Whatever Happened to … DOBOR's Lease of Land at Ma'alaea?

A thousand dollars a day.

That’s roughly what the state has been spending for the last eight years for rent on a vacant one-acre lot at Ma`alaea Harbor, more than double the original lease rent of $150,400 negotiated in 1994. The only offset has been – as Environment Hawai`i reported in 1996 – a piddling few dollars the state got for allowing a sign to be posted near the intersection leading from the harbor to the stretch of condos along the southern shore of the Maui isthmus and for letting a construction company use it as a staging area while building the Maui Ocean Center.All that might soon change, however, according to Ed Underwood, administrator of the Department of Land and Natural Resources’ Division of Boating and Ocean Recreation. The Coast Guard, which has a presence at Ma`alaea, might be interested in using the property, he said. “We’re working with Williams right now,” he added, referring to the lot’s owner, Don Williams, a commercial real estate broker who paid $1.35 million for it just days before entering into the lease with the state. “Things will be happening pretty quickly now.”

No one at DOBOR will defend the lease these days, but when the lease was signed, it was a different story. Back then, DOBOR administrator Dave Parsons said members of the Maui legislative delegation were pressing DOBOR hard to acquire the lease on behalf of a fish company. The written record shows the reverse: DOBOR and the DLNR, under pressure from Governor Waihe`e and Senator Daniel Inouye’s office, were pushing the Legislature to approve purchase of the land or its acquisition through lease. (The Legislature did not approve, but the Board of Land and Natural Resources did vote later to enter into the lease. Ryther Barbin, attorney for Williams who negotiated the deal, has been the Maui liaison for Inouye for years.)

According to DOBOR property manager Bill Andrews, the cumulative total of what the state has paid to Williams came to about $4.4 million as of mid-May.

At the time the lease was signed, an appraisal paid for by the state put the value of the land at $1.66 million, while Williams’s appraiser established the value at $2.1 million. Originally, the state had inserted an option to cancel into the lease, but Williams objected. The state did get an option to purchase the land, but that expired after five years – on August 31, 1999.

In the years since the lease was signed, the Division of Boating and Ocean Recreation has come up with a series of ideas for how the land could be put to use, thus bringing in some income to offset the huge expense. Under lease terms, Williams must give his written consent in advance for any sublease of the property.

In 2000 and 2001, the state attempted to purchase the land and Governor Benjamin Cayetano signed off on the release of up to $2.5 million to finance the purchase. Williams was not a willing seller, however. And in 2002, the lease rent jumped from $297,000 a year (plus excise tax) to $350,000 (plus tax). In 2003, the state was considering ways to acquire the land through condemnation. That effort came to naught.

The lease expires in 2024. Unless the lease is broken, there is no prospect that the rent paid by the state will ever be lower than it is now. At $1,000 a day from here on out, that comes to an additional $6 million that the state will be paying Williams for the use – or lack of it – of this parcel.

Money to pay for the lease rent comes from the Boating Special Fund, which gets its revenue from the fees paid by tenants and users of the small boat harbors across the state. It is the same fund that pays for improvements and infrastructure at the harbors managed by DOBOR.

(For more on this intriguing story, including the involvement of the Church of Scientology and details on the lopsided nature of the lease, check out our website, www.environment-hawaii.org A link for free access to the 1996 articles we published is available in our EH-Xtra column. An update was published in January 2004.)

Volume 20, Number 12 — June 2010