Builder Seeks SMA Amendment to Allow ‘Pepe`ekeo Palace’ to Be Built as Planned

posted in: July 2014 | 0

He’s back. Scott Watson, the bad boy of Big Island builders, is trying a new approach to gain Hawai`i County’s approval of his planned “Pepe`ekeo Palace” on a coastal lot a few miles north of Hilo.

Watson and the partnership backing him, Hilo Project, LLC, want to build the residence much closer to the coastal cliff than the setback contained in the Special Management Area permit for the area allows. That permit, granted in 2006, set conditions for an 11-lot subdivision; Watson’s construction is planned for the southernmost of those lots.Construction of the house and ancillary improvements has been beset by problems practically since the work began two years ago. The lot itself is irregularly shaped. The buildable portion is reduced by a pedestrian easement that runs along much of the makai boundary.

Also, Watson ran into trouble with the State Historic Preservation Division and the Planning Department when he began to build a swimming pool atop a historic foundation where his plans had called for a tennis court.

Watson took the county to court last year, seeking to have the setbacks associated with the SMA permit voided by a judge. As Environment Hawai`i reported, Judge Glenn S. Hara denied his motion for summary judgment. Under terms of the permit, “no house or other substantial structure shall be built closer to the ocean than 40 feet from the top of the sea cliff.” In effect, Hara said, the permit terms effectively became a restrictive covenant on the property.

Hara also rejected the argument of Steve Strauss, Watson’s attorney, that the county lacked statutory authority to establish a setback greater than the minimum established in state law.

With little apparent likelihood of prevailing in court, Watson earlier this year turned his attention back to the county Planning Department.

In February, he applied to the Planning Commission for an amendment to the setback condition. That was rejected by Planning Director Duane Kanuha on March 14.

“You are requesting that the Planning Commission amend Condition 11 to allow a minimum 20-foot shoreline setback,” Kanuha wrote. “The Planning Commission does not have the authority to establish a ‘shoreline setback line’ or ‘shoreline setback area’ less than 40 feet. This authority lies solely with the Planning Director… Furthermore, the only exception that affords a minimum shoreline setback line of 20 feet is for lots that were created prior to adoption of [Rule 11-5(b) of the department]. The subject lot does not qualify for this exception since it was created on March 24, 2006.”

Kanuha went on to suggest that the “proper procedure to accomplish” what Watson was seeking was to ask for an amendment to the condition referring to the certified shoreline of December 23, 2002 – the line from which the 40-foot setback was to be calculated. He should ask instead, Kanuha continued, to apply the 40-foot setback line to a current certified shoreline. “Should the Planning Commission approve the amendment request, you would then need to apply, if necessary, for a shoreline setback variance.”

On March 22, Watson again applied to the Planning Commission for an amendment to Condition 11 of the SMA permit for the subdivision.

And once more, Kanuha bounced it back to him. In a letter dated April 7, Kanuha copied and pasted many of the same paragraphs in his letter of March 14.

This time, however, he gave even more specific instructions to Watson as to what he should apply for. “The application should include a request to amend Condition No. 9 of SMA 450, since you have violated this condition by constructing the house and other improvements within the shoreline setback area referenced in the permit. Condition No. 9 states ‘To retain the existing natural appearance of the shoreline, there shall be no grading or grubbing within the 40-foot setback from the certified shoreline, and no more than 50 percent of the large trees … within the shoreline setback shall be removed on any of the lots.’” Watson, Kanuha went on to say, should also “provide the reasons you are requesting an amendment to Condition No. 9 as well as how the request is consistent with the ‘Grounds for Approval of SMA Use Permits’” described in Planning Commission rules.

Watson’s third try was the charm – at least so long as the Planning Department was concerned. On June 5, the department received his new, improved application to amend Condition 11 of the original SMA permit. (Kanuha’s suggestion that he would need to address Condition 9 was apparently ignored.)

In describing the “problem,” Watson writes that the condition “causes the shoreline setbacks to be measured from arbitrary points and not the true shoreline. Condition 11 incorporated a poor and inaccurate shoreline certification survey that misidentified the shoreline.”

“This circumstance caused the Planning Department to place public access easements in unsuitable and unusable locations,” he wrote. In addition, “the present public access cuts a wide swath through Applicant’s real property and does not provide lawful access to the true shoreline.”

The amendment Watson seeks would modify the SMA permit for just his one lot by having the setback be measured from a 2010 shoreline survey.

He lists several “benefits flowing from the grant of the proposed amendment” – benefits to parties other than himself and Hilo One, apparently. First, he says, with this, the Planning Department will “gain a realignment of the existing public access to an improved location.” That “improved location” would divert the access from where it now legally runs, virtually on top of the area where Watson plans to build a marble-paved lanai for the “palace,” to along the northern boundary of his property. (This relocation would be done in association with a lot consolidation and resubdivision that Watson has proposed with his neighbor to the north.) In addition, he writes, the amendment would be “consistent with the provisions and policies of the state Coastal Zone Management Act,” which promotes shoreline access opportunities.

Granting the amendment will also, he writes, “settle the present lawsuit against the Windward Planning Commission and Planning Department” – the same lawsuit in which Judge Hara’s ruling bodes ill for Watson’s prospects.

Kanuha informed Watson on June 12 that the Windward Planning Commission would hear his application at its scheduled July 3 meeting.


* * *
Meanwhile, in Ninole…

Up the coast a dozen or so miles from his “Pepe`ekeo Palace” sits Watson’s so-called “Water Falling Estate.” The super-luxury property – technically a “farm dwelling” –

includes what Watson says is probably the largest residential swimming pool in the world, a small golf course, and a tennis stadium that seats 450 spectators. All this is on land in the state Agricultural District, part of what Watson told the Planning Department said was a “sod farm” he would be operating in what had been a productive macadamia orchard.

The property was placed on the market last year with an asking price of $26.5 million. With no takers, Watson and his partner in this venture, Laurie Robertson, retained a luxury real-estate auction house to sell it in March, no minimum bid required.

When the hammer fell, the property was sold – for something south of $6 million.

What will happen with respect to an ongoing violation of county zoning laws is unclear. As Environment Hawai`i first reported in December 2012, the Planning Department had issues with several aspects of Watson’s work on this site. These included grading violations, unpermitted construction work, and the operation of an unpermitted helipad atop the house itself.

The helipad violation remains unresolved. When the Planning Department said it turned the matter over to county Corporation Counsel for enforcement last year, fines had accumulated to nearly $30,000.

For Further Reading

Environment Hawai`i has reported extensively on Watson’s projects. See these articles, all available online at Click on the “Browse Our Archives” link on the upper right hand corner.

    • “Shoreline Easement Lost as Builder Racks Up Repeated SMA Violations,” December 2012;
    • “Builder Defies Planning Department with Helipad on ‘Sod Farm’ Dwelling,” December 2012;
    • “Hawai`i County Sends Violation Notices to Builder over Construction at 2 Sites,” January 2013;
  • “Hawai`i County Keeps Negotiating with SMA Violator, Despite Court Ruling,” March 2014.


– Patricia Tummons


Volume 25, Number 1 July 2014


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