Rarely does the tension in a Land Use Commission meeting rise to the level of spine-tingling. But the LUC’s hearing April 30 on the fate of 1,060 acres of Urban land owned by Bridge `Aina Le`a was high drama indeed.
At stake were entitlements to build roughly 2,000 units of upscale resort housing, a commercial center, two golf courses, clubhouses, and other recreational facilities. Along with the entitlements, the first of which were granted nearly 20 years ago, came certain obligations. At the time of the April meeting, these included: the construction of 385 units of affordable housing; installation of a signal and other improvements to a dangerous highway intersection; and the dedication of land for public schools and parks.
For the last couple of years, LUC members were showing more and more impatience with the developer, Bridge `Aina Le`a and its Saipan-based parent, Bridge Capital, LLC. Prospects seemed to grow dimmer by the day that Bridge Capital, the current landowner (the fourth since redistricting occurred), could meet a November 2010 deadline to have in hand certificates of occupancy for the affordable units. In September 2008, the LUC approved a show-cause order requiring Bridge to explain why the land should not be placed back into the Agricultural District.
After two hearings on the order – the first in January, the second the one in April – the LUC had heard enough. After a five-hour-long meeting, interrupted by two executive sessions, a lunch break, and a couple of courtesy breaks to allow Bridge’s attorney to huddle with his clients, the commission voted unanimously to revert the land to the state Agricultural District.
At that moment, the meeting room at the Waikoloa Marriott was dead still. You could almost hear the value of the land, not five miles from the hotel, shattering into smithereens.
‘More or less the landowner’
That was hardly the outcome that Bridge had anticipated. In March, Bridge had given the commission notice of its intent to sell the land to DW `Aina Le`a, a Nevada limited liability corporation. DWAL was no stranger to the commission. In the summer of 2007, it had been identified by Bridge as a development partner, yet shortly thereafter, the company dropped from sight and progress toward meeting the affordable housing deadline – the condition that the commission was most eager to see fulfilled – once more stalled.
Documents that Bridge submitted in March indicated that Bridge and Robert Wessels (the “W” in DW) had signed a purchase and sale agreement more than six months earlier, in September 2008. Yet when Bridge filed its required annual report for 2008 in November, the agreement to sell the land was not mentioned.
Moments before the April meeting was to begin, commissioners received a tabbed binder containing about two dozen documents of various sorts. They included contracts (mostly unsigned) between DW and other parties, a sort of prospectus that DW had prepared for potential investors, and architectural drawings of possible affordable housing units. Also included were materials relating to DW’s negotiations with the County of Hawai`i to build offsite transitional housing – negotiations that, in the end, had led nowhere. (As reported in the March issue of Environment Hawai`i, in January, Bridge `Aina Le`a had originally proposed that the commission allow it credit against its affordable housing obligations for each unit of county transitional housing it built. In February, DW `Aina Le`a replaced Bridge in the talks with the county.)
The commissioners, accustomed to receiving exhibits and motions days, if not weeks, in advance of their meetings, were bewildered – and obviously displeased. The first question that was posed by Commission Chairman Duane Kanuha expressed their confusion. “Petitioners,” he said, “we’re trying to determine who the actual petitioner is… We have Bridge `Aina Le`a’s notice of intent to assign their interests in the petition area to DW. But nevertheless, for the record, Bridge `Aina Le`a is still the petitioner.”
Michael Carroll, an attorney with the Honolulu firm of Bays Deaver Lung Rose & Holma, responded for Bridge. “DW has taken over development responsibilities pursuant to the purchase and sale agreement,” he said. “They’re in charge of development, and Bridge `Aina Le`a is more or less the landowner. Since [DW] are taking over, we’ll be stepping out and they’ll be taking the lead.”
Attorney Eric T. Maehara was also at the table. Maehara, familiar to commissioners as the lawyer who had most frequently represented Bridge, said that he was now representing DW.
Commissioner Reuben Wong then asked, “If Bridge `Aina Le`a is the petitioner, and Mr. Carroll represents Bridge, what is Mr. Maehara doing at the table?”
“In a normal case,” Maehara replied, “if we weren’t facing the order to show cause, it’d be a matter of Mr. Carroll introducing DW to the commission … and formally ask[ing] for a substitution of petitioners. But because we’re in this situation, with the order to show cause, that’s why we have this dichotomy. There’s no clear line. Bridge, through Mr. Carroll, will make a statement. After that point, then I would indulge [sic] the commission to allow me to continue making the case for DW `Aina Le`a to prove its capacity to hit the ground running and attempt to meet all these conditions that the commission has set down in the past.”
‘Who’s on first?’
The commissioners were not inclined to go along with Bridge’s script. Commissioner Normand Lezy explained: “The order to show cause was issued against the petitioner Bridge as the entitlement holder in this matter. Bridge `Aina Le`a is obligated to show cause today why there should not be reversion. As far as I know, nothing has been brought before the commission to show that any other entity, whether it be DW `Aina Le`a or anybody else, has an interest or authority to make representations on behalf of Bridge in connection with the order to show cause.”
Carroll had earlier acknowledged that he was “not as familiar with the current status” of the case as Maehara, prompting Lezy to ask, “Is there somebody, an entity, that is here today that has agency authority on behalf of petitioner Bridge `Aina Le`a to make a presentation and respond to the order to show cause?”
Maehara tried again to push DW forward as the party to which questions should be addressed: “In the purchase and sale agreement, the responsibilities of maintaining entitlements have transferred from Bridge or is [sic] in the process of being transferred, as well as title to the property, to DW.”
Lezy cut him off. “You just said, either has been done or is in the process of being done. What is the current status as we sit here today?”
Maehara replied by reading from the purchase and sale agreement language that authorized DW to assume “development responsibility” before closing on the property. “That, I believe, is the authorization,” he said.
Commissioner Ransom Piltz was not satisfied with Maehara’s effort to substitute DW for Bridge. “Mr. Maehara, you have to understand, the commission has received this… and it causes a lot of confusion as far as who’s on first and who’re the players and everything. But essentially we’re looking at Bridge `Aina Le`a and not DW… So you have to understand, all we’re going to deal with today is Bridge `Aina Le`a. … if they’re not here, then this session is over.”
Maehara asked for a short break to consult with the principals of both Bridge and DW. When the session resumed, Carroll said he would speak for Bridge. Several commissioners observed that the lawyer making filings on Bridge’s behalf had been Maehara, with Carroll a relative stranger to the commission. Carroll then suggested Maehara could act as his co-counsel, an arrangement that seemed to settle the question of representation.
‘A lot of bull’
The first witness called by Maehara was Sidney Fuke, a planner who had been working with Bridge for years but who had recently been retained by DW.
Maehara’s first question to Fuke concerned DW’s taking over from Bridge negotiations with Hawai`i County over construction of transitional housing at a site some 20 miles away, at Kaloko. Fuke commenced with a history of the site going back nine years. Bryan Yee, the deputy attorney general representing the Office of Planning, questioned the relevance.
Maehara acknowledged that the subject “may have little relevance to the issue at hand,” especially since the DW’s involvement with the project was now off the table, but nonetheless asked that the documents concerning the Kaloko transitional housing be accepted into evidence.
Yee again objected, as did Commissioner Lezy. “I don’t see how this evidence has any bearing or will lead to anything that has any bearing on the issue before us,” he said.
Maehara then began questioning Fuke about DW’s plans to fulfill the on-site requirement for affordable housing, calling his attention to an easel displaying a map of the property, showing a small, 60-acre area near the southeast corner of the Urban area where the 400 or so affordable units were proposed to be built.
Commissioner Wong protested. “I have a problem. Mr. Fuke stated he represents or is a consultant for DW, and no longer for Bridge,” Wong said. “If so, it’s not relevant to us what DW is going to do in the future. So I’m wondering whether or not all this testimony has anything to do with Bridge `Aina Le`a?… Unless there’s a showing that DW owns the property today, I’m not interested in what DW wants to do because it’s not relevant to this proceeding.”
Maehara said he would try to “convince the commission of the fact that DW has the wherewithal, past experience, the financial capabilities to step in place of Bridge `Aina Le`a.”
Commissioner Piltz responded: “Those of us who have sat on this commission throughout some of the promises that Bridge `Aina Le`a has made, we bring you this dilemma… We’ve heard a lot of bull. We just don’t want any more coming down the road – that we’re going to do this, we’ve got a thing that isn’t completed yet with DW. Why should we believe what’s going on? You’ve not proven yourself in the past. Granted, everybody wants to get affordable housing, but your clients have not done their job. We’re skeptical about what’s going on here.”
‘A troubling indicator’
Maehara said he was attempting to show, “under oath, that there have been considerable sums of money transferred from DW to Bridge, substantial amounts already paid out to consultants…”
Wong wanted to know, again, whether DW had “actually acquired all of the rights of Bridge?” Or did it merely “hope to acquire it some day in the future?”
Maehara acknowledged DW had no legal title, but again argued that “DW has assumed responsibility of proceeding with all entitlements and all other proceedings.”
Commissioner Lisa Judge pointed out that while there is no legal requirement that the LUC approve in advance any transfer of the land, “it is in our conditions that petitioners are supposed to inform the commission of their intentions to transfer property. One of the things that troubled me when I started to look through these documents, this has been going on back to September 2008. Since then, there was a status report from the petitioner, where none of this was mentioned. At a hearing in January… no mention of intent to sell the property was ever hinted at or disclosed to the commission at that time.
“Now, on March 20, we get all these documents that date back to September 2008… Many of these documents are unsigned, I don’t know what weight we give them when they’re unsigned. That to me is a troubling indicator of the process we’ve followed for the last four years.”
Chairman Kanuha asked Maehara if any representative of Bridge was going to be testifying.
Maehara: “We intend to follow Mr. Fuke with Mr. Robert Wessels, who is a principal in DW. And then follow with a representative of Goodfellow Construction.”
Kanuha: “So the answer is ‘no.’ You’re not intending to call any witness relating to the petitioner.”
Maehara: “We had no intention of calling any witness who is a principal or officer in Bridge `Aina Le`a, but if need be, we can submit authorization of Bridge for these persons to submit testimony.”
‘Hopes and dreams’
After lunch, Maehara explained how he and his clients “had a long discussion as to how we’re going to proceed.” He set forth a new list of witnesses, beginning with Hoolae Paoa, the CEO of Bridge `Aina Le`a, and then Fuke again, followed by other witnesses. “It’s important that we clear the air, [explain] what this transaction, the purchase and sale agreement, is all about, the relationship of the parties, have that all resolved,” Maehara said.
Before he could proceed, Commissioner Wong asked for an “offer of proof, what are all these witnesses going to testify to. Give me a roadmap as to where we’re going.”
Maehara answered that he would be making the argument that “DW in fact is in a position to meet the conditions, specifically the [affordable] housing condition that is a concern to this commission.”
That wasnt good enough for Wong. “Being that we’re here on an order to show cause, I’m asking the petitioner to appear and demonstrate why the order for reversion should not be granted… The construction you’re proposing is only one component.” All the things Maehara was proposing to show, Wong continued, were “hopes and dreams and things we aspire to accomplish,” but they did not “address the issues of the order to show cause.” Wong wanted to know the reasons why Bridge had not met the conditions of the LUC’s decision and order, amended several times over the years, associated with the Urban reclassification. “It could” he suggested, “be natural disasters, pandemic, tsunamis,” that prevented the petitioners from doing “all the good things we said we were going to do.”
“The offer of proof,” Wong continued, “does not address this… It merely talks about the hopes and dreams and things that we want to accomplish. Those are not the issues before the commission. In view of that, I move that the petition area in this docket be reverted to agriculture.”
Maehara, Carroll, and their clients present in the meeting room appeared shocked by the suddenness of Wong’s motion. Kanuha offered Carroll the chance to make a statement before the commission’s vote, and then granted Carroll a five-minute break in which to talk things over with his clients.
When the meeting resumed, Carroll said his clients strongly objected to any reversion. “It’s procedurally improper,” he said. “We haven’t had the opportunity to make our case… We’ve not had an opportunity to explain” the March 20 disclosures. “We’ve got vested rights, have spent $20 million. We have the ability to go forward with the project.”
In further discussion on the motion, Commissioner Judge asked Hawai`i County Planning Director Bobbi Jean Leithead-Todd, Hawai`i what she thought were the prospects for completing work on the affordable housing by November 2010. “We’re talking now less than 18 months. Do you, in the county’s opinion, believe you can get certificates of occupancy for 385 units, given the status of development at this point?”
Leithead-Todd stated she wanted to give the developers the benefit of a doubt. “Given the status of development at this point, it’d probably be very difficult,” she said. However, she continued, “I’d like to give them until November 2010 to deliver. Whether they can do it, I don’t know… I don’t see any harm in giving them that opportunity.”
Commissioner Lezy asked Leithead-Todd to “handicap” the odds of fulfilling the affordable housing condition by the November 2010 deadline. “Can you give me a numerical probability, say 50 percent,” he asked.
Leithead-Todd agreed that the odds were probably no greater than that.
Carroll restated his objections to the reversion. “We are reasserting all objections – it’s a violation of our fundamental rights.” After 2005, when the LUC imposed the 2010 deadline for affordable housing, he said, “the Superferry decision came out, which impacted our progress.”
Commissioner Judge recapped some of the recent history of LUC actions on the Bridge docket. “I feel like we keep going in this circular motion, for those of us who sat through those several meetings in 2005, … we were told there were no further discretionary permits needed, no changes of zoning, ‘Please, just get out of our way, we have machines on site, just get out of our way.’…
“Even then, there was a level of skepticism… That’s why the [housing] condition was written the way it was.”
The issue before the commission was more than “just about affordable housing,” she said, and instead went to the heart of the commission’s basic process. “This has been ongoing since 1989.… Promises were made of benefits to the community. Just one was affordable housing.”
“At the last commission meeting,” Judge continued, referring to the January hearing on the show-cause order, “it was disclosed by petitioners’ representative that, no, we’re not going to do sewage, no, we’re going to do something totally different. That was disturbing to me, in the sense that we made agreements. If nobody is going to live by them, why spend all this time and effort to do this?
“So I’m all for affordable housing, we’d love to have affordable housing, but there are a lot of layers to this…. All the other promises made in 1988 and 1991, and nobody’s even talking about that.”
Carroll asked for a chance to confer with his client before the commission voted. Kanuha said he’d already had the opportunity.
Without further ado, the commission voted 7-0 in favor of reverting the land to the state Agricultural District.
For the next few weeks, said Dan Davidson, executive director of the LUC, the state Attorney General’s office will be drafting the formal order of reversion. After that is signed, Bridge will have the opportunity to ask the commission for reconsideration.
— Patricia Tummons
Volume 19, Number 12 June 2009
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