After decades of delays, Honolulu’s new water chief intends to lease out the city’s prime Beretania Street property to developers to generate revenue and keep rates down.

“It’s really time to see what’s possible,” Honolulu Board of Water Supply Manager and Chief Engineer Ernest Lau told Civil Beat in an interview at the headquarters last week.

“This whole thing has gone back and forth for 25 years or so,” he said. “My challenge is I’d like to try to get an RFP out before the end of the year — 2012. You can quote that and put me on the hook.”

Lau has already met with The Queen’s Medical Center, which has long lusted after the property. The entire complex, about six acres, includes sea-foam green buildings fronting Beretania near the corner of Punchbowl Street and a large multi-tiered parking lot behind, near the hospital.

“I can’t say that it will be Queen’s that will help us look at development of this property, the underutilized property back here, but Queen’s is very interested,” Lau said. He reiterated that any RFP — Request For Proposals — must adhere to procurement law because the Board of Water Supply is a semi-autonomous agency attached to the city government.

Queen’s Hospital’s Plans

“We’ve expressed our interest in this property for several decades now, and we’re just responding to what we anticipate will be growing healthcare demands as the population gets older,” said Mark Yamakawa, Chief Operating Officer for the Queen’s Medical Center and the Queen’s Health Systems. “We’re very much maxed out on space on campus.”

He said Lau’s indication that the water board will issue an RFP this year was a “pleasant surprise” for Queen’s and that the hospital will work on coming up with a proposal that could include a parking structure to serve employees, visitors, physicians and the general public.

“We haven’t made any definitive plans,” Yamakawa said. “We just know that there are a lot of healthcare issues we need to address, and the availability of that space will give us the capacity to do that.”

Queen’s performs 21,000 inpatient procedures each year and hundreds of thousands more outpatient ones, he said. Demographics indicate there will be more demand for services going forward since older people are more likely to have chronic diseases.

“We’re just trying to meet the community need, because we anticipate there will be continuing growth in demand for healthcare services in the future,” he said.

Keeping Rates Steady

Honolulu City Council member Ann Kobayashi has repeatedly encouraged the board to lease space to Queen’s. She ratcheted up her pressure after the Board of Water Supply last year approved a five-year rate hike that will eventually charge Honolulu families 70 percent more.

“Instead of going to the ratepayers every time they need more money, this way they should try to raise some of their own money,” she told Civil Beat Monday. “Government can’t always be going to the taxpayer, the ratepayer. The burden is too great.”

Kobayashi is pushing for an amendment to the Honolulu Charter that would end the board’s semi-autonomy and bring it back under Council control as the Department of Water Supply in the executive branch.

The resolution to initiate the ballot measure is up for a public hearing Wednesday afternoon at Honolulu Hale.

When the matter came up last month in committee, Lau asked for a chance to show that he would communicate with the Council and pursue alternative revenue sources like a lease of the Beretania property.

“Development of that site only makes sense if it is a good benefit to our water customers, to the public we serve,” Lau told Civil Beat.

Some Water Staying

Kobayashi said the parking area is under-used and would be a good spot for Queen’s to expand. But that’s not all.

“The office buildings don’t have to be there. They could be in Kapolei or anywhere else,” she said. “The Board of Water Supply owns a lot of land, and they should look at developing another property and leasing this out.”

Lau said it’s not that simple.

“I know that Council member Kobayashi would like to get us off the whole property except for the pump building there, but maybe a compromise on that is just leave this building here, because this is a very central location for the public to come to pay bills, to meet with us, and this area is part of the Capitol District, the civic center of government,” he said. “So I think it’s good for us to remain here.”

Other functions could be moved to “a more strategically, better-located site.”

Chemical and microbiological labs can’t be relocated anywhere in town, he said, so those will be difficult to move unless there’s a replacement facility constructed to meet those needs. For office workers, the board might have to rent commercial space on a short-term basis or work out a property-exchange with whichever developer is chosen.

“We’re going to point out in the RFP what our requirements are, which includes things like provisional parking either on-site or off-site … the provisional offices, the laboratory function will be probably one of the tougher ones, and we’ll define what has to remain on the property,” Lau said.

“I’m hopeful that any developer that proposes on this project, given our constraints or parameters, will be able to come up with a good win-win type of deal that is good for the water customer and also good for that developer,” he said. “Ideally Queen’s would be a great one, but we do have to compete that process. And so it’s putting together that RFP, which also defines our requirements.”

Kobayashi suggested that affordable housing rentals might make sense near downtown, and Lau said with a smile that even a high-rise hotel wouldn’t be a problem if it brought in $100 million in lease revenue per year.

“I think our water customers would be OK with that,” he laughed.

“What I don’t want to do is limit the creativity of the developers coming in, because they know the market out there, they know what the anticipated market would be, and they’ll have to be the ones willing to put down the money, the financing, and take the risk of developing here on this property,” he said.

“Queen’s is an obvious one because they feel I think they need to expand their facilities and they’re running out of space.”

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