Land Use Commission Grants A&B Petition for Important Agricultural Lands on Maui

posted in: Agriculture, July 2009, Land Use, Water | 0

On June 4, the state Land Use Commission unanimously approved a petition by Alexander & Baldwin, Inc. to designate more than 80 percent of its vast Maui fields as Important Agricultural Lands (IAL). While commissioners praised the company’s dedication to protecting agricultural land on Maui – one member even teared up while expressing her joy – others involved in two ongoing, heated disputes over the water that serves those lands voiced concerns about how A&B plans to use its non-IAL agricultural lands. In addition, they raised the issue of how the designation might influence those disputes, since nearly anyone who incurs legitimate, IAL-related costs (including certain legal fees) can claim generous credits offsetting tax obligations to the state.

In its petition, A&B sought IAL designation for 27,104 acres in West and Central Maui, 87 percent of which is in sugarcane grown by H&CS, an A&B subsidiary. Six percent is used for seed corn, pasture, and pineapple, and the rest is made up of gulches or agricultural infrastructure.

Although state law allows owners of IAL to fast-track the urbanization of up to 15 percent of a given petition area, A&B waived its reclassification credits, just as it did with its first IAL petition, for roughly 3,000 acres in south Kaua`i.

At the commission’s meeting, held at the Maui Prince Hotel in Makena, A&B attorney Ben Matsubara said that the Maui petition area represents 83 percent of the company’s fee simple agricultural lands on Maui. Under the IAL law, counties may require IAL designation for a maximum of 50 percent of a private landowner’s property. Despite A&B’s proposal for far more than that, Maui County, as well as a couple of members of the public, expressed dismay that A&B did not include all of the 33,000 acres of agricultural lands that it owns.

Maui planning director Jeffrey Hunt commended A&B for its petition and said he appreciated the company’s voluntary waiver of land reclassification credits. However, regarding the thousands of acres of “gap lands” not included in the petition, he said, “We just want to put A&B and everyone on notice that we may protect those non-IAL lands through our General Plan update….It’s a nice application, but it could have been better.” Hunt also asked the commission to include as a condition to the designation A&B’s waiver of reclassification credits.

Maui Tomorrow Foundation executive director Irene Bowie and the Sierra Club’s Lucienne De Naie also questioned why several thousand acres, which they said were just as productive as any of the lands included in the petition, were left out. They noted that A&B had at one time proposed to develop those lands, which are located along the coast, at Ma`alaea, and at Hali`imaile.

Both women noted that the areas left out of the petition fall outside the county’s urban growth boundaries. Bowie added that given two disputes currently before the state Commission on Water Resource Management over most of the water that feeds the petition area – the Na Wai `Eha contested case hearing over surface water in West Maui and the 27 petitions to amend stream flows in East Maui – “the availability of water is in no way guaranteed.”

Given the legal disputes between A&B and Maui residents who wish to see streams restored for natural, cultural, and kuleana uses, De Naie complained that the tax credits associated with IAL unfairly favor A&B and HC&S in the Na Wai `Eha contested case hearing and the petitions to amend the standards for streams that feed the irrigation ditches of East Maui Irrigation Co., yet another A&B subsidiary.

Under the state’s IAL incentives package, the state may issue up to $7.5 million in IAL tax credits a year on a first-come, first-served basis. A single taxpayer may claim an IAL tax credit for qualified agricultural costs up to $206,250 over three years. In the first year, a taxpayer may claim up to $156,250 of qualified agricultural costs; in the second, up to $37,500 of qualified costs may be claimed; and in the third, up to $12,500. All of the qualified agricultural costs must have been incurred after July 1, 2008. (Environment Hawai`i previously reported that, according to the Department of Agriculture’s deputy Duane Okamoto, only those with approved IAL petitions could receive the tax credits. Since then, however, Okamoto has deferred to the state Department of Taxation to decide who can claim those credits. According to Lynn Garcia of the Department of Taxation, any taxpayer who incurs qualified costs relating to IAL can claim credits.)

Under the law, qualified agricultural costs can include everything from expenditures for farming equipment to road repair to agricultural housing. They may also include legal fees related to retaining sufficient water for agricultural activities, such as may be incurred in the CWRM cases. This, DeNaie said, creates an “un-level playing field.”

Although the state Office of Planning had concerns about some of the lands that were included in the petition, it still supported the petition since those lands represented only a small percentage of the total area and the county did not oppose their inclusion.

In the end, the LUC unanimously approved the petition after touring the lands a day earlier. While A&B’s representatives spent most of the tour showing off sugarcane fields and production techniques, the company’s most recent SEC quarterly report suggests that it may be looking to farm crops other than sugarcane. A two-year drought that has hampered sugar production will likely result in HC&S posting significant operating losses in 2009, greater than those in 2008, the report states. “The Company recognizes that continuing large losses at its sugar operation are unacceptable and has implemented, and will continue to, actions to mitigate the losses, as well as to determine the ongoing viability of its sugar business and of alternative business models,” according to the SEC filing. “Management changes made in the first quarter sharpen the company’s focus on the plantation’s financial performance and facilitate the review of strategic alternatives for the business, including the possibility of transitioning to a more energy-centric model. Other operating improvements and strategic alternatives also are under evaluation.”

* * *
Commission Stays Decision
To Revert Puako Land

A company that wants to push forward with development in West Hawai`i near the Mauna Lani resort has won a last chance to show why the LUC should not revert 1,060 acres from Urban back to the Agricultural District. The commission already voted on April 30 to revert the land, after Bridge `Aina Le`a did not show to the commission’s satisfaction that it could meet a November 2010 deadline to meet its affordable housing obligations. But another company – DW `Aina Le`a – that has entered into a purchase agreement with Bridge but which does not yet hold title petitioned the LUC to stay its decision and allow the company to either intervene in or become a party to the case.

At the LUC’s June 5 meeting, Robert Wessels, a principal in DW `Aina Le`a, explained his company’s plans and efforts to meet the affordable housing deadline by simultaneously building multi-family townhouses and the infrastructure to support them.

“We have an obligation to deliver 385…affordable units by November 2010. The only way is we have contractors working on top of each other,” he said, adding that the buildings will start to go up before the infrastructure work and that building pads will be put in as early as this November. Sixty to 80 units will be under construction at all times, and 35 to 40 units a month will be put on the market.

By June 2010, Wessels said, the mass grading should be done, with finish grading and surfacing done by mid-August.

Representatives from Hawai`i County testified that the county fully supported the project and wished to see it continue. They could not, however, confirm that DW’s timelines were realistic.

Hawai`i County planning director Bobbi Jean Leithead-Todd told the commission on April 30 that there was only a 50 percent chance that 385 units could be completed within 18 months. When commissioner Normand Lezy asked county planner Norman Hayashi what he thought the odds were now, given the new information Wessels had presented, Hayashi said only that, “hopefully, there will be affordable housing.”

Unsatisfied, Lezy said, “I’m going to hold your feet to the fire. What’s the likelihood that the deadline will be met and all certificates of occupancy will be issued?”

“I’m not able to answer that question,” Hayashi said finally.

DW’s ability to meet deadlines aside, deputy attorney general Bryan Yee, representing the state Office of Planning, argued against granting DW’s petitions. He said that no rule allows the LUC to add a co-petitioner to a case after an order is made and that DW’s petition to intervene should be denied because its interest in the case is identical to Bridge’s.

After weighing the arguments, the commission approved a motion by Lisa Judge to 1) direct the LUC to take under advisement DW’s petition to be a co-petitioner/intervenor; 2) grant the motion to stay the April 30 decision; and 3) direct the commission’s executive director to schedule a one-day hearing to allow Bridge to submit additional evidence on why the land should not revert to the Agricultural District. Judge added that Bridge could designate DW to be its representative at the hearing.

Kaua`i LUC member Thomas Contrades, the only commissioner to vote against the stay, questioned the commission’s ability to approve DW `Aina Le`a’s petition since the company was not even a party to the case. He asked the commission’s deputy attorney general to explain, in writing, the legality of the commission’s vote.

— Teresa Dawson

Volume 20, Number 1 July 2009

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