Board Talk: Unearthed Solar Farm Deal Forces Change to Legacy Land Purchase

posted in: March 2019 | 0

Eight years ago, an industrial development proposed by Tropic Land, LLC on two agricultural lots in Lualualei Valley drew crowds of supporters and opponents to meetings of the City and County of Honolulu’s Planning Commission and the state Land Use Commission (LUC).

To make its development possible, the company needed the city to amend the Wai‘anae Sustainable Communities Plan to allow industrial uses on about 260 acres amidst agricultural lands in the valley. That amendment was ultimately adopted, but the company’s failure to win enough votes from LUC members to change the land use district from Agricultural to Urban — in part because of its inability to secure access from the U.S. Navy, which controls the main access road — effectively halted the project. And years later, the company, whose investors were facing financial troubles, put the lands up for sale.

Enter the Wai‘anae Community Re-Development Corporation (WCRC), more commonly known as MA‘O Organic Farms. MA‘O operations director Gary Maunakea-Forth was one of the most vociferous opponents of the Tropic Land development, telling the LUC in 2011, “We look at Lualualei Valley as a huge opportunity. The soils there are good. Lualualei Valley is the Tuscany of O‘ahu.”

The non-profit organization bid on both of Tropic Land’s parcels, which had a total appraised value of about $4.3 million. On the smaller, 21-acre parcel, MA‘O proposed to plant a variety of food crops. If it manages to buy the larger 236-acre parcel, the organization plans to expand farming and build leasehold homes for farm managers and “others working in the broader community food systems movement,” according to a 10-year plan released in December 2017.

In mid-2018, with the help of a $750,000 grant from the state’s Legacy Land Conservation Program, the Trust for Public Land (TPL) bought the property with the intention of eventually transferring it to the WCRC. According to a report prepared by the Department of Land and Natural Resources’ Division of Forestry and Wildlife (DOFAW), which houses the Legacy Land program, TPL later became aware of a May 2015 unrecorded license agreement Tropic Land had entered into with Oahu SPE 101-14, LLC, a company that planned to develop a solar energy farm on 2.4 acres of the land TPL had just purchased.

The solar company secured a Feed-In-Tariff agreement with Hawaiian Electric Company in December 2017 and is in the process of selling its interest to AES Distributed Energy, Inc. Under various agreements, that company will ultimately be able to operate a solar farm on the property for 20 to 30 years.

Because the initial Legacy Land grant did not contemplate this use, DOFAW asked the Board of Land and Natural Resources on February 8 to amend its approval of the grant to allow the solar farm to be built. After the license expires, the land will used for farming.

Land Board member Chris Yuen asked Maunakea-Forth whether the license came up during negotiations over the purchase price of the property.

Maunakea-Forth replied that he was aware of it, but failed to convince the company owners to give the land back.

“I don’t have a problem with what’s being proposed,” Yuen said, adding that if he were selling the property, “I would say, look, I have a revenue stream that I’m giving up in selling this property and it would have bumped up the valuation.”

The TPL’s Steve Rafferty explained that the license came up in due diligence investigations that occurred after the initial Land Board approval. “The solar company showed up when we were very close to closing. They [Tropic Land] had a back-up buyer. Our option was to not buy the property or buy the property and roll the dice, so we bought the property and we’re holding it until MA‘O can get fully funded.” Rafferty reported that the organization has received $350,000 from Freeman Foundation, which will allow MA‘O to complete the sale.

To Yuen’s point about the land’s value, a second appraisal, which factored in the license, determined the property’s value to be nearly $1.4 million, rather than the $1,000,060 TPL paid for it. “Ironically, this turned into a bargain sale,” Rafferty said.

Land Board chair Suzanne Case asked whether it might be possible to elevate the solar panels, allowing farming to occur underneath. There are a couple of solar farms in the state, one on O‘ahu and another on Kaua‘i, that allow for sheep grazing.

“We have no control over the type of installation,” Rafferty replied.

Maunakea-Forth said that the company has a solar farm next door and the panels there are three to four feet off the ground. He also said his organization was less interested in farming beneath the panels and more concerned about how or whether the solar company would use herbicides to control weeds.

Under a revenue-sharing condition of the Legacy Land grant, $424,528 will be returned to the Legacy Land Conservation Fund if the solar farm operates for 20 years. The fund would receive $653,978 if the license agreement extends to its maximum 30 years.

The board ultimately approved the amendment to its 2018 grant approval.

According to MA‘O’s 10-year plan, planting of perennial crops is expected to start on the property this year, with production ramping up to cover 10 acres by 2022.

—Teresa Dawson

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