Time and again, developers of resort communities in Hawai`i have attempted to win approval (both official and unofficial) for their proposals by depicting the benefits that their projects will bring. Hamakua Sugar Company is no exception.
In October 1991, the company prepared a document entitled “Kukuihaele Land Use Public Benefits Proposal.” It recites the benefits of keeping Hamakua Sugar in business. Included in this category are 750 plantation jobs and 1,700 indirectly related jobs; 450 plantation-supported housing units; revenues to the county of $60 million a year, and power generation amounting to roughly 12 percent of the Big Island’s electrical supply.
But it also contains a list of what are described as regional benefits to be derived from the proposed development of the resort complex in the Kukuihaele area. These benefits “represent a quantitative value of approximately $135 million,” the document asserts.
There Goes the Neighborhood
If that $135 million were a cash contribution to the county; it would nearly equal the county’s annual budget. However, the contributions are almost all “inland” donations of land, whose value is fixed not at the cost Francis Morgan paid for it ($2,500 an acre, approximately) but at a cost approaching ten times that.
The report makes reference to potential public costs, but does not quantify these. Whatever they are, according to the report, “the project is expected to generate revenues substantially greater” than those costs. First of all, the continuation of Hamakua Sugar’s operations will keep its $60 million a year flowing to the state’s economy and, applying to that figure the “sugar industry multiplier” effect, “this component of community economic benefit” can be computed to be worth $187 million to the Hawaiian economy, the report states. Increased property taxes from the development will cause revenues to exceed costs to the county, with the excess over 20 years being reported at $175 million.
Finally, the report calculates that construction and visitor spending revenues would result in “a cumulative positive balance of state revenues over costs after 20 years of operation” of $85 million to $125 million.
These figures are presented without argument; there is no way of knowing on what basis the benefits stated were calculated.
Inflating Assets
The report is more specific when it comes to the dollar value of the contributions Hamakua Sugar Company has agreed to make as a result of “anticipated exactions.”
There is the donation of 12 to 18 acres of land for a new school in Honoka’a. This land, which the report says has a value of $18,000 an acre, is shown to represent a contribution of $2.16 to $3.24 million. (Obviously, there has been an error in someone’s arithmetic; even assuming the land has this value -a questionable assumption – the value of the donation would be no more than $324,000.)
The next contribution – of a two- to six-acre site for a “fire/police station in Honoka`a – is reported to have a value of $36,000 to $108,000. The math this time is correct, even though the assigned value of the land is still questionable.
Construction of a seven-mile roadway, with a 120-foot-wide casement the entire length, linking Kukuihaele to the Belt Highway at Waimea represents a contribution calculated to be between $52 million and $15 million.
The fourth contribution is of a 70-acre site in Honoka’a to be used for more than 200 “affordable/ resort employee housing” units. This contribution, at $20,000 an acre, has a value of $1.4 million, according to Hamakua Sugar.
A Wash for the Public?
Next are infrastructural benefits. Construction of “all interior project roadways” is included herein (even though this is not a public benefit unless the public is allowed to use the roadways). Intersection improvements “as required” are included as well, although the need for these improvements would be a result of the resort development – once again making it difficult to see how the public obtains any net benefit. Other components of this contribution are listed as the development of a domestic water system; two wastewater treatment facilities; storm drain systems, electrical and telephone facilities to serve the resort, and “possible solid waste transfer station site.” All these items would be for the use of the project, with only minimal benefit to the public (with the possible exception of the possible solid waste transfer station). The total value of the infrastructure is placed at $80 million.
The report then lists five “regional public benefits directly related to recreation, open space, agricultural and historical/cultural preservation.” These include a 300-acre buffer, to be dedicated to the state through a conservation easement, along the rim of Waipi’o Valley (362 acres at $24,000 an acre, or $8.7 million), a new Waipi’o Valley lookout with a visitor center, access road, parking area, picnic pavilions, restroom and landscaping. The improvements will cost $250,000, the report states.
A third amenity will be “public shoreline access parking and related improvements” At 1.5 miles, a 10-foot right of way comes to two acres. The approximate value is placed at $48,000 for land and $200,000 for improvements.
A Meaningless Exaction
Fourth on this list of “recreation, open space, agricultural and historical/cultural preservation is core plantation downzoning.” This is a reference to one of the “exactions” placed on Hamakua Sugar as a condition of upzoning the land proposed for the Resort. In return for the resort approvals, Hamakua Sugar agreed to have 12,000 acres of its remaining land, intended to be kept in cane, downzoned into the Agricultural-20,000 a category.
In County Council debate on this so-called exaction, Council Member Helene Hale described it as meaningless. “There’s not going to be one 20,000-acre parcel,” she said in the Council’s meeting of November 20, 1991, “and any of those parcels that exist now that arc not contiguous are going to be nonconforming, and they’re going to be able to be sold off. They’re not in the plan at all, and that really bothers me.”
Tim Lui-Kwan, a lawyer for Hamakua Sugar, provided some specifics. Eighty-one separate tax map parcels now existing would be consolidated into 47 new parcels, he said. “And it’s true, some of them can’t be consolidated because there’s nothing to attach to… But some of them are being created [that] are big there’s one consolidated lot that would be over 1,200 acres.”
In any event, the manner in which the dollar loss entailed in this downzoning is calculated bears noting. Each downzoned acre represents a loss of $2,000 to Hamakua Sugar, according to the report, for a total loss, or “contribution,” of $24 million. However, the land itself will remain as productive as before, there is no actual loss at all represented by this downzoning.
The fifth benefit in this recreational-open space category concerns public play to be permitted at one of the three resort golfcourses. The public will be allowed 30 starting times a day and will be charged $25 per round of golf, according to the plan. The dollar value of this contribution is placed at $711,750 per year – meaning, evidently; if one calculates backward, that the public will be getting a discount of $65 off the regular rate of $90 per round. Inasmuch as the regular rate anticipates a profit for the owner of the golfcourse, and does not therefore represent out-of-pocket costs, to take as a contribution the full $65 per round difference entails an extremely generous calculation of benefits.
The package of community benefits for the Kukuihaele area is made up almost entirely of land to be donated to various projects. Six acres for a county park, six more acres of land under the Last Chance Store and 11 plantation camp houses, four acres near two other plantation camps; three acres for a cemetery expansion; an acre of land for an intersection with a new road leading to the makai resort – this adds up 1020 acres, to which Hamakua Sugar assigns a total value of just under $300,000. The new intersection itself is estimated to cost about $1 million (although here, again, since this is a cost associated with the new resort, and is only necessary if that resort is to be built, this intersection represents no net gain for the people living in Kukuihaele).
Establishment of a “Kukuihaele Real Property Tax Trust Fund” is being considered (no commitment) by Hamakua Sugar Company. This, the report says, would be “to provide additional tax relief beyond what is available in the existing real property tax system.” No dollar figure is assigned to this.
Finally, an “interpretive/cultural center, plantation museum, community center” is listed. Here, again, there is no specific commitment of any dollar amount.
Paper Benefits
The public benefits, as itemized in the Hamakua Sugar Company benefit plan, come to $135 million. This includes the donation of about 600 acres of land, to which Hamakua Sugar assigns an average value of more than $23,000 an acre (exclusive of the “value” lost to dowzoning.)
But if one looks more closely at the benefits listed, quite a different picture emerges. Those projects whose beneficiaries are resort visitors and residents should not properly be included in this list. Also, those projects that would not be required if the resort were not being developed should be eliminated. Finally, it is reasonable to calculate the value of land contributed for public use on the basis of $2,500 an acre (what Morgan paid) instead of $20,000 or more an acre.
On this basis, the public benefit component of the development can be considered as follows: $36,000 for school land; $12,000 for a fire house or police station; $140,000 for land for “affordable” housing, $724,000 for the Waipi’o Rim buffer and $250,000 for the improvements at the lookout, $4,000 for the shoreline access path; and $40,000 for the various parcels in Kukuihaele. The grand total is $1.206 million, or less than 1 percent of the figure stated in the Hamakua Sugar Company plan.
The long-term, overall benefits are far greater than even the $135 million, Hamakua Sugar states. Its report concludes by comparing a “without project” scenario to one “with project”. The former is “conservatively estimated at almost $200 million annually,” what with revenues lost, unemployment benefits having to be paid, and a loss of the mill as an independent electrical power producer. The “with project” scenario results “in a total public and community benefit figure of at least $335 million.”
The public costs are not addressed in the report. However, these may be substantial. Several of them are identified in a report on the potential socio-economic impacts of the Kukuihaele development plan (prepared by Community Resources Inc., and appended to the Kukuihaele Land Use Plan prepared by Belt Collins & Associates).
Hamakua Sugar argues that the increased expenditures will be more than covered by increased taxes. The Community Resources, Inc, study claims that the additional real property tax revenues will come largely from owners of the land to be developed, as opposed to full-time resident. Even so, it acknowledges that the proposed development “could encourage speculation, prematurely driving prices up.” Also, “for the average resident of a small community like Honoka’a,” notes, increases in value/cost/taxes would come from other working families seeking a home in tight housing market.”
Volume 2, Number 11 May 1992