Sunshine Lawsuit Halts Maui Vote On Agreement Giving Developers Water

posted in: May 2001, Water | 0

It was what one Maui resident called a “reverse Robin Hood” deal, where water was being robbed from the island’s poor – beset with constant water restrictions – and given to rich developers for resort and housing projects.

At its March 20 meeting, the Maui County Board of Water Supply was poised to sign away 8.9 million gallons of water each day for the next 25 years to a group of developers called the Central Maui Source Joint Venture. A lawsuit over the way the agreement was reached has derailed its approval for now, but the issue has put many residents on alert.

The “settlement agreement” was intended to resolve a dispute over water that the county years ago promised to the developers. The county’s chief negotiator recommended the board’s approval, but that recommendation came despite no clear determination of how much, if any, water the county owes.

Of no less concern to many was the secrecy that attended the negotiations. People at the March 20 meeting were further inflamed on hearing that the agreement was drafted not by a county attorney, but by a lawyer representing the private parties to it.

“If I were the public attorney that had drafted that agreement, I would be sued for gross malpractice,” said attorney Isaac Hall. It was Hall who, on behalf of Maui Tomorrow, Inc. and Maui resident Mark Sheehan, filed the lawsuit that led the board to defer a vote on the agreement.

Hall challenged the board to provide evidence that the developers were entitled to the water they claim. His own research, he said, had determined that far from being owned water by the county one of the developers, Wailea Development Corporation, might actually owe the county water. “And all of you know this,” Hall testified. At this, a few board members nodded in agreement. Hall added that probably only one developer, Seibu, now known as Makena Resort Co., was owed any water at all – about .5 mgd at the most.

In addition to filing the lawsuit, Hall requested a contested case hearing on the agreement. “The agreement puts [developers] up at the top again, over the Kula farmers, over all the people on the waiting list for meters, over Hawaiian homesteaders,” Hall said. “Here we go again, you guys are about to sign another agreement that’s going to vault them, the developer guys, the big corporations, up on to the top.”

The Agreements

In the early 1970s, four developers had big plans for central Maui but the county couldn’t provide enough water for their projects. Eager to start building, the developers struck a deal with the Maui County Board of Water Supply in 1975 called the Central Maui Source Development Agreement, calling for the developers to drill wells to supply 19 million gallons a day to the county’s Central Maui system. Each partner would share in the cost to develop these wells, which was estimated then at $1,962,000. At the time, the estimated sustainable yield of the `Iao aquifer, the source of the water, was thought to be 36 million gallons a day (it has since been recalculated at 20 mgd).

In return, over the next 25 years, each developer would “share in whatever quantities of water that are developed in each phase.” Should the full 19 mgd be developed, Wailea Development Company would have received 7/19 of the total amount, and Seibu, Alexander & Baldwin, and Hawaiiana Investment Co. would have received equal shares of the remainder. (The new agreement calls for sharing 8.9 mgd in the same proportion, so that Wailea would continue to receive 7/19, or roughly 3.3 mgd, while the others would get 4/19 each, or about 1.9 mgd.)

Instead of developing wells with a capacity of 19 mgd, the developers drilled three wells with a capacity of no more than 13.4 mgd, although even that is disputed. In the same period, the partners have built the Wailea Resort, the Maui Prince Hotel, and hundreds and hundreds of condominiums, among other things. The partners say they have not received water equal to what they developed and have pressured the county to allocate them the water they say they’re owed.

Last March, under a separate agreement with Alexander & Baldwin,* the board started negotiating with the partners regarding the “outstanding entitlement” of the 1975 agreement. On March 12, 2001, BWS member Bob Takitani presented the settlement agreement to the board and the public. Under the agreement, the joint venture partners (now called A&B Properties, Makena Resort Corp., Waliea Resort Company, and Hawai`i Land & Farming Co., Inc.) would contribute $1.5 million to develop water outside the `Iao aquifer, with the BWS is to reimburse them that sum.

Several testifiers asked what the source of the water would be. Many expressed fear that the new water will have to come from East Maui. Should that be proposed, it would be highly controversial. A county proposal for well development in East Maui has been subject to years of litigation, while nearly a century and a half of massive surface water diversions have many people calling for widespread restoration of streams.

The biggest question is: how much water – if any – is owed to the developers. But the proposed agreement leaves this unanswered. In a March 12 memo to BWS chair Elmer Cravalho, Takitani claimed the agreement settles questions about the amount of water used by the partners and the amount owed, but he then acknowledged that establishing a water allocation for each partner has not been possible because no one has agreed on how much water the joint venture developed.

Furthermore, he wrote, “The JV and BWS will resolve the issue of how much water has been used and how much is outstanding within 30 days from the adoption of this agreement.”

Noting the backwards approach, Jeffrey Parker asked the board, “Why decide the most important aspect after signing the agreement?”

BWS member Jonathan Starr also disputes the amount of water the joint venture has developed. In an opinion piece published in The Maui News of March 17, he explained that the developers’ wells produce much less than the claimed 13.4 mgd.

Because of maintenance requirements, total capacity is usually reduced either by a third or by the capacity of the largest well in the field. “In point of fact,” he continued, “the largest well at Waiehu Terrace has been out of service for the past 14 months after a catastrophic pump failure. This reduces the yield of all the wells drilled by the joint venture to between 8.3 mgd and 8.9 mgd.” That figure, in turn, should be further reduced by a third because of peaking factors. “An average home may use a certain number of gallons per day, but on some days, such as during summer holiday like Labor Day, use is far greater,” he wrote. “Thus, the true yield of the joint venture wells is between 5.4 mgd and 6 mgd worth of meters.”

Carl Freedman, a BWS consultant testifying as a private citizen, said in written testimony that language regarding water allocation would exempt the developers from BWS rules that require the department to find that there is adequate supply to accommodate each new request for service and that providing that service won’t compromise existing customers.

If water supply doesn’t keep pace with water demand in the Central Maui area, he said, the developers would get priority service, Freedman wrote. In addition, the county would be forced to provide water service without compensation for transmission, distribution, storage, or treatment costs – no matter where the service is requested. “If one of the partners asked the department for a water meter out in the middle of a cane field, or water for a subdivision or development in an unimproved location, the BWS would be contractually obligated to provide all necessary improvements,” he wrote.

Others testifying challenged the board’s authority to allocate water resources, saying that the authority to do so rests with the state Commission on Water Resource Management. In addition, they said, any allocation of water must not violate the public trust doctrine, which requires resources to be protected for use by the public.

In the complaint alleging Sunshine Law violations, Hall, too, argued that the agreement violated the public trust by giving developers priority access to all developed water resources, and by requiring the county to build water transmission infrastructure – at taxpayer expense – to meet the developers’ needs.

Several people testifying also argued that the Central Maui Source Development Agreement expired on December 31, 1999. The agreement states that the term of the joint venture would be until the 19 mgd was added to the BWS Central Maui system “or December 31, 1999, whichever date occurs earlier.” Therefore, they said, nothing is owed.

Secret Meetings

Before the agreement was distributed at the board’s March 12 meeting, board member Starr expressed his dismay at how it was reached. “I believe that it was negotiated in clear violation of the Sunshine Law,” Chapter 92 of Hawai`i Revised Statutes. Although that law does provide for specially appointed committees to investigate a matter of official board business, the scope of the investigation and of each member’s authority must be spelled out at a public board meeting before the committees embark on their task.

“Now,” he continued, “I requested very, very strongly on a number of occasions that if any meetings on this matter were to be held, that we board members be informed ahead of time. And so far, I’ve not as a board member received any information that such meetings were taking place. Starr said he had heard from “private sources” that three board members had been meeting with developers in private. “I understand that at least at one of those meetings, one of the board’s participants was none other than the president of one of the corporations which make up the Central Maui Source Joint Venture,” he said.

When Starr asked the identity of the Negotiating Committee, Cravalho ruled his question out of order. Only when Hall asked the same question did Takitani respond, identifying Peter Rice, Clark Hashimoto, and himself as members. He and Cravalho said members were appointed last April, while the committee itself was established eight years ago and has been negotiating ever since. Takitani said he became a committee member in 1998.

The board, with the exception of Starr, approved receipt of the report and scheduled the March 20 meeting for its approval. On that date, it was standing room only in the seventh floor meeting room of the county building. At the outset of the meeting, Cravalho announced that the board had received just half an hour earlier the complaint Hall had filed in Circuit Court the day before and would therefore not be voting on the matter.

The BWS never openly discussed anything relating to its Negotiating Committee, according to Hall’s complaint. How often the committee met or what was discussed is unknown. Takitani is no longer a member of the BWS and has declined to discuss board matters. Hashimoto told Environment Hawai`i, “In my short knowledge of joint venture discussions, we always went into executive session,” when the board and its attorney meet in private. His own involvement in the Negotiating Committee, he said began “after [the agreement] was written up.”

The Maui Board of Water Supply tabled the proposed joint venture agreement after this article was published. For details, see The Maui News’ online report of April 27, 2001: [url=http://www.mauinews.com.]www.mauinews.com.[/url]

* For details, see the July 2000 cover and the June 2000 article ” What Maui County and A&B Have Agreed On” online.

The 1975 and draft 2001 joint venture agreements are both available at the Maui Department of Water Supply website: [url=http://www.mauiwater.org]http://www.mauiwater.org[/url]

— Teresa Dawson

Volume 11, Number 11 May 2001

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