City Struggles With Owner’s Claims Of Waimea Valley’s Value, Rights to Build

posted in: January 2006 | 0

He’s got entitlements. He’s got an appraisal for $18.2 million. He had an offer of $16 million for the property….

These are the kind of worries that made some Honolulu City Council members believe they’d be putting the city at risk if they let their condemnation lawsuit over Waimea Valley go to trial. “He” is Christian Wolffer, the New York-based investor who is a principal with former valley owner Attractions Hawai`i, which is fighting with the city over the ownership of and compensation for the valley.

At a December 7 meeting of the council, noted attorney James Case, testifying on behalf of the Stewards of Waimea Valley, said that the he had reviewed the court files, and determined that city had “a good hand.”

“You’re not going to get hurt by a jury of your peers,” he assured the council.

And what about that appraisal?

Case said that the council could trust its own, much lower appraisal. Also, he said, a separate appraisal done for the Office of Hawaiian Affairs appraisal “backs up the city” and strengthens the city’s case for condemnation.

(In his September 27, 2002 appraisal report, Craig Leong, hired by the city, noted that the flat, and therefore buildable, parts of the valley are mostly in special flood hazard areas and are rife with historic sites. Based on these and other factors, Leong concluded that the entire 1,875 acres were worth $2.6 million. Jan Medusky’s November 2002 appraisal report for Attractions Hawai`i was silent on what Leong saw limiting factors, but stated that the 300 makai acres—the part of the valley that extends from the vicinity of Waimea Falls to Kamehameha Highway – could be developed for residential use, while the remaining 1,500 or so acres were best reserved for “traditional conservation.” Medusky concluded that Waimea Valley was worth $18.2 million. OHA’s September 2001 appraisal by John Child & Company places the value of Waimea at $5.3 to $6.5 million.)

And what of that alleged offer?

“A whiff in the sky,” Case said. “It was a letter of intent, not binding on anybody. Anybody can sign a letter of intent that I’m interested in buying your property.…You don’t get any weight until you’ve sold a piece of land, you’ve got cash in your hands or you have a firm agreement of sale with a substantial down payment where the person is really going to be hurt bad if he doesn’t perform. A letter of intent is worthless. It should be discounted by you entirely,” he told Councilmember Gary Okino. Okino had expressed concern over what he had come to believe was a “pretty firm commitment” from the Ginn Company, an East Coast developer who had signed a letter of intent in November 2000 to buy Waimea Valley for $16.9 million. (Court records note that Leong describes the letter as “highly suspect.”)

Finally, Okino asked Case, “What about the fact that the landowner had entitlements to develop eco-cabins or whatever all the way up there, the side of the ridge, to the tune of two or three-hundred units?”

On this, Case admitted that he was not very knowledgeable. But according to Sam Lemmo, administrator for the Department of Land and Natural Resources’ Office of Conservation and Coastal Lands, Attractions Hawai`i has no such entitlement.

Thirty-one years ago, the Board of Land and Natural Resources approved a Conservation District Use Application for recreational use at Waimea Valley. The valley was owned then by Bishop Corporation, which a year earlier had received Land Board approval to develop its 1,800-acre property into a park.

In approving the permit, the Land Board approved in concept of Bishop Corporation’s master plan for the area, which included, among other things, the development of vacation cabins. Twelve areas had been selected throughout the park, each to contain six to 10 cabins, for a maximum of 120 cabins, each with a maximum floor area of 800 square feet.

The Land Board included conditions in the permit that required each project in the master plan to receive prior Land Board approval, each major project to be accompanied by an environmental assessment, and that upon the approval of a project, the applicant had one year to initiate construction of the project.

The Bishop Corporation and subsequent owners of Waimea Valley never built those cabins, even after the Land Board approved an updated Master Plan for the area in 1989.

While Okino seemed to think that the permit entitled Attractions Hawai`i to develop the valley, which would therefore make the land more valuable, Lemmo told Environment Hawai`i, “Approval-in-concept is not a vested right.”

The Council ultimately voted unanimously to deny a proposed settlement of the city’s lawsuit to condemn Waimea Valley, filed in 2001. The settlement, which had been crafted in secret, would have allowed the city to keep the 300 seaward acres (known to most people as Waimea Falls Park) for $5.1 million, and would have returned the remaining 1,500 or so acres of mountainous terrain to Attractions Hawai`i.

Immediately after the council’s vote, however, Honolulu Mayor Mufi Hannemann condemned the council’s action and reinitiated settlement talks with Attractions Hawai`i. If somehow the valley or portions of it are returned to Attractions Hawai`i (whether as a result of mediation or a court decision), proposed changes to the DLNR’s Conservation District Rules could significantly shrink the developable areas there.

Waimea Valley lies within the limited and general subzones of the Conservation District, but mostly within the limited subzone. DLNR rules allow one single family residence to be built on a limited subzone lot, so long as the house is built in a flood zone or coastal high hazard area.

It’s an odd rule, and many (including former Land Board member Kathryn Inouye) have questioned why the Land Board would keep a rule that encourages building in dangerous and unstable areas. So in 2002, the Land Board, led by Inouye who is herself a developer, approved a request by the DLNR’s Office of Conservation and Coastal Lands to hold public hearings on proposed rule changes that would eliminate language that encourages the building of houses flood- and coastal hazard-prone areas.

The OCCL held public hearings on the proposed changes shortly thereafter, but eventually chose to abandon the changes because landowners, believing they should be allowed to build in such areas, had objected strongly.

“I decided it was too much controversy,” says OCCL administrator Lemmo. “Private landowners were feeling they were getting rights taken away from them.”

However, Lemmo says he’s planning to try again and will include those proposed changes to the limited subzone rules in other rule changes he plans to bring to the Land Board early next year. If those changes are adopted, houses will be prohibited in the limited subzone, which covers more than half of Waimea Valley.

“There are eight parcels in the valley and not all of them are developable,” Lemmo says, adding that anyone wanting to build a home there would have to file a Conservation District Use Application and do an environmental assessment.

— Teresa Dawson

Volume 16, Number 7 January 2006

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