Board Talk: Unpaid Lease, Lehua Island, Haleakala Trail and More

posted in: August 2017 | 0

Landscaper May Finally Pay State Its Nearly Half A Million Dollar Debt

An ill-timed auction. An effort to give a Waimanalo animal shelter time to relocate after its lease expired. Alleged verbal instructions from state land agents to the new tenant to not pay rent.

These are just some of the actions over the past decade or so that have left the state Department of Land and Natural Resources with unpaid rent, fees, and interest totaling $466,825, and about another $200,000 in the hole for foregone rent and property improvement costs. It’s also reportedly caused Landscape Hawai`i, Inc. (LHI) — the winning bidder for the 20-acre lot once occupied by the shelter — to incur hundreds of thousands of dollars in financial losses.

With any luck, the debt to the state, at least, will be paid. At the July 14 meeting of the Board of Land and Natural Resources, both the department and LHI agreed to try to finalize within 60 days a payment plan for the amount owed. The board also directed LHI to pay one year’s rent in 30 days. Should either of those deadlines not be met, the company’s lease will be terminated.

Botched

“Mr. Tsuji shook his head in disapproval,” report the minutes of the Land Board’s July 13, 2012, meeting. Russell Tsuji, the DLNR’s Land Division administrator, had apparently just learned that his division had auctioned off the agricultural lot in Waimanalo in 2004 while Candy Lake, CEO of the non-profit Sylvester Foundation, was still on the property, along with all of the shelter’s dogs, cats, horses, and other rescued animals.

Lake’s lease for the lot was set to expire in August 2004. Four months earlier, Peter Young, DLNR administrator at the time, signed a notice of sale and public auction for the property for intensive agricultural purposes. DLNR staff led prospective bidders on tours of the lot that summer. The department held the auction on June 30.

With strong interest in the property, LHI’s winning bid of $36,500 came in vastly higher than the minimum bid price of $4,764 a year. What might have seemed to be a windfall for the state, however, turned out to be just the opposite when Lake refused to leave, a situation that garnered significant local news coverage.

In July 2004, LHI paid its first semi-annual rent installment and was supposed to have been able to take possession of the property that September. Instead, Lake and her many animals were allowed to remain.

“Staff was ordered to allow her to remain from the governor’s office,” Tsuji explained to the Land Board last month.

Lake, who had found ways to relocate some of the animals, was eventually evicted on March 3, 2005, by “about 30 DLNR personnel, police, and others,” according to an LHI chronology. But, by all accounts, the property was left a complete mess.

“There were large amounts of trash, construction material, stockpiles of debris, tires, barbed wire, corrugated metal, a Matson container that was too rusty to be moved and created a hazard, broken bottles from drinking, missing windows, screens and damage to walls caused by vandalism, condoms, needles, and syringes from drug activity on the subject property,” a 2012 account by LHI’s attorney Wray Kondo states.

What’s more, LHI representatives had believed that the company would be able to use three livable structures that they had seen during the pre-auction tour (even though the bid package had called for only one), and that electricity would be available. It was not.

While the DLNR had auctioned the property “as-is,” the Land Division agreed to clean up several things for LHI. According to a staff report to the Land Board, the division paid more than $150,000 to clean one building to be used as a dwelling, install fencing, tow abandoned vehicles, demolish one structure, and remove vegetation and debris.

LHI eventually signed a 30-year lease for the property on March 23, 2006, and paid another $18,250 in rent.

Haggling

Despite the Land Division’s efforts, LHI felt the state needed to do more. The company claimed that the division had fenced the property in such a way that it cut off access to four usable acres.

It wrote the division repeatedly over the years, asking that the division re-install an electric meter box that it believed the division stole and that it reduce the lease rent by 20 percent until all issues were resolved.

Once a lease won through a public auction is signed, however, the Land Division cannot just change the rental terms. Even so, in an attempt to resolve one of LHI’s complaints, “on June 1, 2009, a former staffer at the Land Division [Charlene Unoki] informed the Fiscal Office to change the commencement of billing date to April 1, 2008, instead of April 1, 2006, which was the commencement date of the lease. In effect, the staffer was providing a rent-free period of two years,” the Land Division report states.

LHI was still not satisfied and continued to withhold rent. While company representatives have repeatedly claimed that Unoki verbally told them to not pay any rent until all of the outstanding issues were resolved, the DLNR made it clear in 2012 that it felt it had done enough. By this time, Unoki had retired and the lease file had been taken over by another land agent, Barry Cheung.

On July 13, 2012, the Land Division recommended that the Land Board deny LHI’s request for a rent reduction and consider canceling the lease. At that time, LHI owed $127,750 in back rent.

The board ultimately deferred taking any action, because it was unsure of what legally binding assurances, if any, the division may have given LHI. However, Kondo continued to discuss the matter with DLNR director at the time, William Aila.

In an August 6, 2012, letter, Kondo pointed out that DLNR records suggest that utilities were included as a feature of the lease, adding, “Without a meter box and electricity, an effective business operation cannot proceed.” He stated that LHI had spent $317,000 making the property usable and $10,000-$15,000 in attorney’s fees. He asked that the DLNR pay LHI’s attorney’s fees, consider the company’s lost opportunities caused by the lack of electricity, waive all rent until the department paid to bring electricity to the property, and pay for and install plumbing for the dwelling.

In his December 28 response, Aila rejected Kondo’s proposal, pointing out that the property was auctioned in an “as is, where is” condition. What’s more, in adjusting the lease commencement date from 2006 to 2008, the department had effectively given LHI two years of free rent (a total value of $73,000). Alia did, however, offer to pay $5,850 for the installation of an electric meter box to settle the matter.

“The things that they demanded or felt was needed to make things right we just can’t do. Waiver of rent … the state can’t waive rent,” Tsuji told the Land Board last month.

Five Years Later …

The Land Board did not revisit the matter until last month, at its July 14 meeting. LHI had on its own had electric service restored to the property. But as it had still not paid any additional rent, the Land Division recommended canceling the lease.

“They’ve been there 11 years and they paid one year of rent,” DLNR director and Land Board chair Suzanne Case said.

Rather than terminating the lease, LHI’s current attorney, Ben Matsubara, offered a new proposal: allow the $150,000 LHI spent — and the $125,000 it plans to spend — to restore the property’s structures to a semblance of what they were in 2004 to be credited against its arrearage.

“Maybe if we would waive some of the interest that would be helpful,” he added.

He also tried to assure the Land Board that LHI had not simply been ignoring the DLNR’s rent default letters for the past five years. Since he began representing LHI in 2015, “I answered 14 times,” he said, adding that in his responses he asked the division for an opportunity to discuss matters further.

Board member Keone Downing, a business owner himself, seemed baffled as to why LHI chose to keep the property despite its poor shape.

“‘Why, at that time, didn’t they go to the state and say, ‘I can’t accept this. This isn’t what I signed up for’? As a businessman, I wanna be out of the contract. It would go out to bid again and maybe I could get a lower price,’” he said.

“I’d be really interested to see why you keep hanging on … and yet at the same time saying, ‘You didn’t do this, you didn’t do that,’” he said.

“That’s a good question, one I ask to myself. … I’ve been told [by DLNR] ‘Don’t worry. We’ll get it fixed.’ I was maybe naive to believe,” LHI president Kyle Ushijima replied. He added that the property was well-suited for his plant nursery needs in that it was level, with terraces.

“I didn’t realize I could terminate the lease at that time. I didn’t investigate it or even think about it. That’s my fault,” he said.

“What I don’t understand, frankly, is you’ve been in possession of the property for 11 years and you’ve paid no rent,” Case said.

LHI’s Cindy Comer again pointed to DLNR staff. “We met with [former DLNR director] Peter Young in 2007. He told us do not pay the rent until this is resolved. And then a month and a half later, Charlene Unoki met with us. She knew the file and … said ‘Do not pay the rent until this is resolved,’” she said. Comer then recounted all of the work LHI had to do to make the trashed property workable and livable.

“I can understand working those things out the first few years of the lease. I don’t understand for the next nine years,” Case replied.

“We were told not to pay. We were told ‘till 2012 not to pay,” Comer said.

“And it’s five years later,” Case replied.

“Just to amplify [Case’s] point, there was a Land Board meeting to get you to pay the rent,” board member Chris Yuen said. To Comer, he added, “Your offer in 2012 was to waive five and a half years rent.”

“ — and that was declined,” Case said.

To Land Board member Stanley Roehrig, whether or not LHI actually suffered financially as a result of the botched lease process was key. “For me to get a feel of what’s fair, it’s very helpful if I look at your tax returns and see whether you’re making money or you didn’t. If you’re taking a beating … that would be something that I would consider, that we should take into account. On the other hand, if you’re making good business notwithstanding these peripheral problems, then it shows another light on what’s fair. I certainly agree with the chair and Chris, you got a lot of free rent,” he said.

As to LHI’s reliance on past directions from DLNR staff regarding rent, Roehrig said, “If somebody tells you they’re going to take care of you, no worry, no worry, and after awhile they don’t take care of you, after awhile you scratch you head and wonder if it’s true. … Charlene is gone and Peter is gone. You gotta pay up.”

A Decision

In the end, Yuen made a motion to give LHI 30 days to pay this year’s rent and 60 days to finalize a payment plan for the back rent (plus interest), provided that the Land Division give them a proposed plan within 15 days. Also, LHI’s continuation under the lease with a payment plan would be conditioned on the settlement of the company’s claims against the state, he said.

“My motion is not that you get into a negotiation of how much rent is due,” he said. “In my motion, it’s a take it or leave it. If the department does not agree [on a payment plan], I say that’s the end of the story.”

“You gotta take your chances on the one year’s rent. You might just suck eggs on that,” Roehrig told LHI and Matsubara.

Before the vote on Yuen’s motion, Case indicated that she would be opposing it and that she would prefer to cancel the lease.

“This is a situation that has gone on so long, there’s no equity here, in a fairness sense. You’ve got to do your part of the bargain in any business transaction,” she said.

On this, Yuen seemed to agree. “I don’t see a lot of equity. There have been a lot of great excuses for the lessee to not pay the rent.” However, he continued, “we have a tenant. If we can get the rent paid … we want to get it paid.”

With that, the board (except Case) voted to approve Yuen’s motion.

 

***

State Owns Historic Maui Trail,

But Recommends Against Its Use

 

On July 14, the Land Board approved a request by the DLNR’s Division of Forestry and Wildlife to terminate a May 2012 memorandum of agreement with Haleakala Ranch Company that allowed the public, with a guide, to access twice a year what was believed to be the historic Haleakala Bridle Trail through the ranch. The six-foot-wide trail extends from Makawao to Haleakala crater. Whether it was public or not was a matter of dispute at the time DOFAW and the ranch entered into the MOA.

In April 2014, the 2nd Circuit Court ruled that the state indeed owned the trail, in a case initiated by Public Access Trails Hawai`i (PATH). The ranch agreed not to appeal the verdict and a final order was filed in July 2016.

With the ownership issue settled, the ranch asked DOFAW last August to end the MOA, which the department seemed glad to do. In its report to the Land Board, DOFAW indicated that managing the reservation system and guided hikes required a significant amount of time and placed “a substantial burden of expense on an already stretched Na Ala Hele program.”

In an October 27, 2015, statement, Scott Fretz of DOFAW’s Maui office explained that because the trail was unmarked and cut through private lands, it was impossible to stay on the trail and avoid trespassing without a guide. Hikers also were at personal risk given the ongoing cattle operations on the surrounding lands.

“It is furthermore not constructed and maintained to Na Ala Hele trail standards and there are no parking areas or other amenities. For these reasons, the department does not recommend that the trail be used,” he wrote.

In its report last month to the Land Board, DOFAW noted that it was still pursuing an agreement with PATH “or other appropriate entities” on the terms of public use of the trail. “that will better accommodate the public.” It added that it had reached out to PATH, the ranch, and the Maui Chapter of the Sierra Club to discuss the issue.

 

***

Board Approves

MOU for Lehua Project

 

The pieces needed to rid Lehua Island of invasive rats are falling into place. Last month, the U.S. Fish and Wildlife Service (FWS) and the state Department of Land and Natural Resources (DLNR) were expected to publish their final environmental assessments of their Lehua Island Ecosystem Restoration Program to be conducted this year. And at its July 14 meeting, the state Board of Land and Natural Resources approved a memorandum of understanding (MOU) and implementation agreement between the many parties involved: the DLNR, FWS, U.S. Coast Guard, Island Conservation, National Tropical Botanical Garden, and the owners of Ni`ihau, which is less than a mile south of Lehua and will be used as a staging area.

The MOU describes each of the parties’ roles and sets forth the terms under which they will interact.

The U.S. Department of Agriculture was considered, but is not included as a party. According to DLNR Division of Forestry and Wildlife administrator David Smith, the USDA wants its own separate agreement. Still, the MOU does identify actions to be undertaken by the USDA: 1) develop and implement monitoring protocols, and 2) purchase bait, on a reimbursable basis, if applicable.

Lehua is federally owned, but is also a state seabird sanctuary managed by DOFAW. According to the FWS draft environmental assessment for the project, “Lehua is home to the largest breeding colonies of brown boobies (Sula leucogaster) and second-largest for red-footed boobies (S. sula) in the Hawaiian Islands, the fifth-largest Hawaiian breeding ground for wedge-tailed shearwaters (Puffinus pacificus), an important large colony of red-tailed tropicbirds (Phaethon rubricauda) and is home to the westernmost colony of Hawaiian black noddies (Anous minutus). Three federally-listed species are suspected of nesting on Lehua: Newell’s shearwaters rumped storm-petrels (Oceanodroma castro) and Hawaiian petrels (Pterodroma sandwichensis).”

To restore the island’s plant and bird populations, rabbits were eradicated in 2006 and the agency tried but failed to eradicate the rats in 2009.

After evaluating the possible reasons for the failure, the parties and agencies involved in the 2009 eradication agreed to give it another shot. The effort will involve aerially dropping anticoagulant bait onto the island. Diphacinone, which was used last time, would again be used, as well as brodifacoum, if necessary. (For more on this, read our April 2017 cover and sidebars.)

The owners of Ni`ihau, who had been concerned that the last bait drop had caused a major fish kill on their island, are now on board, DOFAW’s Smith told the Land Board.

“They’re offering to let us operate off the island,” he said, adding, “the last time [the parties involved] didn’t cooperate with Ni`hau and they were pissed off.”

“Could we say for the record it upset them?” Land Board chair Suzanne Case asked.

“The Ni`ihau people were upset we did not properly get their consent,” Smith clarified. “It’s kind of a breakthrough to have them working on this,” he said.

While Ni`ihau’s residents seem to have been won over, some resistance to the aerial broadcast of pesticides remains, with blog posts and web articles warning of the potential dangers the aerial broadcast of pesticides poses to non-target species (including humans).

Given the controversial nature of the project, Land Board member Sam Gon wished DOFAW the “best of luck.”

“Having to jump through flaming hoops, you look un-singed,” he said.

 

* * *

Fence Project for

Kaua`i Seabirds

 

To help mitigate for the incidental take of rare seabirds that are attracted to and harmed by nighttime lights on Kaua`i, the state Division of Forestry and Wildlife wants to protect and enhance their habitat by building a two-hectare, predator-proof enclosure on the rim of Kalalau Valley, on the border of Koke`e and Napali Coast state parks.

The fencing project is part of a larger mitigation strategy in DOFAW’s Kaua`i Seabird Habitat Conservation Plan, which covers actions by a number of non-federal entities (such as the state Department of Transportation) that may cause harm to Kaua`i’s seabirds. (The Kaua`i Island Utility Cooperative, with federal grant assistance, is developing a separate habitat conservation plan to mitigate for bird collisions with power lines.)

In addition to building the fence, the HCP calls for the removal of predators, monitoring for seabirds, and installation of equipment to make the enclosure a “seabird attraction site.”

“That sounds like a seabird dating site,” Land Board member Chris Yuen said at the board’s July 14 meeting, where DOFAW requested approval to put the two-year project out to bid.

DOFAW’s David Smith explained that it kind of is. “It refers to birds figuring out there’s other birds [there],” he said, explaining that birds flying overhead will investigate bird calls from the ground.

Land Board member Sam Gon noted that the project site will be a difficult place to build a fence.

“Very challenging,” Smith agreed.

DOFAW is expected to select the winning bidder by the end of this month. Work will not likely begin until next spring or summer, according to a staff report.

The board’s approval of the project could not come soon enough for some. In June, Hui Ho’omalu i Ka ‘Āina, Conservation Council for Hawai’i and the Center for Biological Diversity filed a notice of intent to sue the DOT for failing to stop lights at airports and harbors on Kaua`i, Maui, and Lanai from injuring Newell’s shearwaters, Hawaiian petrels, and band-rumped petrels, all of which are covered under the HCP.

A recent study led by the Kaua`i Endangered Seabird Recovery Project and published online in the scientific journal Condor found a 94 percent decline in the shearwater population and a 78 percent decline in the Hawaiian petrel population between 1993 and 2013.

“Kaua‘i’s endangered seabirds are under threat from a whole suite of issues, including introduced predators such as feral cats, powerline collisions, light attraction and invasive plants – as well as threats at sea which could include overfishing, by-catch and the effects of climate change,” stated lead author Andre Raine in a DLNR press release on the study.

 

* * *

Savio Gets Time

To Clear Out Properly

 

Cowboy hat in hand, Savio Realty vice president Dana Kenny pleaded with the Land Board last month for two or three more weeks to clear its property out of the old Uncle Billy’s hotel, which the DLNR abruptly ordered to close in June after a county inspection deemed it unsafe.

Savio had a permit from the board to keep the hotel operating while the DLNR and Hawai`i County worked out a plan for the greater Banyan Drive area owned by the state. Before that could happen, however, state and county inspections found numerous health and safety concerns at the hotel, known as the Pagoda Hilo Bay Hotel after Savio took it over last year.

At the Land Board’s July 14 meeting, DLNR Land Division staff had recommended canceling Savio’s permit and issuing a new one to Tower Development, which operates the adjacent Grand Naniloa Hotel and wants to build a fence around the dilapidated Pagoda property to shield it from view and to control trespassing.

Kenny, however, asked if the board could wait a little longer before canceling Savio’s permit so the company could exit properly.

“It’s been 17 business days to go from being fully operational to having a parking lot sale,” he said. “There’s not a manual on how to do this.”

He continued that Savio had been told by DLNR that the hotel would have to close on July 14 and then it would be given time to remove property (beds, furniture, etc.). Based on that timeline, Kenny said that Savio has paid for advertising for two sales.

“It’s next to impossible to do the sale by this weekend,” he told the board. “We’re selling beds. They’re being inspected for bed bugs. They’re being bagged. We’re trying to do this in a real fashion. We’re not dragging people through the hotel and [telling them] ‘pick what you want.’”

“Most of our rooms had full kitchen. We’re not talking about a bed, two night stands, and two lamps. We’re talking about microwaves, pots, pans …,” he said.

He said many furnishings will be going to non-profits: Catholic Charities, Habitat for Humanity, ARC. If Savio isn’t given enough time to distribute everything properly, a lot will end up at the landfill, he said.

He added that there are also hazardous wastes that need to be properly dealt with.

“Our agreement with you is an agreement we consider to be an honorable one. We want to walk out of that property and hand you folks the keys and have you folks say, ‘Wow, you did a good job.’ … We want to feel good about who we are. We’re members of the community. We’re going to run into each other again,” Kenny said.

“At the end, I want us to be able to shake hands and say, ‘It wasn’t the best experience, but it wasn’t a bad experience,’” he said.

Tower president Ed Bushor seemed amenable to waiting a few weeks. “I don’t care either way. I’m doing this for the community,” he said with regard to the fence. “I build churches. If we’re giving this stuff to the church, I’m the first guy to say it’s a good idea,” he said.

Land Board member Chris Yuen made a motion to give Savio three more weeks to complete its work and to give Tower a permit on August 4 to begin fencing.

After the vote, Land Board chair Suzanne Case offered her sympathies, as did Yuen.

“Getting to the point where we had to close it is the last point we wanted to be at with this property. I’m very sorry we put your company in this position,” he told Kenny.

— Teresa Dawson

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