Kawao Park is no more. The site it once occupied, high on the western wall of Palolo Valley, has been irreparably scarred by a contractor hired by a developer required by the City and County of Honolulu to build a water tank as a condition of the city’s approval of a subdivision in Palolo Valley.
The developer has filed for bankruptcy; the contractor has stopped work; the city is left holding a piece of property that is more than worthless, it is a major liability. City engineers worry that heavy rains could loosen thousands of cubic yards of illegally dumped fill. Drainage swales downstream are already clogged by rubble. Any more might well cause flooding in the area.
To restore the site, the city can, of course, draw down on the performance bond posted by the contractor. But no one involved seriously believes that that bond -in the amount of $20,000 – will be adequate to restore the site to anything remotely approaching its original condition. To give some idea of the bond’s inadequacy, consider that the contractor claims already to have done about half of the excavation and construction work called for, and his costs to date have been more than $700,000.
Since December 1990 all work has stopped on the site. The city has been desultorily trying to get the contractor, H.E. Johnson Co., Inc., to remove the fill placed on the park grounds – placed there, as it turns out, without any of the necessary permits having been obtained from the Department of Parks and Recreation and in violation of the Conservation District Use Permit issued for the work. In contrast, H.E. Johnson has vigorously pursued its own claims against the developer, Emma International, Inc., a company registered in Hawai’i but whose owner lives in Taipei.
For a park as small as Kawao, the story of its demise is long indeed. For anyone interested in the use and abuse of public land, however, it is a story worth telling.
In the Beginning
Kawao Park sits – or sat – on four acres that were part of a much larger parcel than the City and County of Honolulu purchased in 1952. The previous owner, American Finance, Ltd., had proposed to develop the 25-acre parcel as part of what was called Unit V of the Carlos Long subdivision. But Frederick Ohrt, chief engineer of the Board of Water Supply at the time, reported to the city Planning Commission in August 1951 that “there was evidence of ground movement taking place in that area.”
Ohrt had had an engineer on his staff, M.L. Randolph, study the soils at the site. Ohrt summarized Randolph’s findings to the Planning Commission as follows:
“The Unit V area is divided into two geographically different parts: (a) the mauka leg, where the soil is in a serious condition of instability and where the drainage problem, though present, is not insurmountable, and (b) the bay in the valley walls where the drainage problem is paramount, although there are and will be problems of soil instability and topography.”
Ohrt recommended to the Planning Commission “that the area be declared unsuitable for a homesite subdivision … and that it be suggested to American Finance, Ltd., that the project be abandoned.”
Concurring in that opinion was the Federal Housing Administration, which informed the Board of Water Supply that in view of Randolph’s “excellent” study, the FHA had determined that “the risks involved do not warrant further participation in this area by FHA.”
American Finance was suddenly very interested in unloading the property. Its vice president, Ruddy Tongg, offered a total of about 35 acres for sale to the city for $20,000. On September 11, 1952, the Board of Water Supply accepted the offer. And so the city came into possession of the land.
In 1959, the Legislature urged the city to dedicate the land to park use. Although original plans called for the entire parcel to be included in the park area, the Board of Water Supply balked at this, noting once again the instability of the soils and pointing out that the watershed value of the land – the reason given for its purchase by the city – would be undercut by development. Scaled-down plans were drawn up; Kawao Park was the result.
Designs on the Land
A small roadway led to the park from the end of Narcissus Place. Pedestrians could park on Narcissus and walk up a short flight of steps, crossing over Pukele Stream. The park boasted of a comfort station, two picnic terraces with shelters, and a cooking pit.
For nearly three decades, Kawao Park was maintained by the city’s Department of Parks and Recreation. Starting in the 1980s, however, Kawao Park became the object of intense negotiations involving the Board of Water Supply and a would-be developer of nearby land in Palolo valley. The developer wanted to put in a 38-unit subdivision but water service was going to be a problem. The elevation of the proposed subdivision required it to be served by what the BWS calls its “605 system,” with 605 referring to the height in feet above sea level of the spillways on reservoirs that feed this system. As a condition of winning city approval for the subdivision, the developer was required to make certain improvements to the 605 system, including construction of a reservoir (a concrete tank, actually), booster pumps, and a 12-inch water main connecting the new reservoir with the 405 system.
The developer at the time, Palolo Estates Partnership, and its then-consulting engineer, Wilson Okamoto & Associates, Inc., selected Kawao Park as the ideal site for the reservoir.
Records of the initial discussions suggest that early on, the park and the reservoir were seen as co-existing. A memorandum of a meeting held November 18, 1983, attended by a Parks Department staff person and representatives of Wilson Okamoto, indicated that the Department of Parks and Recreation would have to review the “tank development plans to insure compatibility with existing Kawao Park.”
Meanwhile, at the BWS
But six months before that November meeting, Wilson Okamoto, trying to get the Board of Water Supply’s permission to build the 605 reservoir on park land, described it as the site of “the abandoned Kawao Park” (emphasis added).
The BWS was cautious – concerned more with the stability of the soil than the preservation of the park – but had a strong motive to work out an arrangement with the developer. The BWS could require the developer to construct a reservoir larger than what was needed to serve the new subdivision. The surplus would be used to improve water service to the Board of Water Supply’s existing customers in the area, whose water service was substandard.
When the BWS asked for an opinion from the city’s Corporation Counsel on this arrangement, the reply was that while “a financial benefit will definitely accrue to the private developer,” the Board of Water Supply would be getting a reservoir. “The BWS land, which was purchased with public funds, will thus still be used for a public purpose,” the opinion concluded.
The Board’s engineers still had reservations about the soil stability. To address this, the Board insisted that the developer prepare a study addressing this question. Apart from that, by 1985, the deal was pretty well set. As described by Kazu Hayashida, chief engineer for the Board of Water Supply, in a letter October 23, 1985, to Brian Gray (of Gray Hong Bills & Associates, the new consulting engineers for the developer), the BWS approved the proposal to build a 200,000 gallon reservoir on city land, in the vicinity of Kawao Park, with these conditions (among others): that the developer upgrade pumps at a 405-foot reservoir nearby; that it submit “a satisfactory agreement with a letter of creditor similar security to guarantee the construction of the reservoir and pipeline”; that it “pay for plans and specifications for the reservoir and pipeline” and submit them for BWS approval; and that the developer provide a soil study “to confirm that the site can accommodate” the reservoir.
With the developer having agreed, the Board of Water Supply indicated to the city’s Division of Land Utilization in 1986 and 1987 that the BWS had “no objections” to the proposal for subdivision and construction of a 110-unit “cluster” housing development.
In late 1988, the property approved for the cluster housing project was sold by Palolo Estates Partnership (headed by developer Larry Clapp) to Emma International. A year later, Emma hired H.E. Johnson to grade the housing site and build the units for $6,313,287. In a separate contract, Emma agreed to pay Johnson $1,075,000 to prepare the reservoir site and build the tank.
‘An Unsuccessful Park’
The Parks Department, however, still had not relinquished the park site to the Board of Water Supply. In a memo dated May 23, 1988, and apparently at the instigation of the BWS, the Parks Department began grousing about Kawao Park and expressing an interest in having the land “revert” to the BWS.1
In that memo, Parks Department director Hiram Kamaka justified the park’s demolition: “This has not been a successful park because of its isolation, lack of parking, and because it is frequented by undesirables.” he wrote. Kamaka stated that the Parks Department no longer maintained the area and no one had complained about that. “Thus, we do not anticipate serious, adverse reaction to the proposed park abandonment.”
In April 1989, the Palolo Neighborhood Board was beginning to wonder what was, or wasn’t, going on at Kawao Park. At its meeting of April 26, 1989, residents indicated that they had only just then learned that the comfort station was going to be demolished and the land returned to the Board of Water Supply. Mayor Frank Fasi’s representative at the meeting, Gail Kotaka, told the residents that the “park is unused and the city is concerned with liability.” One Neighborhood Board officer asked that instead of city funds being used to destroy the facilities, they be used to maintain them should the community want to keep the park.
City Managing Director Jeremy Harris wrote a follow-up letter to Wally Inglis, Neighborhood Board chairman. Harris indicated that the proposed transfer of the park back to the Board of Water Supply came at the instigation of the Parks Department, “because maintenance has been abandoned for a while.” (In a file copy of that letter at the Parks Department, a marginal note reads: “Not correct!” Indeed, other documents bear out ongoing maintenance at the park until early 1990, when the water meter serving the park was finally disconnected.)
In June 1989, the Neighborhood Board requested that the city put a hold on demolishing park structures, to which Mayor Fasi responded with a promise that no demolition would occur “until your Neighborhood Board has reviewed the matter.”
The Neighborhood Board agreed in July not to oppose letting Kawao Park revert to its natural state, but requested that the city keep open, “by written agreement, the option of land reverting to park use should there be future community demand for such use.” A letter to that effect from board President Inglis drew this response from Hiroaki Morita, acting director of the Parks Department, on November 30, 1989: “While we appreciate your concern and commend you for looking after the future recreational needs of the Palolo Valley … facilities available at Palolo Valley Field are adequate to satisfy current as well as future recreational needs.”
At no point, it would seem, was the Neighborhood Board informed of the city’s well advanced plans to allow a 200,000-gallon reservoir to be built at the park site.
In May 1990, the bulldozers arrived.
Missing Permits
They came, but not by any authority. The Conservation District Use Permit issued by the Board of Land and Natural Resources for construction of the reservoir had lapsed at least a year earlier. The required right-of-entry from the Parks Department was never obtained. No demolition permit was obtained. No permit to store fill on site was obtained, nor was any permit issued allowing the contractor to construct a turn-around area for his trucks on the park access road.
Perhaps the most significant omission concerns the failure of the city to require the developer to put up a bond for construction of the reservoir, as the Board of Water Supply had been insisting be done for the previous five years.
By November 1990, it was apparent that all was not well at the reservoir site. The contractor had not removed excavated material from the construction area but had rather used it to build up the existing road, widening it to accommodate turning trucks. No soils report had been provided to the city to indicate the stability of the fill or its use in this fashion. The Board of Water Supply had no approved plans for any of the work. On top of it all, the contractor had begun to dump excavated material into a drainage swale at the park base, prompting neighboring residents to call the board to express worries about possible flooding during heavy winter rains.
On November 13, 1990, the Board of Water Supply sent word to the consultant that “Board of Water Supply inspection for the Palolo Heights 605 reservoir… is being suspended immediately since the required grading plan/soils report has not been approved.”
David Bills, of Gray Hong Bills & Associates, responded two days letter, requesting reinstatement of inspection services and stating that the problem was only temporary. “Because the soils engineer determined that the fill that has been placed is not satisfactory [for use in buttressing slopes at the cluster housing site], the contractor has elected not to fill on-site and after completion of grading for the reservoir site, the temporary fill he has placed on the site will be removed. The contractor needs the use of this temporary fill as a temporary ram to facilitate access for concrete trucks. After the tank has been poured, the access road will be graded to the approved grade, excess material removed from the site, and the work completed.”
At a meeting November 19, 1990, attended by the consultant and Board of Water Supply staff (but not by any representative of the contractor), everyone agreed “that the contractor should remove all the excavated material” and that Bills would notify the contractor of this.
On December 4, 1990, Brian Gray of Gray Hong Bills informed the Board of Water Supply that the contractor had complied. But when the BWS sent inspectors to the site on December 12, they found otherwise. “Contrary to your claim,” Hayashida wrote back to Gray on December 17, “our site investigation and photos … reveal that the excavated material has not been removed.”
The rains came; the contractor stopped work; and the developer apparently ceased paying its bills.
Where’s the Bond?
That’s how things stood when, four months later, in March of 1991, the developer wanted to obtain final subdivision approval from the city’s Department of Land Utilization. With final approval in hand, the developer could begin selling the project either to would-be residents or to another developer. (In other words, final approval greatly enhances the market value of the property.)
Before the DLU grants final approval, it requires either that the developer post bond covering the full estimated costs of construction, or that the construction be completed. With grading still not completed, Emma chose to pursue the former route.
And so Brian Gray began negotiating with the various city departments (Public Works, Board of Water Supply, DLU) on the amount of bond required. In a letter to Hayashida, Gray asked that the bond for the reservoir construction not be the full cost – $1,075,000 – but that the developer be required to post just $516,000 of that, to reflect 52 percent of the site work already having been done at the time. (The combined bond proposed by the developer for subdivision construction and reservoir work was $2,539,794.99.)
The Board of Water Supply disagreed. Hayashida informed Gray on March 22, 1991, that “our records indicate a discrepancy between the actual work completed and the percent completed.” Hayashida asked for “detailed breakdowns of cost for the contract amount and work completed.”
The consultant replied with a copy of the contractor’s invoice to the developer, indicating slightly more than half of the reservoir work being completed – but, again, no bond was forthcoming. Still, when the consultant and city representatives met on April 25, 1991, no problem concerning bonding was anticipated. People from the Department of Parks and Recreation, the Board of Water Supply, and the engineering consultant agreed on steps needed to get the project back on track were decided upon.
Their discussions were all in vain. Emma International was in serious financial trouble by this time. The bond would never be posted.
The End Begins
Evidence of the trouble was readily available, had anyone looked. Two days before Hayashida’s letter, H.E. Johnson, the contractor, filed a complaint against Emma in Circuit Court, seeking a mechanic’s lien for more than $1.4 million on the developer’s property for work performed at the subdivision site. In May 1991, H.E. Johnson filed a second complaint against Emma International for nonpayment of erosion control work at the subdivision site. And in January 1992, Johnson sued Emma again for more than $720,000 that Johnson said was owed for work at the reservoir site.
Evidence was available, too, at the city’s Department of Land Utilization. The tentative approval for the subdivision, granted in 1987, was to have expired in March 1991, but, at the request of Emma, four 30-day extensions were granted. Emma stated it needed the time to arrange the financing for the bond and other work. For a few days, it appeared as though Emma might succeed.
The white knight was to have been a company called New American Homes, Inc., whose financial backing, in turn, was to come from a company called Atlantic & Pacific Investment Corp. A&P appears to have been based in Corpus Christi, Texas, but, to judge from a letter written in June 1991, indicating its willingness to back New American Homes, A&P was a wheeler-dealer on a global scale.
A&P described itself as “in the primary business of lending hands concerning real estate projects, by arranging letters of credit from our investors and associates to provide supporting collateral for funding some of our real estate loans.” The letter, signed by Glenn R. Premru, identified as CEO and chairman of the board of A&P, went on to say that the company had committed to providing New American Homes with a $10 million loan, which “will be funded through Merrill Lynch Bank & Trust Company in Geneva, Switzerland.” The required documentation “will be in place within the next five international banking days and the actual disbursement of funds, with regard to the first draw will occur within seven to ten international banking days.”
“Seven to ten international banking days” passed. A&P was never heard from again. On July 30, 1991, Donald Clegg notified Brian Gray that the subdivision permit had expired. “In order to reactivate your cluster development, new applications shall be submitted.” Clegg notified the Department of Public Works to “evaluate the status of the grading permit and grading bond and take the necessary action under the grading ordinance.”
Dreaming On
In August, Gray finally alerted the Board of Water Supply to the fact that the contractor had pulled out without complying with the demand to remove the loose fill. The BWS responded, informing him that if the fill was not removed and the site restored by October 1, 1991, the matter would be turned over to the corporation counsel. Hayashida did just that in November.
Beating him to the punch at the corporation counsel’s office was Sam Callejo, then director of the Department of Public Works. Callejo sought legal help from the city’s lawyers on September 24, 1991, asking whether and, if so, how, the city should proceed to conduct emergency erosion control measures at the subdivision and reservoir sites. The costs of controlling runoff were estimated at about $560,000; Callejo proposed – and the corporation counsel approved-cashing in Emma’s grading bond of $769,000 to cover the erosion control costs. That was accomplished in October, but it was determined by the city that the bond money could be used for work on the subdivision site only. Cost of clearing the rubble from the park is acknowledged to go far beyond the meager $20,000 grading bond posted for that site.
At a December 1991 meeting attended by staff from BWS and the Parks Department as well as Lowell Wolf of the corporation counsel’s office and Brian Gray, a course of action was outlined that entailed going after the contractor for restitution. It was mentioned that the city “would put lien on cluster property also” – that is, the land owned by Emma International. At no point, however, did anyone indicate an interest in pursuing this option.
In a subsequent memo from Wolf to Hayashida recapping the points raised at the meeting, Wolf paints the prospect of going after Emma in discouraging colors: “BWS could file a lien on the developer’s property for reimbursement of the cost to remove the excavated material,” Wolf wrote, “but only after obtaining a judgment to this effect in court.” Wolf seemed to prefer going after the contractor. While the developer should be liable, “due to its shaky financial condition and the location of its principals in Taiwan, our initial efforts should be against the local contractor. The contractor can seek indemnification from the developer and increase the size of the mechanic’s lien we have been told has been filed on the developer’s property,” he wrote.
Hollow Threats
With Hayashida’s approval, Wolf sent a letter to H.E. Johnson, the contractor, ordering removal of the excavated material. Should Johnson fail to comply, “several courses of action are available,” Wolf wrote, including: “a lawsuit for continuing trespass, … administrative action for failure to obtain authorization for the grading … which could result in an injunction requiring removal of the excavated material; civil fines up to $1,000 per day the violation continues; and criminal prosecution, or a combination of these actions.”
In January 1992, yet another meeting was held. The city was represented with staff from its Department of Public Works; Board of Water Supply; Department of Parks and Recreation; and Corporation Counsel. H.E. Johnson Sr. and Jr. attended, as did their attorney, William H. Gilardy Jr. Brian Gray, the developer’s engineer, was also present.
H.E. Johnson Sr. said his company was already $2.5 million “in the hole” as a result of its work for Emma. When discussion turned to the matter of the danger posed by the loose fill, Brian Gray allayed concerns. There was “no imminent danger,” he was reported as saying, with a visual inspection he conducted having revealed no instability. Earlier, when a previous developer had submitted a soils engineer’s written report of a surface inspection of the site, before any excavation had been done, the Board of Water Supply refused to accept it. Now, however, the oral assurances of a civil engineer in the employ of the developer, based on nothing more than a visual inspection, were apparently accepted by all parties as authoritative.
Fending off the Public
In March 1992, the Palolo Neighborhood Board was worried. Members had followed the city’s efforts to use the subdivision grading bond to restore that parcel. They asked the mayor’s representative whether the reservoir area was included in the city’s rehabilitation plans.
Fasi responded with a letter April 9, 1992, to Cliff Terry; board chairman: “remedial work is still in the process of being negotiated with H.E. Johnson for Palolo Heights cluster subdivision, reservoir, and Kawao Park areas. This site is covered by a grading bond,” he assured Terry. Fasi’s suggestion that the city could use the grading bond for the subdivision site for work at the park site or that the bond covering the park site was sufficient to cover work there – was in clear conflict with the facts.
The site is still unrestored. The enormous “bench” cut into the valley wall where the reservoir was to be placed remains an eyesore. The concrete steps and metal railing leading to the park site are covered with rubble dumped by the contractor. The park access road is overgrown, strewn with boulders and fill.
A foreclosure order for the sale of Emma’s property, to satisfy Johnson’s claims, was issued in late July, with auction of the land set for early August. Before that could happen, Emma International sought protection from creditors by filing for Chapter 11.
1 In fact, it is unclear whether the land ever left the BWS’ jurisdiction. According to a May 23, 1988 memo from Parks Director Kamaka to Hayashida of the Board of Water Supply, the park “has never been officially turned over” to the Parks Department. Notwithstanding this, for the next several months Parks and Water negotiated the terms under which the Board of Water Supply would take back the park land. The terms finally settled upon were that all improvements would be removed before the transfer, and that the Parks Department would be responsible for preparing all required documents. To this day, the Board of Water Supply continues to claim that the property remains under the jurisdiction of the Parks Department.
Volume 3, Number 3 September 1992