Branching Out: From Clinic, to Farm, to Commercial Kitchen, to Business Center

posted in: Development, Health, November 2013 | 0
In October of 2011, Governor Neil Abercrombie received a letter from Cheryl Vasconcellos, seeking his help “to overcome some bureaucratic red tape… Hana Health would like to renovate and/or construct new buildings and improve services … as well as remove and/or close large capacity cesspools.”
She sought his assistance with three specific tasks: “(1) secure state approval for the proposed uses of the property, (2) rezone the two parcels of property leased from the state, and (3) meet a number of conditions and requirements imposed by funding sources.”

In addition to Hana Health having to deal with large-capacity cesspools “owned by the state,” Vasconcellos wrote, a new “nutrition center” was being built and a business training center, senior housing, and new medical facility were being planned.

Also, she wrote, “a permanent farm market stand and child care facility for Hana Health employees are also slated for development. These capital improvement projects are expected to be paid for by various state, federal, and private grants and loans. However, funding and development is contingent on the coordination and cooperation of DLNR.”

“While Hana Health believes that all the activities it seeks to do in the proposed buildings complies with the lease,” Vasconcellos said, “there is a simple solution if the state insists that the lease terms prohibit them. The state and Hana Health can simply amend the lease to allow for the social services that the state already encourages. All the activities and services Hana Health seeks to do or continue to do are consistent with public policy. Hana Health is requesting pre-approval for all plans described in this letter.”

The “pre-approval” sought was apparently not forthcoming, since five months later, Vasconcellos was writing Maui legislators asking for their help with the interpretation of terms of Hana Health’s lease with the state.

The Department of Land and Natural Resources’ “interpretation of the use provision in our lease is preventing Hana Health from meeting the health and social service needs of the Hana community,” she wrote. Commercial activities were anticipated in the 1996 legislation that privatized the former state facility, she continued, citing the original plan that included a snack bar and laundromat.

By the time these pleas for assistance were written, Hana Health had already branched out substantially from the operation of a limited health- and dental-care facility. While it had not been able to develop the blue-sky proposal of a wellness village anticipated in a 2004 environmental assessment – replete with guest cottages, pools, conference center, and other amenities found usually in resorts – it had developed a commercial farm and had built greenhouses on much of its 12 leased acres. Produce from “Hana Fresh” was being sold to upscale hotels and restaurants as well as supermarkets on Maui and at Hana Health’s own roadside market.

The nutrition center, which includes a commercial-grade kitchen, prepared means not only for kupuna and others in the Hana community, but for the tourist market as well. In a 2012 interview available in an online podcast, Vasconcellos says that she had recently been approached by Roberts Tours, which wanted the nutrition center to provide food service for Japanese tours in Hana three times a week. “Also,” she continued, “Polynesian Adventure Tours contacted me last week. They want to bring their visitors to our farm market for lunches as well.”

Hana Health’s website advertises farm tours every Thursday. “The morning includes a 45-minute walking tour of the Hana Fresh farm, followed by a Farm Market breakfast.” Cost is $25 per head, with a minimum head count of four.

Character of Use
All the admittedly commercial activity would seem to violate the limits on Hana Health’s use of the site contained in the lease approved by the Board of Land and Natural Resources in 1998. In approving the lease, the Land Board stipulated that its use be “Eleemosynary (charitable purposes, including those described in the Lessee’s Articles of Incorporation and for other social services commonly provided by the government.”

Paragraph 12 of the lease itself is more specific. “The Lessee shall use or allow the premises leased to be used solely for health care services to the Hana community as set forth in Lessee’s articles of incorporation and for other social services commonly provided by the government.”

As early as 2003, Vasconcellos seemed to be chafing at the lease restrictions. In connection with plans for the wellness village being floated at that time, she obtained an opinion from John Reyes-Burke of the law firm Burke Sakai McPheeters Bordner Iwanaga & Estes that determined the proposed use “reasonably constitute ‘health care services,’ ‘medical services,’ ‘assisted living services,’ ‘health education,’ and/or ‘related community services’ for the Hana community (or other social services commonly provided by the government). Moreover, the ancillary or multiple-use facilities, such as the administrative offices, the restaurant, or the conference center, appear to be reasonable or necessary to accomplish the provision of health care services and the operation of the entity … providing them.”

The planned wellness village did not materialize, and for the next six years, the issue of disputed interpretations of the character of use for the leased land lay dormant.

It arose again, however, in 2009, in connection with the “nutrition center.” To move forward with permits for construction, Vasconcellos required approval from the DLNR. In a letter dated August 20, 2009, then-DLNR director Laura Thielen gave her blessing, provided that, “Users of this facility shall be limited to employees and patients of Hana Health and no commercial sale of products from the facility shall take place.” If, Thielen went on to say, the use of the facility “substantially deviates from the current purpose and intent as stated above, the state of Hawai`i reserves the right to reconsider the terms and conditions under which this approval is granted.”

A Lien
Not only has Hana Health engaged in commercial activity, it has also accepted a loan that places a lien on state property without the approval of the Land Board.

Paragraph 11 of the lease forbids the lessee to allow any lien to be made against the premises or any improvements. Paragraph 19 gives the state a lien against the buildings and improvements to ensure performance by the lessee of lease terms. And Paragraph 20 states the lessee “shall not mortgage, hypothecate, or pledge the premises, any portion, or any interest in this lease.”

Yet to find the funds needed to open the nutrition center, Vasconcellos accepted a $1.5 million loan from the RSF Social Investment Fund of San Francisco. Security for the loan, as spelled out in the financing statement filed with the Bureau of Conveyances, includes “all of the following property, now owned and hereafter acquired by Debtor [Hana Health] or in which Debtor has or may hereafter acquire an interest … and all proceeds and products thereof: accounts, chattel paper, instruments, deposit accounts, commercial tort claims and general intangibles resulting from Debtor’s farm, kitchen, or nutrition center operations.”

According to Daniel Ornellas, the DLNR’s Maui District land agent, the RSF lien should never have been granted and, if the matter should ever come to court, would not be recognized as valid.

A Means to an End
Vasconcellos has repeatedly stated that the commercial activity is needed to support the provision of health care services to Hana and surrounding underserved communities. In addition, she says, the farm it operates meshes nicely with its mission of improving the health of low-income, mainly Hawaiian residents.

“One of the main focuses of what we’re doing is addressing the social determinants of health – high rates of unemployement, lack of education, lack of a stable food supply that is actually nutritious,” she stated in an interview with the director of RSF that forms the substance of the podcast mentioned earlier. “And so we have several programs besides the medical center that provides a full range of primary care, dental health care, etcetera. We started about seven years ago the Hana Fresh farm… It started as a youth program with Hana School, to provide employment opportunities to young kids, especially at-risk youth…. We also run a daily farm market for the Hana community… and we also do prepared meals.”

With the nutrition center now open, she said, “We’re looking forward to making that a very successful, profitable venture that provides an additional revenue stream to support the health center, which is pretty reliant on grants.”

“We’re at break-even right now,” she said. “It will be the meals to tourists that will generate a revenue stream, which was the plan from the beginning for the nutrition center.”

Vasconcellos was asked whether she had approached the DLNR about changing the lease terms. By press time, she had stated only that “[a]ddressing all of the misinformation and false assumptions inherent in your questions would take more time than I am able to devote right now.”

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