Bridge `Aina Le`a Gets Drubbing From the Land Use Commission

posted in: March 2009 | 0

“To some extent, we’ve been had,” said the chairman of the state Land Use Commission, commenting on the painfully slow progress by landowners to move forward with a development proposed in the area of Puako, on the Kohala Coast of the Big Island.

The development, he noted, had been approved in record time because LUC members had been led to believe that the developer had the financial backing to pay for the project. But “to date, nothing has happened. The developer needs to show some good faith.”

Those comments were made in 1995 by then LUC chairman Allen Hoe, expressing his frustration with Nansay Hawai`i, which had proposed the development of some 2,000 housing units on 3,000 acres of land mauka of the Mauna Lani resort.

More than 13 years later, LUC members appear to be even more exasperated than Hoe was with Bridge `Aina Le`a, the developer that has succeeded Nansay. Despite their approval in 2005 of a time extension (to 2010) for completion of 384 “affordable” housing units, commissioners had been growing skeptical that the development was on track – or even had been launched. Last fall, the commission voted to ask Bridge `Aina Le`a to show cause why the LUC should not order the 1,060 acres in the Urban land use district, where the core of the development is planned, to revert to Agricultural, its status before the LUC gave its blessing to the concept of a resort and golf-course community back in 1987.

But when the commission held a hearing on the show-cause order in January, the developer sought instead to change the terms of the development agreement. When Bridge attorney Eric Maehara was asked to present his case, he focused the commission’s attention on Bridge’s request to be relieved of the need to build all affordable housing units on the project site.

As an alternative, Maehara proposed that the affordable housing provision be amended to require no more than 100 units on site, to be completed by the end of 2012, and to fulfill any other affordable housing requirement that Hawai`i County might impose.

Commissioners were not happy. Lisa Judge, of Maui, originally made the show-cause motion in September, and she stood by it. “Unfortunately, here we are today and no affordable homes are on that development. Not even a glimmer of them coming anytime soon. No building permits, no infrastructure….

“I look back at that Decision and Order granted January 1989, and amended decision granted July 1991, when the project was sold to Nansay. Many many promises were made to the community, to West Hawai`i, to the Big Island. In those documents, the petitioner agreed to a 60-percent affordable housing condition. In 2005, the Land Use Commission granted relief, to provide only 20 percent, since they said they were going to do it right then. Twenty years have gone by and nothing’s happened… This commission needs to know if, how, and when the promises will be kept.”

Changing Conditions

That’s not what Bridge representatives were prepared to give. Instead, the CEO of Bridge `Aina Le`a, Hoolae Paoa, told the commissioners about the alternative arrangements that Bridge was now pursuing. “We intend to solve the affordable housing requirements, and have been in discussions with the County of Maui to build transitional housing in Kaloko,” he testified under direct examination by Maehara. (After Paoa’s second reference to Maui, he was corrected by a deputy attorney general.)

The previous administration of Mayor Harry Kim had rejected a letter of intent that Bridge had proposed, Paoa said. But, he added, “the new administration has renewed negotiations. As of today, we’re substantially complete on an agreement that will deliver this year 24 transitional housing [units]… and also allows us to develop 72 units on that site. This will require an amendment to the housing condition.”

“Transitional housing is so important,” Paoa continued. “We are prepared to spend money now to do the transitional housing. We also recognize the need for rental units. And that will require an amendment to the conditions” of the LUC decision and order.

As recently as November, the county administration, under then Mayor Harry Kim, had been at loggerheads with Bridge. First, Bridge had proposed reconfiguring the development by submitting a project district application to the county. When notified that this would require preparation of an environmental impact statement, Bridge submitted a non-significant zoning change application that would allow all 384 affordable housing units to be shifted to one location. Bridge argued that the relocated units would allow for construction efficiencies and would enable the company to meet the LUC deadline for affordable housing, but Yuen denied the application, noting that the proposed site was in a floodway. In November, the county Planning Board of Appeals upheld Yuen’s decision. (For details, see the December edition of Environment Hawai`i.)

Yet even as Bridge was appealing Yuen’s decision, its attorneys had approached attorneys for the county in an effort to work out a separate deal. On November 13, Maehara wrote LUC chairman Duane Kanuha, asking that the hearing on the show-cause order be delayed a month, from December to January. Bridge “has been in negotiations with the County of Hawai`i with regard to … participation in a county sponsored transitional and affordable rental housing project at Kaloko, Hawai`i… [A]s you are no doubt aware, a new county administration will be inaugurated on December 1, 2008.” Postponing the hearing, Maehara continued, would “give the new county of Hawai`i administration a reasonable opportunity to review this matter and respond to the proposals of the Petitioner with regard to the Kaloko housing project.”

Within days of the swearing-in of Mayor Billy Kenoi, Bridge and the county had apparently struck a tentative deal. Bridge, Maehara said, “has an agreement in principle with the County of Hawai`i to irrevocably deposit $6 million into an account from which it will periodically draw down payments for the development of the transitional housing.”

Paoa said Bridge would build 24 transitional units and 72 rentals near Kaloko, but Julie Mecklenburg, deputy corporation counsel for the county’s Office of Housing and Community Development, indicated that no deal for 72 rentals was in the works.

“We received a proposal from Bridge `Aina Le`a on December 17,” she said in testimony to the LUC. A draft memorandum of understanding was agreed upon on December 26, but it “is still under negotiation,” she added.

“We have agreed in principle on the construction of 24 transitional units,” she said, but as to the 72 affordable rental units, there has been “no real commitment made in that respect.” The Kaloko project “only has water commitments for 32 affordable rental units, so the other 40 cannot be constructed there.” For the additional affordable housing credits they’ll have to earn for this project, “they’d have to come up with another proposal for us under a different agreement,” Mecklenburg said.

Altered Plans

Deputy Attorney General Bryan Yee, representing the state Office of Planning, asked whether Bridge would be managing the affordable units – “haven’t decided,” Paoa replied – or would be receiving rents – “It could be that, but we haven’t formulated a plan,” Paoa said.

How many affordable units would then be built at the Bridge `Aina Le`a site, Yee asked. “It depends on what we can work out, offsite, work out with the county, and also with the approval of the LUC… We’re going to build more than 385 units. There will be room for more.”

Yee: “So you don’t know the number of affordable units to be built, but it will be equal to 385?”

Paoa: “Possibly more.”

Under further questioning, Paoa told Yee that the Memorandum of Understanding with the county “has nothing to do with `Aina Le`a…. The MOU is for Kaloko.” Bridge and the county were close to an agreement on how much affordable-housing contribution Bridge would have to put up as a result of construction at the Puako property, Paoa said, although he could not say how many units would be required.

Yee then asked about financing, noting that in 2007, Paoa had said that Bridge `Aina Le`a was looking to partner with another joint venture.

Paoa replied that he had an agreement “that brings in an affordable housing developer who would demonstrate his financial capabilities. We don’t have a final deal, but we’re close.”

Yee inquired as to the relationship between Bridge `Aina Le`a and Bridge Capital, which Paoa identified in 2007 as the company providing capital for the project.

“It’s a sister company,” Paoa said.

“You share a parent company?”

“Under terms of the joint venture, it would,” Paoa replied. “So Bridge `Aina Le`a can draw down on the financial resources of Bridge Capital, the parent company.”

“Let me try this one more time,” Yee said. “Bridge Capital is the parent company of Bridge `Aina Le`a?”

“For financial reporting purposes,” Paoa said, “but it is a separate company. All Bridge `Aina Le`a has right now is debt. It has to draw down on something that has financial – Bridge Capital has cash to fund Bridge `Aina Le`a… They’ve agreed to give money, but with conditions. But they are committed to spend money to build the [affordable] units. It will be Bridge Capital that will put $6 million in escrow… I’m also an officer of Bridge Capital.”

Yee pressed Paoa on changes that Bridge `Aina Le`a had made to its proposed development that had not been conveyed to the Land Use Commission or the Office of Planning. Originally, the plan called for all affordable units to be built in the petition area, along with the market-rate housing, Yee noted.

Paoa agreed: “I wasn’t here or involved, but I suspect that makes sense.”

Yee: “In 2007, you decided you needed to build the affordable housing units in one particular area… What did you tell the LUC? In 2007, did you tell the LUC that the [county] project district application was needed?”

No, Paoa replied.

Yee inquired about plans for construction of the market-rate housing.

“We have no plans for market housing,” Paoa said. “There’s not a market that’s available right now. I don’t have any plans to develop market housing….”

Other commissioners pressed Paoa on other changes in the plan.

Commissioner Judge noted that the decision and order approving the project had 50 conditions, all of which were to have been met by 2002. “Bridge `Aina Le`a has missed all the deadlines set out in those documents – for affordable housing, drainage, water sources, sewage treatment plants, transportation. All that was supposed to be done by 2002. Yet you say you’re not here to ask for an extension, but all these deadlines are passed. So I’m a bit confused… and I just heard you say you’ve eliminated one of the golf courses?”

Paoa acknowledged that one of two planned golf courses had been cut from the current development proposal.

“As these things change, they need to be changed with us as well,” Judge told Paoa. “This whole project has morphed into something you can’t even tell us what it is now.”

Maehara attempted to mollify the commission, acknowledging that the show-cause order “is probably the most severe remedy the commission has…. We realize the seriousness of this situation… I think it behooves the petitioner to set forth in detail exactly what is being proposed today for this project and also to express in detail to this commission exactly how we propose to meet the affordable housing condition.”

But whether that would be sufficient remained an open question at the end of the meeting.

Commissioner Thomas Contrades of Kaua`i was visibly angry. “This meeting is not to discuss whether or not they can have credits for transitional housing. It’s not to discuss whether they’re going to build affordable housing. It’s to show me why at this very second I should not make a motion to revert this land back to Ag, take away what we gave them. I’m totally insulted by what has gone on so far, by the fact that they haven’t even bothered to tell me why I shouldn’t do that… You say you’ve done stuff that I’ve never seen as a commissioner. Everybody else needs to show me a piece of paper that shows they have the money. Now we hear they own a bank. How much money? Where? They have partners. They have an international group. I have never seen any of that.

“My favorite word: obfuscation – making everything cloudy so you cannot see. I want to see. That is my job, my duty, that’s what I swore to do when I became a commissioner… This is crazy, this is nonsense, this is insulting… Don’t think I’m not upset about this.”

As the meeting drew to a close, commissioner Reuben Wong asked the commission’s deputy attorney general, Russell Suzuki, whether the LUC could order the land to revert to its original classification “unless the petitioner finds a substitute petitioner for this project.” Wong noted that the commission had heard “how great this project is for the community. We can use a world-class golf course. We can even have great jobs for people. But nothing’s happened… Not that the project is bad, it’s that the one who’s running this project is coming to this commission with empty promises. I’d like the attorney general to advise us if we can order the reversion unless the petitioner finds a substitute petitioner, so we can have things done to help this community.”

The matter of the show-cause order was continued and is scheduled to be taken up by the LUC at a meeting tentatively set for April.

— Patricia Tummons

Volume 19, Number 9 March 2009

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