With Conditions, O`oma Development Wins Support of State Planning Office

posted in: August 2010 | 0
A proposal to develop land near the southern end of the Keahole airport into a mixed residential and commercial development appears to have moved a giant step closer to approval now that the state Department of Transportation and the developer have come to an agreement.
imageDOT administrator Brennon Morioka informed the Land Use Commission of the agreement on July 15, when the LUC met in Kona to close up the evidentiary portion of the hearing on the petition submitted by Dennis Maresco and his company, Midland Pacific Homes, for a project known as O`oma Beachside Villages. Plans call for between 950 and 1,200 residences (about half of them single-family homes) and two commercial centers on some 300 acres seven miles north of the village of Kona. Some of the land (near the Queen Ka`ahumanu Highway) is already in the Urban land use district; another 75 acres along the shore would be kept in Conservation. The land that is the subject of the LUC docket comes to roughly 181 acres.

One of the biggest obstacles to approval has been concern over the noise from landing and departing planes. Morioka was firm in pointing out his department’s position is neutral with respect to whether the LUC should approve the project. It is neither supportive nor opposed, but is taking instead a position of “no objection” to the project moving forward, he told the commissioners.

His department had had concerns, he said, both from the standpoint of protecting the ability of the Kona airport to continue operating into the future despite encroaching development and from the standpoint of the increasing vehicular traffic on the primary arterial road along the Kona Coast, the Queen Ka`ahumanu Highway.

The “no objection” position was tied to a series of conditions that had been worked out between the developer and the DOT in talks extending back for a couple of years, Morioka said. “One of the conditions we ask for is that an avigation easement be placed” on the land, he said. “This is very important to us; it will release and indemnify the state from many of the issues common to airport operations,” including noise, fumes, and other potential nuisances.

The agreement also calls for all housing units where the noise exposure levels are 55 DNL or higher to be mitigated by the developer, with no units to be built in areas where the noise exposure is expected to be greater than 60 DNL. (DNL refers to a 24-hour average noise exposure, expressed in decibels, with nighttime sound receiving a slightly higher weight than daytime noise.)

To ensure that the conditions are followed, the DOT is requiring all subdivision and design plans be submitted to the DOT for approval. “We want to ensure the operations of the airport are not negatively impacted,” Morioka said. “Neither the DOT nor the FAA [Federal Aviation Administration] will participate in any form of mitigation with respect to noise, both in the near term or long term,” no matter how the airport master plan may change or airport development may play out.

As far as road traffic goes, “we expect the petitioner will submit and get approval from the Department of Transportation on a traffic impact analysis report (TIAR) that will identify all impacts, mitigation efforts, as well as determine what its pro-rata share of development will be in paying for these mitigations.” The TIAR is also to be updated regularly by the developer, at least every five years.

Access to the development off Queen Ka`ahumanu will be restricted to vehicles heading south, which can enter the main access road by means of a right turn. Northbound travelers heading toward the site will have to make a U-turn at some point north of the turn-off, then backtrack. Travelers wanting to head north when leaving the development will not be able to turn left, but must instead travel south on Queen Ka`ahumanu until they reach a point where a legal U-turn is possible. This right-in, right-out pattern, as it is called, is only an interim measure. In the long term, Morioka said, “Queen Ka`ahumanu Highway is considered restricted access… We will be closing down all access and going to grade-separated access at selected locations.” After that, access to O`oma will be by means of a planned makai roadway running from the airport south to near Kailua village, with limited access to Queen Ka`ahumanu. To ensure that homeowners are aware of this, one of the DOT’s conditions is disclosure of the eventual termination of direct Queen Ka`ahumanu access.

With the DOT adopting that stance, the state Office of Planning, automatically one of the parties to every petition for a boundary amendment, shifted its position to one of affirmative

Abbey Seth Mayer, director of the OP, said his agency’s support was based on conditions that protect the interests both of the airport and of the Natural Energy Laboratory of Hawai`i Authority (NELHA), which lies directly north of the O`oma parcel. These are, he said, “key conditions … absolutely mandatory for approval.”

“We’re leaving it basically to the developer to take the risk,” he continued. “If they’re going to be able to provide a product where the public’s going to want to live, that’s their risk. If the noise is too great and they can’t get the prices they need, that’s their risk.”

A second concern of the state was the impact of the development on NELHA, which, Mayer noted, depends on pristine surface and deep water, and which also needs to be able to develop its property without fear future neighbors will consider it a nuisance.

NELHA’s ongoing activities, Mayer said, “will continue to produce dust, odor noise, solar reflections, wastewater into injection wells. It could impact O`oma.” To mitigate against this, the Office of Planning was proposing that O`oma accept a 100-foot buffer on its boundary with NELHA, in which no development would occur. Also, to allow NELHA to continue to use injection wells, O`oma was to agree not to put any well that might be a source for potable, desalinated water within a quarter mile of the NELHA boundary.

Finally, Mayer addressed the issues of compliance and enforcement – areas that the commission has been grappling with for years in the case of the `Aina Le`a development just up the road from O`oma. Mayer proposed that the commission include as part of its approval a condition “requesting an automatic order to show cause” in the event that conditions are not met. The show-cause order refers to a demand that the developer show cause why the land should not revert to its pre-petition status.

“Part of our consideration on this,” Mayer explained, is that in this case, “you have potentially incompatible land uses related to both the airport and NELHA.” He wanted to make sure, he said, “that the petitioner is actually going to develop – and not simply entitle it, take the uptick in value, and use that to swap or sell” the property. “So in ensuring that the developer will develop the product as stated in its representations, we feel the automatic order to show cause puts the burden on the developer and takes it off the public and state…. If it appears that they [the developer] are not going to be able to meet a ten-year deadline [for completion of backbone infrastructure], it puts the burden on them to come back in.”

The next step in the process is the drafting of proposed findings and decisions by each of the parties. The commission will take those up at its next hearing on O`oma, a date for which has not yet been scheduled.

* * *
`Aina Le`a Faces Compliance Hearing

Once more, the state Land Use Commission has put the developer of the project known as the Villages of `Aina Le`a on notice that its progress toward a critical deadline is unsatisfactory.

In 2005, the LUC imposed a November 17, 2010, deadline for construction of 385 units of affordable housing on the site. Although the 1,060-acre parcel had been placed in the Urban district in 1989, the land, which had changed hands several times already, was still undeveloped in 2005. The owner at the time, a subsidiary of Bridge Capital, stated that the affordable housing would be up within three years, but the LUC allowed a full five years for the build-out.

Since then, Bridge is ostensibly out of the picture. A new developer, DW `Aina Le`a (DWAL), came forward last year after the LUC was so put out with Bridge that it was poised to have the land revert to the Agriculture District. The LUC relented on its order to show cause why the land should not revert, allowing DWAL to exercise its best effort to comply with the development conditions. To show its seriousness of intent, DWAL was required to complete 16 affordable units by March 31.

But at a meeting on July 1, commissioners were obviously disturbed by some of the statements made by DWAL’s principal, Robert Wessels, concerning progress toward the November deadline and compliance with the interim condition.

Regarding the interim condition, Wessels and his attorney, Alan Okamoto, argued that even though there were no paved roads, electricity came from a portable generator, water from a tank, and sewage was sent to an unpermitted leach field, the units still met the definition of complete since, as Okamoto stated, the buildings “can be hooked up as soon as the utilities are ready.”

Another issue concerned financing, especially as it related to DWAL’s ability to finish work on the affordable units by mid-November. The chief contractor on site, Goodfellow Bros., had not been paid for several months and, according to Wessels, work on the site had pretty much been on hold for “about 60 days,” as of July 1. The problem was capital – or lack thereof. Goodfellow, the principal infrastructure contractor, was not working and, in fact, had extended a $5.5 million loan to DWAL, Wessels said. (The same day of the LUC meeting, West Hawai`i Today reported that a company that poured foundations for the affordable housing buildings was owed more than $300,000 by DWAL while a drywall contractor had yet to be paid for his work.)

Wessels acknowledged that financing had been problematic, causing delays in work as well as preventing his company from taking title to the land, more than 90 percent of which continues to be owned by Bridge `Aina Le`a. Last year, Wessels had told the LUC he would be taking ownership by October 2009.

Deputy attorney general Bryan Yee, representing the Office of Planning, pressed Wessels on this issue. Wessels acknowledged that a shortage of capital had resulted in reworking the agreement of sale with Bridge, so that now the deadline for purchasing full title to the Urban land was pushed back to October 2010. What was Wessels doing to get the money to close the deal? Yee asked.

“When one lender didn’t perform,” Wessels said, “we got the Ex-Im Bank to loan us $98 million, including $12 million to release the balance of the residential land. We have a firm commitment and will close in 45 days.”

Capital Asia, the Singapore-based group that was providing financing by selling undivided shares in the 62-acre parcel DWAL does own (where the affordable units are to be built), was providing a steady stream of capital, he said, just at a rate slower than what is required. “We need $120 million for all the affordable units alone,” Wessels said. (At present, the number of individual owners of the 62 acres is approaching 400, each one representing an investment of at least $96,000.)

Although the final environmental impact statement for the entire project has not yet been released or accepted by the county, and notice of acceptance probably won’t be published until September at the earliest, Wessels said he was planning to obtain approval for sale of condo units within 30 to 45 days, with closing in October or November. “We hope to get this before the EIS is accepted,” he said. “We want to start sales before the EIS is complete.”

Other conditions of the development were proving difficult as well. The intersection with Queen Ka`ahumanu Highway needs to be improved before the affordable units can be occupied. But improvements cannot be begun until a final EIS is in hand and the Department of Transportation approves the plans. A sewage treatment plant needs to be up and running before occupancy can occur, but again, the EIS needs to be completed and plans have to be approved by the Department of Health.

Wessels told the commissioners he was hoping to process permits for the sewage treatment plan concurrent with completion of the EIS. In addition, because the plant is proposed to be built outside the Urban area, the county Planning Commission would have to approve a special permit.

Despite the daunting prospects, Wessels did not ask the commission for any time extension. In correspondence with the LUC, however, Okamoto had stated that “there will be situations which [DWAL] would like to address with the commission to see if some reasonable changes can be made” in the timetable.

“Will you be requesting an extension?” Yee asked Wessels.

“We haven’t found a way around some delays,” Wessels replied. “We intend to advise the commission where we stand… We’re notifying the commission we have hurdles.”

A Deadline, Not a Goal

The Office of Planning had seven concerns, listed by Yee:

    • The March 31 deadline for 16 complete houses had not been met. “Can you live in these homes?” he asked rhetorically. “No.”
    • The EIS was way behind schedule; so far behind, in fact, that the November deadline for completion of affordable houses cannot be met, Yee said.
    • There was the slowdown. “Any slowdown makes November impossible,” he noted.
    • The Office of Planning submitted to the commission an ad by Capital Asia, the group selling the undivided shares in the land, which included terms suggesting the investment was guaranteed, he said, adding, “The county was convinced the financing was secure, but we know now that was inadequate.”
    • In violation of the condition to notify the commission of changes in land ownership, Yee said, the LUC had been given no notice of the more than 300 owners of the affordable parcel.
    • There was the ongoing involvement of Bridge, Yee said. “The deal [sale of the land] should have closed last October 9, but DW didn’t have the money to pay,” he said.
    • Finally, the November 17 deadline “is a requirement, not a goal. I urge you to keep this. It is important to hold them to this,” he said.

Okamoto pleaded for his client, asking the commission “to consider we’re dealing with an area that’s been in play a long time. It makes all the sense in the world to keep this area urban… Construction is on the ground. No conventional financing is available. Mr. Wessels is prepared to put up buildings that are going to be vacant. It does make sense to allow this property to be developed so it can meet its part in the area.”

OP director Mayer was not swayed. “We’ve spent an incredible amount of time, effort and taxpayer money… If we are not able to hold the petitioners to the conditions we set, then what we do here in my mind loses all meaning. We need a new petitioner, a bona fide landowner and developer.”

LUC member Vladimir Devens made a motion to keep the show-cause order alive; to have another status hearing before the November deadline; to reaffirm that the November deadline was not a goal but a deadline, with copies of certificates of occupancy to be issued by that time for all affordable units; and, finally, to determine that the March 31 deadline for 16 affordable units had not been met. The motion passed, with all eight commissioners present voting in favor.


Patricia Tummons


Volume 21, Number 2 — August 2010


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