breakdown of affordable units by adjusted income percentages?\u201d Kim asked.<\/p>\n

Seddon could not give a hard answer, noting that it had changed a \u201ccouple of times \u2013 it sort of moved around from the original proposal.\u201d<\/p>\n

Rick Prahler, chief of HHFDC\u2019s development branch, hedged a bit: \u201cIt\u2019s a moving target right now,\u201d he added.<\/p>\n

\u201cJust give us some idea of the last place you were, before the target moved,\u201d Kim asked.<\/p>\n

Neither Seddon nor Prahler could do that, with Prahler explaining that he was hesitant to do so, \u201cbecause I don\u2019t know if [Forest City has] made a public commitment to this set of numbers.\u201d<\/p>\n

No Cap on Profits<\/b><\/p>\n

Kim also asked about the portions of the agreement that specified the developer\u2019s investment in the project as well as its anticipated profit.<\/p>\n

The HHFDC has provided an interest-free loan of $25 million from the state Dwelling Unit Revolving Fund (DURF), which is to cover costs of planning, acquiring permits and approvals, and part of the initial infrastructure costs. The development agreement also calls for another $84 million to be obtained in various subsidies. (According to HHFDC board meeting minutes, Forest City anticipates those subsidies might come in the form of Community Facilities District funding, Tax Increment Financing, as well as federal and county public assistance.)<\/p>\n

With funding in place, HHFDC\u2019s Stan Fujimoto told its board in 2008, when the DURF loan was approved, Forest City expects to make a profit of $23 million by the time the project is concluded (2023, with a possible five-year extension), representing 13 percent of the total land development costs.<\/p>\n

Kim asked Seddon whether this 13 percent was a cap or an estimate.<\/p>\n

\u201cI don\u2019t believe there\u2019s a cap,\u201d Seddon said.<\/p>\n

\u201cDo we know the up side potential?\u201d Kim asked.<\/p>\n

No, Seddon replied.<\/p>\n

The development agreement calls for Forest City to receive an 18 percent internal rate of return, \u201cpost tax \u201cas such tax may be applied to \u2026 Forest City Enterprises, Inc.), on any investment made by Forest City. In addition, it is entitled to a project management fee equal to 3 percent of development costs, a 1 percent \u201clegal\/accounting fee,\u201d and a 5 percent \u201cconstruction management fee.\u201d These fees, however, don\u2019t cover for \u201cany legal, accounting, planning, or other professional services performed by third parties.\u201d Those costs are to be folded into the land development budget, according to the development agreement. And all the fees are over and above the 18 percent rate of return.<\/p>\n

Kim asked how the 3 percent management fee had been calculated. Seddon could not say. \u201cIf it\u2019s based on the project cost,\u201d Kim noted, \u201cthat\u2019s another $5.4 million over and above the $23 million.\u201d<\/p>\n

\u201cThe 3 percent management fee, 1 percent accounting fee, 5 percent construction fee \u2013 all over their basic profit. So $15, $16 million more. And they get a loan with no interest for 15 years.\u201d<\/p>\n

No Penalties<\/b><\/p>\n

Senator Suzanne Chun-Oakland was puzzled. \u201cWhy would the state enter into such an agreement?\u201d she asked Seddon.<\/p>\n

\u201cThe tools that we\u2019re using, 201H, loaning DURF money for the interim, these are all tools that the Legislature has given us to support affordable housing,\u201d Seddon replied.<\/p>\n

But when Seddon could not provide a count of what units would be affordable and to what ranges of income, Chun-Oakland asked, \u201cWhy wouldn\u2019t we hold the developer responsible for coming up with affordable units if we\u2019re providing that kind of incentive and financial support? \u2026Why are we not expecting something?\u201d<\/p>\n

Seddon noted that Forest City had entered into a contract to do just this.<\/p>\n

Yet, \u201cThere\u2019s no penalty for not fulfilling the contract,\u201d Chun-Oakland noted. Seddon agreed.<\/p>\n

Why not?<\/p>\n

Seddon stated it was \u201cnormal practice. We don\u2019t have penalties in our development agreements.\u201d<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Posted 12\/01\/2010  “So, I’m a little perplexed,” said Donna Mercado Kim, chair of the Senate Committee on Ways and Means after a lengthy interrogation of Karen Seddon, head of the Hawai`i Housing Finance and Development Corporation over terms of the agency’s … Continued<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4,351,338],"tags":[7],"class_list":["post-7068","post","type-post","status-publish","format-standard","hentry","category-development","category-eh-xtra","category-land-use","tag-patricia-tummons"],"_links":{"self":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/posts\/7068","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=7068"}],"version-history":[{"count":0,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/posts\/7068\/revisions"}],"wp:attachment":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=7068"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=7068"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=7068"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}