Hawai‘i County Reverses Course On Affordable Housing Approvals

posted in: January 2019 | 0

When the Land Use Commission approved the placement of more than 700 acres of Waikoloa land into the Rural district back in 2008, one of the conditions was that the landowner comply with County of Hawai‘i requirements for affordable housing. As set forth in Chapter 11 of the County Code, developers are to earn “housing credits” equal to 20 percent of the total number of units or lots proposed.

With Waikoloa Highlands, Inc. (WHI) proposing to develop 398 single-family lots, it would need 80 credits.

As it turned out, however, the deal, struck with the county in late 2016 and calling for 11.7 acres of WHI land to be used for that purpose, fell far short of that. At most, the county may see 32 affordable units developed as a result of the affordable housing agreement signed by representatives of the administration of former Mayor Billy Kenoi

just days before his term expired. (Environment Hawai‘i reported more extensively on this in our September 2018 edition.)

At an LUC hearing on October 24, the question of whether the county’s agreement with WHI was sufficient to satisfy the affordable housing condition arose. To allay LUC concerns about that, WHI attorney Steve Lim had Valery Grigoryants, the individual who has been identified as having ultimate authority over the company, address the issue.

Was the company “currently able and willing to see the project through to completion?” Lim asked.

“Yes,” Grigoryants replied.

“Are you aware of recent discussions with the county” Office of Housing and Community Development (OHCD)? Lim asked.

“Yes,” Grigoryants answered, “and I would like to confirm that we have intention to start negotiation in good faith to transfer three or four acres for affordable housing,” which, he said, would be in addition to the 11.7 acres transferred as a result of the 2016 agreement.

When Joel LaPinta, WHI’s on-the-ground manager in Hawai‘i, testified at that same October hearing, he disclosed that he had met with county OHCD staff and a deputy corporation counsel assigned to the agency earlier that month.

Lim told the commission that the meeting was requested by OHCD “to assist their project developer,” the current owner of the 11.7 acres. “The developer needs more land area because there’s a mauka-makai drainage that runs through the property, so there’s not enough land to develop af- fordable housing. We’re trying to show the commission that the petitioner is, in good faith and on a voluntary basis, trying to help the county.”

The OHCD, La Pinta said, “asked us to come and meet with them to acquire more land to accommodate 80 more affordable apartments. … We would like to accommodate them.”

Lim asked La Pinta what “drivers” – incentives – were offered to WHI in return.

“Available tax credits,” he replied.

Commissioner Dawn Chang was baffled by the discussion.

“With all due respect, I’m a little confused. Is this transaction related to the affordable housing condition in the matter before us, or is this a separate transaction?”

“We think it’s a separate transaction,” Lim said. “For the first time, we saw the county’s position that the release of the housing requirement wasn’t good. So that’s why we’re discussing why we feel that we satisfied the requirement. … If the county takes the final position that we haven’t satisfied the agreement, then this becomes very relevant.”

On October 25, Jeff Darrow, representing the Hawai‘i County Planning Department, was questioned further on the affordable housing condition.

“Do you know the county’s position on fulfillment” of the affordable housing provision? Darrow was asked by Ron Kim, the deputy corporation counsel advising the Planning Department?

“Our position is that they have not complied with the affordable housing require- ment,” Darrow replied.

Lim then bore down on Darrow under cross-examination.

Was Darrow involved in preparing the affordable housing agreement?

No, Darrow answered.

Was he involved in negotiating the agreement?

No, again, Darrow said. That fell to the OHCD staff, “as well as our corporation counsel,” which approved the agreement, and the mayor’s office.

Was Darrow familiar with the “affordable housing release” document, signed off on by the county in July 2017, which purported to release WHI from further need to comply with affordable housing conditions?

Yes, Darrow was familiar.

“Why was this release agreement executed by the county?” Lim asked Darrow.

“I can’t answer that question,” Darrow said, adding that the OHCD administra- tor, Neil Gyotoku, and possibly the deputy corporation counsel, Amy Self, who signed the release, could shed light on that issue.

“Why the change of position?” Lim asked.

“A question has arisen on the transfer of the 11.7 acres to an entity that was not considered a nonprofit entity,” Darrow answered. Under the County Code, the land has to be transferred either to the county itself or to a qualified nonprofit. The recipient of the land, Plumeria at Waikoloa, LLC, was a for-profit entity.

“The petitioner is concerned,” Lim said. “We had an agreement. Now the county says, ‘you didn’t do what you needed to.’ We’re trying to determine what exactly they want us to do.”

Kim, the county corporation counsel, explained to the LUC that there was no way the agreement and the release, although signed by county officials, could have ever bound the county. “The main factual problems with the agreement are that it doesn’t comply with its own terms or the County Code,” he told the commissioners. “The county cannot contract to trump its own code. Chapter 11-5 requires that if the developer is to donate land … in lieu of developing it itself, the conveyance must be to either the county or a nonprofit. In this case, the conveyance was to a for-profit, which turned around and sold the property for a reported $1.5 million.

“And the other problem with the property that was conveyed was that it is not supposed to have any unusual characteristics that would make it difficult to develop. Yesterday, Mr. LaPinta testified to the substantial drainage easement that made it difficult to develop, and also the unusual shape.

“Finally, the land donated is supposed to be sufficient to accommodate the number of affordable housing units which the developer is required to build, and in this case, the actual owner now of the property is saying he can only build I believe the number … was 32 affordable housing dwellings. So these are the problems I see.”

There was one more thing Kim wanted the commissioners to know: The agreement on affordable housing claimed that Plumeria at Waikoloa was a nonprofit, “which was not true.”

At the conclusion of the October hearing, the LUC instructed the parties to brief the commission before its final hearing on, among other things, the question of whether the affordable housing condition had been satisfied.

That final hearing, held November 28, saw Gyotoku, the county housing administrator, testify under subpoena as to his knowledge of the circumstances surrounding the two key documents that relate to the affordable housing condition. First, there was the December 2016 agreement, which called for 11.7 acres to be transferred to Plumeria at Waikoloa. Second, there was the release from the condition that was executed in July 2017.

The “Affordable Housing Agreement” was signed by four parties over about a two-week period. Natalia Batichtcheva signed on behalf of Waikoloa Highlands on November 18. Susan Akiyama, the county housing administrator at the time, signed on November 22. Deputy corporation counsel Amy Self signed her approval “as to form and legality” on November 30. Finally, Mayor Kenoi signed on behalf of the County of Hawai‘i on December 1.

Gyotoku did not assume his position until December 5, as part of the new ad- ministration of Mayor Harry Kim. Asked by Lim if he could “speak to issues relating to the 11.7 acres conveyed,” Gyotoku replied, “In part, I am.” Under further questioning, it became clear that Gyotoku would admit to little knowledge of the details as to how or why Plumeria at Waikoloa had been chosen to receive title to the 11.7 acres designated for affordable housing.

“How did the county pick Plumeria?” Lim asked.

“I do not know,” Gyotoku replied.

Lim then suggested that the county had altered documents. “You understand that the deed signed by my client for 11.7 acres was altered at some point in time at the county’s level?”

Gyotoku replied, “I believe so.”

Lim: “Without the consent of my client?”

Gyotoku: “Yes.”

Ron Kim, the deputy corporation counsel representing the county, sought to clarify this point: “My understanding was, you said that the deed Waikoloa Highlands signed was altered at the county level. Did the county alter the deed after it was signed?”

Gyotoku: “By the time it was recorded at the Bureau of Conveyances, it does not say it was not a nonprofit. My understanding was, when it was at my office, Plumeria was a nonprofit.”

In fact, documents that Environment Hawai‘i obtained from the Bureau of Conveyances as well an exhibit offered by Lim reveal that there are discrepancies.

The warranty deed that conveyed the land to Plumeria at Waikoloa – signed June 1, 2017, by Batichtcheva, but not recorded with the state bureau until January 29, 2018 – identifies Plumeria at Waikoloa, LLC, as “a Hawai‘i limited liability company,” giving its address as a Post Office box.

A nearly identical document, which was forwarded to the Office of Housing by Sidney Fuke, a planner then working on behalf of Waikoloa Highlands, on June 19, 2017, is identical in all respects but one: on the second page of the warranty deed, Plumeria at Waikoloa is identified as “a Hawai‘i non- profit corporation” having a street address the same as that of Hilo attorney Paul Sulla. However, within that same document, on page 1, Plumeria at Waikoloa is said to be a Hawai‘i limited liability company.

The notarized signature page and the notary authentication are identical on both documents.

The “release agreement,” which Fuke appears to have drafted and Batichtcheva also signed on the same day as the warranty deed, also identifies Plumeria at Waikoloa as a Hawai‘i “non-profit corporation.”

In the end, Gyotoku shed no light on the confusion. Mayor Harry Kim did give finality to the matter when, on November 9, he signed a letter stating clearly the county’s position:

“The official position of the county of Hawai‘i (‘County’) is that Waikoloa Mauka LLC (‘Petitioner’) has not yet fulfilled Condition 9 (Affordable Housing) of the State Land Use Commission’s Findings of Fact, Conclusions of Law, and Decision and order… At the present time, Petitioner is engaging in negotiations with the County towards fulfilling this condition, and the County will require Petitioner to fulfill its affordable housing requirements under the law.”

With the LUC having reverted the classification back to Agricultural, there is no current housing requirement. If the landowner wishes to pursue county approvals for an Agricultural lot development, however, it will still need to satisfy the requirements of the County Code.

As to who nominated Plumeria at Waikoloa to receive the land and who took the $1.5 million in proceeds when the land was resold to the current owner, that remains a mystery.

— Patricia Tummons

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