Panel Green-Lights Zoning Change for Hotel, Other Uses at Kona Airport

posted in: Land Use, September 2020 | 0

In July and August, both the Leeward and Windward Planning Commissions of Hawaiʻi County approved a recommendation that the County Council change the county’s zoning ordinance and county code to allow for a range of activities at the county’s two major airports, in Kona and Hilo.

The change involves adding a definition of “primary airport” to the zoning code that conforms to the Federal Aviation definition of an airport that receives 10,000 or more passenger boardings a year. The proposed definition also lists “standard accessory uses” at primary airports, including, but not limited to, retail and dining establishments, rental car offices, service businesses, and hotels and conference centers.

Planning director Michael Yee, who initiated the change, said the current zoning at airports – Limited Industrial (ML) and General Industrial (MG) – does not allow for a number of uses that are already occurring at the airports, such as retail businesses and automobile rental companies. “One reason for this amendment is to bring these uses in line with the Zoning Code,” Yee stated in his recommendation to the commissions.

“Another reason for this amendment,” Yee wrote, “is the county has received a request from the Department of Transportation – Airports Division to allow for conference centers, and for overnight accommodations (hotel) to support airport operations … mainly for the Kona International Airport.”

This “Primary Airport” land use along with accessory uses, Yee wrote, will still require plan approval be obtained from the planning director. “This plan approval review will allow the planning director to approve the request, including requested accessory uses, as well as review and approve the associated elements of each use, such as height, amount of rooms, parking, setbacks, landscaping, etc.”

There was little public objection when the matter came before the Windward Planning Commission in July. But last month, when the proposed zoning changes were heard by the Leeward Planning Commission, several members of the public voiced concerns that the proposal was, as Janice Palma-Glennie put it, the “nose under the tent” that would unleash much more – and much more inappropriate – development, impairing nearby coastal waters.

Testifying in favor of the changes was Chauncey Wong Yuen, the Hawaiʻi District manager for the DOT’s Airports Division. It was Wong Yuen who wrote Yee last December, requesting the changes be made. In justifying the request, especially the hotel, Wong Yuen noted that a hotel was already in the Kona airport master plan. It would “support the needs of business and government travelers” and would provide accommodations to travelers who might be stranded. “Also,” he wrote, “we are targeting a hotel size of 150 rooms, which would accommodate a typical flight size in the event of a cancellation.”

The hotel, he concluded, “will be a tremendous benefit to the Ellison Onizuka Kona International Airport at Keahole, and to the traveling public and community… The hotel would still be subject to RFP [request for proposal] requirements of [Hawaiʻi Revised Statutes Chapter] 102, and subject to approval by the Board of Land and Natural Resources.”

After Yee drafted the proposed changes, the DOT submitted further comments in April, this time from DOT Director Jade Butay. While DOT-Airports “appreciates and supports the … action to address this zoning inconsistency,” Butay wrote, he objected to the language requiring plan approval from the county planning director.

The plan approval requirement remained. 

A Done Deal?

Wong Yuen claimed in his letter that a competitive request for proposals would be issued before any hotel plan would be submitted. And in his testimony to the commissioners in August, Craig Biscard, the property manager for the Kona airport, said that he would “look for potential lessees to do the development.”

However, Melvin G. Mason Jr. seems to think he already has a lock on the hotel.

In his testimony before the commission, Mason said he was the CEO of Keahole Hotel & Suites, a business that, according to the Department of Commerce and Consumer Affairs, was organized in October 2019. He had already worked out an agreement with the neighboring Natural Energy Laboratory of Hawaiʻi Authority – NELHA – for delivery of seawater for a sea-water air conditioning system for the hotel. “It’s been in the works since 2006,” he said.

“I was the one who actually propositioned and proposed this to be built,” he added. In getting to this point, “honestly, I went through a lot of hoops, red tape, black tape, purple tape, blue tape, white tape. Everything. Even with the Ethics Board.” (He did not explain this further.)

Mason said he was the former CEO and president of Keahole FBO I, LLC, “which is actually the big development with the FBO at the end” – at the south end of the airport property, that is.

No one raised an eyebrow at that. It was one of many claims Mason made in his 10-minute testimony that day, celebrating his aliʻi ancestors, his business acumen and experience at home and abroad, and his successes in developing inventive educational tools and curricula.

Right before the commissioners were set to vote on the issue, commissioner Max Newberg asked Mason, “Out of curiosity, are you a developer?”

Mason replied, “Yes, I’m going to be developing this.”


In fact, Mason was involved with not one but two businesses that received approval from the Board of Land and Natural Resources for no-bid leases to develop fixed-base operations – FBOs – on property at the Kona airport.

On the same property, in fact.

On December 9, 2016, the Land Board approved a Department of Transportation request that it be allowed to issue a 35-year direct lease (not competitively bid) of 239,456 square feet – about 5 and a half acres – of land at the southern end of the Kona airport to Keahole Enterprises, LLC. The leased land included land straddling both the state Urban and Conservation districts, although the map attached to the DOT’s submittal did not indicate state district boundaries. The DOT regularly claims in its submittals to the Land Board that such direct leases are authorized under Chapter 171 of Hawaiʻi Revised Statutes. The negotiated lease rent for the first five years was just under $127,000 a year. Listed as the sole member of Keahole Enterprises, which had been registered with the Department of Commerce and Consumer Affairs just six months earlier, was Jon Riki Karamatsu, a former member of the state House of Representatives and a partner of Mason in a number of enterprises. The Land Board approved the request without discussion.

Less than a year later, the DOT was back before the Land Board, seeking its approval for a direct 35-year lease of land at the Kona airport. This time, the area to be demised was the same as had been approved by the board earlier, but it also included an additional 17 acres, for a total of 22.7 acres.

Maps submitted to the DLNR in 2016 and 2017 show the areas proposed for a direct lease for an FBO at the Kona airport. The area proposed in 2016 is included in the 2017 proposal.

The proposed lessee on this occasion was Keahole FBO I, LLC, an entity organized in August 2016. Again, the Land Board approved it and about thirteen other requests from the DOT in just one vote. And again, the sole member of the LLC was Karamatsu. Proposed rent was $474,397 a year for the first five years, with increases thereafter.

As a condition of the lease, Keahole FBO I was required to invest at least $5 million in improving the premises in the first two years of the lease. As before, the report submitted to the Land Board stated that no environmental assessment or environmental impact statement would be required for the anticipated development, since it was already covered in an environmental assessment of 2013 for the Kona airport master plan.

In January 2019, at the opening day of the Legislature, Karamatsu posted on his Facebook page a photo of legislators milling about on the floor of the House chamber.  “My business partners and I are working to build facilities, infrastructure and services for private jets” at the Kona airport, he wrote in an accompanying post, “where we have over 15 acres of land. … Further, our entities are helping the state on improvements they want in their KOA [Kona airport] master plan.”

That year, Senate Bill 652, and a companion bill in the House, called for authorization of up to $50 million in special purpose revenue bonds to support the development proposed by Keahole FBO I. Among those supporting the bill was the Department of Transportation, which said the bonds would “provide a portion of the financing for the Kona Jet Center … situated on a 16-acre development at the south end” of the Kona airport. The project would include “six acres of new ramp, a 6,500 square foot fixed base terminal, a 36,000-square-foot state of the art hangar, a 50,000 gallon above-ground fuel facility,” in addition to roads, parking lots, and utilities, the DOT testimony stated.

Later in the 2019 session, the Senate bill was amended to delete the mention of $50 million and instead leave the dollar amount of bonding blank. In testimony on this draft, Keahole FBO I asked that the original amount be restored, stating: “In addition to the lease fee for our premises and lease fee for the areas to be developed for the DOT, the DOT will receive $7.5 million in in-kind donation of developed infrastructure and generate revenue from 2 percent of our gross profit, $0.04/gallon of Jet A fuel we sell, and 30 percent of any of our subleases.”

The bill did not make it out of conference committee. By that time, Keahole FBO I had hooked up with AV8 Partners, LP, whose principal, Matthew Clayton, identified himself in testimony to the Legislature as one of the founders of Keahole FBO. Today, AV8 Partners is listed in the DCCA registration as the sole manager of Keahole FBO I, LLC. Its mailing address is in care of one Kevin Allen in Phoenix, Arizona.

Meanwhile, it is unclear whether the DOT ever did execute a lease with either of the Mason-affiliated entities. A query was made to the DOT, but no response had been received by press time. A list of private companies occupying the Kona airport site appears on the Hawaiʻi County property tax website, but the name of Keahole FBO I or Keahole Enterprises is not among them.

On his website for Keahole Enterprises, however, Mason has a page devoted to the Keahole Hotel & Suites. “Even if you don’t travel a lot,” the website states, “you’re [sic] always enjoy the benefits of an VIP at our smoke-free Legacy of Keahole Hotel & Suites in Kailua-Kona, KEAHOLE, HAWAIʻI, at the Kona International Airport.”

“Our hotel also has a coffee shop, sundry shop, banquet rooms, and an airline ticket desk,” the website says.

Photographs show the inviting lobby and bar – of the Hotel Plano – Frisco, in Plano, Texas.

— Patricia Tummons

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