Land Use Commission Tries but Fails to Resolve Dispute over Kuilima Resort

posted in: March 2010 | 0

The stand-off between Kuilima Resort Company (KRC) and the community groups opposing its proposed 3,500-unit expansion of north O`ahu’s Turtle Bay Resort is officially in limbo.

At the state Land Use Commission’s February 4 meeting, commissioners came within one vote of putting an end to the April 2008 bid by the Defend O`ahu Coalition (DOC) to force KRC to defend the Urban designation of 236 acres owned by the company. The commission needed five votes to pass a motion by commissioner Kyle Chock to deny the group’s request for an order to show cause why the land, redistricted in 1986, shouldn’t revert to the Agricultural District. Of the six commissioners present, just four — Chock, Thomas Contrades, Duane Kanuha, and Nicholas Teves — voted to deny DOC’s request. Commissioner Normand Lezy opposed Chock’s motion and vice chair Reuben Wong abstained. A subsequent motion by Contrades to amend the LUC’s 1986 redistricting order was withdrawn after commissioners discussed legal issues in executive session.

Whether or not the LUC revisits the Kuilima issue any time soon, it was clear from the discussion at the meeting that some commissioners believe KRC has made substantial progress on the development and has, therefore, not violated any of the conditions in the 1986 Decision and Order (D&O) requiring certain elements to be built. Most of the commissioners at the meeting also appeared to agree with KRC that the timelines for build-out projected by the earlier landowner, Kuilima Development Company (KDC), are not binding upon KRC.

Even so, the commission was clearly not happy with the status quo and may, at some point, recommend on its own that the D&O be amended to include completion deadlines. On February 4, however, it just wasn’t ready to take that step.

Binding or not?

Discussion at the LUC’s meeting focused on two main issues: 1) whether the representations KDC made to the LUC in 1986 regarding its schedule for completing the resort expansion and the various components in that plan were binding, and 2) whether, in accordance with administrative rule at the time, substantial progress had been made in the redistricted area within fivfe years of the LUC’s original decision.

With regard to the first, the LUC redistricting order lacks any condition requiring the project or its components to be completed according to a certain schedule, although it does include projected deadlines in its findings of fact (FOF). For example, one finding states that substantial portions of the infrastructure, as well as 315 resort condominium units, would be completed within five years of the LUC’s approval (that is, by the end of 1991), and the entire expansion would be complete by 1996. Completion of Kuilima’s master plan would include a variety of projects, but under the D&O’s conditions, KDC was required to: 1) build hotels on property in the Urban District; 2) construct employee housing (equivalent to 10 percent of the condo units); 3) improve Kamehameha Highway; 4) develop water sources and infrastructure; 5) improve Punaho`olapa Marsh; 6) protect archeological sites; 7) provide public access and parking and dedication of a city park; 8) construct a sewage treatment plant; and 9) monitor coastal resources.

The DOC’s attorney, Greg Kugle, has argued that the administrative rules in effect in 1986 required the developer to make substantial progress in the redistricted area “within a period specified by the commission not to exceed five years from the date of approval of the boundary change.”

What’s more, Kugle has argued, state law and the LUC’s current administrative rules say that when deciding whether to issue an order to show cause, the commission must consider the representations and commitments made in the boundary amendment petition.

Kuilima’s attorneys have countered that KDC only offered projected — not firm — completion dates and that current rules regarding representations did not exist in 1986 and cannot be applied retroactively. Therefore, they argue, the LUC’s decision and order contains no enforceable time limit.

But at the commission’s meeting last month, Kugle argued that if the developers have eternity to meet the conditions, those conditions don’t really exist. The representations included in the findings of fact are therefore enforceable, he said. Should the LUC decide to adopt a recommendation by the state Office of Planning to amend the decision to include deadlines, Kugle added, the LUC might want to also consider adding standards concerning the developer’s financial ability to perform, and to revisit the conditions regarding affordable housing and burial treatment.

According to Kuilima attorney Ben Matsubara, there is no reason for the LUC to issue an order to show cause or to amend the decision because the KRC is in compliance and the decision is legally sound. While KDC clearly made statements about when the project would be complete — “the transcript is the transcript, what happened happened” — he said that the LUC cannot enforce conditions that aren’t expressly stated. The decision and order mentions that development must progress and that certain things need to be started, but the conditions don’t require hotels or anything else to be finished by date certain, he told the commission.

‘Substantial Progress’

The commission’s rules in 1986 allowed the LUC to impose some kind of time frame on development, but only in regard to the area redistricted, Matsubara argued. What’s more, the rule, Hawai`i Administrative Rule 6-3, only required Kuilima to make substantial progress in the development of the area redistricted, within a commission-imposed time frame not to exceed five years.

“Not ‘substantial completion,’ not ‘finalize all your development.’ You just have to substantially progress development within a five-year time frame,” he said.

He added that commissioners in 1986 knew they did not have any jurisdiction over the development timeline outside the petition area and therefore chose not to impose any deadlines in those areas.

“While it may not be a perfect Decision and Order, it is definitely not defective or flawed and no modification…is required,” he said.

Matsubara pointed out that, within five years of the LUC’s decision, KDC started infrastructure improvements, applied for permits for its wastewater treatment plant, began well construction, and completed the 18-hole Palmer golf course, among other improvements. This, he said, meets the burden of rule 6-3.

Commissioner Lezy asked what, among the things that KDC had said would be done in the 236 acres subject to the redistricting, had not been accomplished. Kuilima manager Stanford Carr responded by pointing out that the Palmer golf course and the Punaho`olapa Marsh cover more than 50 percent of the redistricted area. He acknowledged, however, that the proposed equestrian center, 96 acres of resort condominiums, and two parks have not been done, although one of the parks has received tentative subdivision approval. Carr added that he expected Kuilima would receive final subdivision approval from the city sometime this spring.

Lezy then asked Mastubara to explain how the golf course and marsh improvements constitute substantial progress, when the condo units — something Lezy said he considered to be the “primary components” of the development plan for the redistricted area — have not even been started.

“If there was a ‘substantial completion’ wording in there, I would agree with you… [but]the key term is ‘substantial progress’,” Matsubara said. He reiterated his position that the fact that work already done covers more than half the area counts as “substantial progress,” and that there is no requirement in the decision and order that anything has to be completed.

“Wouldn’t you agree with me, though, that the anticipation would be that once a petitioner makes substantial progress, that then should lead to completion?” Lezy asked.

“That could be argued,” Matsubara conceded, but he added that a lot of developments are affected by the market and that as long as a developer is making progress, that should be good enough.

When asked by commissioner Chock to define substantial progress, Matsubara said he didn’t have a legal definition, although at one point he stated that “substantial compliance” referred to infrastructure. In any case, Matusbara said, “the petition area….has much of the needed infrastructure and I think…we’ve progressed enough to contest any reversion.” He added that the golf course alone cost more than $20 million and Carr said about $10 million in engineering work has been done for parkway roads.

Kugle, however, argued that substantial progress, according to rule 6-3, refers “to the new use approved,” which in this case includes a golf course, 1,000 resort condo units, a public beach park, a private park, and a stable. “Of those new uses, they have a golf course, no condos, no parks, no stable. I would say of the five new uses [approved], they’ve got one….The public benefits that were so important — the parks and affordable housing — don’t exist,” he said.

Addressing the apparent concerns about completion, Carr said that while current entitlements allow Kuilima to build 1,000 condo units, they may not all be built. He said that Kuilima would build what the market desires, which, for the petition area, may be single-family units at 2.5 units per acre, as opposed to 12 units per acre, which he said would be allowed on 96 acres.

“So it’s highly possible you won’t be developing according to the representations you made back then?” commissioner Duane Kanuha asked.

No, Carr said. The uses would be the same, but the density may change. He explained that many local resorts have not built to the maximum density allowed by their entitlements. For example, the Mauna Lani resort on the Big Island was allowed to build four hotels and built just two, he said.

“Sometimes less is much more desirable. Obviously the market has to support what you’re building….No matter what the future is here, any time we build on any one parcel, we will be taking it through a process with the [City and County of Honolulu] Department of Planning and Permitting, which will require us to … address concerns,” he said.

Proposed Modifications

When the Defend O`ahu Coalition first filed its motion with the LUC for an order to show cause, the state Office of Planning (OP) recommended denial, and instead urged the commission to amend the decision and order to include development deadlines. When the LUC discussed Kuilima last year, several commissioners seemed interested in the OP’s recommendation, but deferred taking action without further legal counsel.

At the LUC’s February meeting, the city Department of Planning and Permitting’s Don Kitaoka discouraged the LUC from adopting any calendar deadlines on the expansion because some of the project’s timing is dependent on the city’s ability to process various applications.

Even so, OP executive director Abbey Seth Mayer argued that it would be appropriate to include some kind of development timeline in the D&O. In addition to requiring a developer to make substantial progress in the redistricted area within five years, Mayer pointed out, HAR 6-3 also allowed the commission to reclassify the land “upon failure to perform within the specified period according to representations made to the commission.”

“Kuilima tried to discount the value of the representations made, but clearly there is reference to representation,” Mayer said. However, he continued, it was unclear to him what the term “specified period” referred to.

“Does the term…refer back to five years or does it refer to the specified period in the representations or does it refer to the specified period that’s explicitly given in the conditions? So, I think there’s a lot of room to argue…the whole issue of substantial progress. I also think it would be appropriate to define substantial progress in the conditions…for the LUC then to have the foundation to take further action,” he said.

But while he advocated for inclusion of a schedule, Mayer asked for more time to work out an agreement with KRC. The OP and KRC had begun negotiations over a possible stipulated agreement for the development, but had postponed them pending a decision by the Hawai`i Supreme Court on whether the expansion’s decades-old EIS is still valid.

Mayer said he felt the entitlements, “the sheer quantity of units,” seemed inappropriate today, and that this issue, among other things, could be part of an agreement between the state and KRC. “For example, in negotiations, the state can ask for accelerated timelines for public benefits, it can ask for decreasing density in certain project areas,” he said.

Mayer said a lot of the most contentious aspects of the expansion fall outside the 236 acres and the parties might discuss whether the downzoning of other sites is possible, particularly parcels around Kawela Bay.

If the parties cannot reach an agreement, then the LUC can still add a time limit or other conditions, he said. If they do agree, they can present it to the LUC for the commission’s approval and adoption.

“The intent to modify [the D&O] will continue to bring the petitioner to the table,” he said, adding that despite his recommendation that the LUC deny the Defend O`ahu Coalition’s motion, “the motion has been positive in that it has brought the petitioner into discussions. Now there needs to be a correct motion. The order to show cause is not. A motion to modify is.”

Kuilima’s Matsubara said he agreed to negotiate with the OP, but opposed any modification of the D&O. “That being said, downzoning is something that could be discussed,” but the vehicle to implement that would have to be short of a modification, he said.

The coalition’s attorney, Kugle, said he had a huge concern about what might transpire in private discussions between the OP and Kuilima. He also said he did not share Mayer’s uncertainty about whether a developer was bound to perform according to its representations.

“You can’t get any clearer than that,” Kugle said of rule 6-3. “I don’t think the commission had to adopt a condition that said you have to comply with representations. You don’t have to do that. The statute says they do. The regs in effect then say they do. The regs today say they do. The Supreme Court says they do.”

The Vote

The commission did not agree. After returning from an executive session to discuss legal issues, Chock made a motion to deny DOC’s request; Contrades seconded the motion.

During discussion, Lezy argued that substantial progress clearly had not been made within five years of the LUC’s 1986 decision.

“A critical component of the petition area played into whether or not substantial progress had been made – the resort condo units. Representations were made by the petitioner that construction would be done in two years, well within the five years provided in 6-3. I do personally believe that those representations were binding,” he said.

Commissioner Kanuha said he echoed some of the comments of both Lezy and Chock, but in the end, the D&O and meeting transcripts left him uncertain about how binding the representations were.

KRC has made some strides in constructing infrastructure, but “whether or not that’s enough to pass the test, I’m not really sure,” he said.

Kanuha said he was inclined to support Chock’s motion, but added that more needed to be done to clarify what standards apply to the petition area, including “a solid time frame so there’s no ambiguity.” Chock agreed that more discussion was needed to bring a stronger sense of closure to this issue and added that DOC’s participation in any discussions between the OP and KRC was crucial.

Lezy interjected that if the coalition’s motion were denied, KRC would have no reason to continue discussions. He added that with regard to the commission’s desire to set a time limitation on completion, “frankly, [KRC] made it quite clear that they have no desire to modify.”

Contrades then assured Lezy that should momentum halt, he would make a motion to amend the D&O himself. “We might even want to up the requirements if we can,” he said.

Commissoin vice chair Wong was on the fence: He didn’t feel an order to show cause would solve any problems, he said, but if nothing was done, “This could continue forever and the petitioner gets the impression that he can take the next hundred years to develop the property. I don’t think that’s acceptable, and there must be a mechanism for modification.” Based on Contrades’ commitment to make a motion to modify, if necessary, Wong called for a vote.

The vote failed 4-1-1. Predictably, when Lezy moved to approve DOC’s request, no one offered a second. Contrades then moved to amend the D&O, but after an executive session, prompted by Lezy, to discuss how or whether DOC would participate in amendment hearings, Contrades withdrew his motion.

(For more on the Kuilima development, see the June 2006, September 2008, and March 2009 issues of Environment Hawai`i, which are available on our website.)


Teresa Dawson


Volume 20, Number 9 — March 2010


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