Hawaii’s attorney general is fighting back against a recent decision by a Big Island judge that critics say weakens the power of the state to hold developers to their promises.

Attorney General David Louie recently filed a notice of appeal challenging Circuit Court Judge Elizabeth Strance’s ruling that the state Land Use Commission couldn’t revert a property’s urban land use classification back to agricultural because the developer had repeatedly failed to build affordable housing that the state required as a condition of its approval of the project.

The LUC’s decision last year to change the land slated for the Villages of Aina Lea back to ag halted development of the $250 million resort community and put in limbo housing that had already been built on the property.

Land use attorneys have said the move by the LUC was unprecedented and a rare case of commissioners finally taking a stand against developers who for years have failed to fulfill commitments that were instrumental in getting their projects approved.

“A lot of conditions were based on promises developers made to the LUC. And years later, suddenly they don’t want to live up to the promises anymore,” said Robert Harris, executive director of the Hawaii Sierra Club and an attorney.

Strance’s ruling did not say that the LUC lacked the power to change land use classifications if a developer fails to fulfill conditions laid out in its final decision. Rather, she said that the commissioners should have taken into account broader factors.

Nonetheless, it was seen as a significant blow to the powers of the LUC. And a final ruling in the appeal could set a statewide precedent that significantly weakens or affirms the powers of the LUC, which some attorneys argue are too broad.

“If the state loses, is that going to set an important precedent binding on other courts and the LUC in all other cases? Yes, it will,” said Burce Voss, the attorney for Bridge Aina Lea, a developer for the Villages of Aina Lea.

He said that it could be a couple of years before there is a final ruling.

Unchecked Development

Alarmed by the construction of scattered subdivisions and the loss of prime farmlands, the Legislature created the LUC in the 1960s.

Lawmakers determined “that a lack of adequate controls had caused the development of Hawaii’s limited and valuable land for short-term gain for the few while resulting in long-term loss to the income and growth potential of our state’s economy,” according to the LUC’s website.

The agency, made up of gubernatorial appointees, has power to grant or deny developers requests to take lands out of agriculture for urban use. And it can impose requirements that developers must fulfill in order to keep the urban classification, such as building roads to mitigate traffic impacts, constructing affordable housing or investing in community improvements.

Recent approvals include the 12,000-home master-planned community of Hoopili and the 5,000-home Koa Ridge.

While Strance’s ruling in the Villages of Aina Lea case was specific to that case, it’s likely to have a chilling effect on the LUC’s propensity to repeat the move.

“It will definitely make the LUC think twice before it reverts property,” said Jesse Souki, director of the state Office of Planning.

And the decision could impact how commissioners act in a case that is bringing new immediacy to the issue.

Maui Residents Surprised By Mall

In the 1990s, Kanonoulu Ranch petitioned the LUC to change the classification of a parcel of land it owned in Kihei on Maui from agricultural to urban. The plan it pitched was for an industrial park with warehouses, auotomotive repairs and wholesale distributors, according to LUC documents. Some commercial activities were expected to support the workers.

“Granted, you will have a few, as I mentioned, hair dresser, restaurant or some catering service probably okazu, something to service these people, probably even a branch of a bank would be located within the light industrial complex,” a representative of Kanonoulu Ranch told commissioners in 1995.

The developer provided analysis on how the project would impact traffic, jobs, scenery, energy and wastewater, which were all taken into account in the commission’s decision to approve the industrial park, according to LUC documents.

While commissioners didn’t place any deadlines on project construction, it did include a condition that the project be built “in substantial compliance with the representations made to the commission.”

Ownership of the parcel which sits mauka of Piilani Highway changed hands a couple of times. And this year, many residents and state lawmakers were surprised to learn that the new owner, Eclipse Development Group, was planning to use the land to build one of the biggest malls in the state.

The project has generated a strong backlash from some residents and established community advocacy groups as well as state lawmakers.

“There is a huge outcry against it — impassioned, enflamed, angry, vocal,” said Mark Hyde, president of South Maui Citizens for Responsible Growth, which opposes the mall.

The project has its supporters, too.

“We’re overhearing from people that they support the idea of having more shopping on Maui, spending their shopping dollar on Maui and not having to go to Oahu to buy Christmas presents for family,” said Tom Blackburn-Rodriguez, a spokesperson for the company on Maui.

He said the shopping center was meant to be a “good family friendly environment, a place where people can relax and have fun with their neighbors.”

Changing Plans

But for critics, a main issue is that the land was supposed to be used for an industrial park, not a large retail mall.

“How does it go from being a 123 light industrial complex to being a 700,000-square-foot mall without having any public input and all that — that is my concern,” said Rep. George Fontaine who represents the district. He said he didn’t find out about plans for the mall until June.

Residents have expressed concerns that studies haven’t been completed on the potential impacts of the shopping center and worry it will create traffic gridlock.

“It raises all sorts of red flags,” said Harris. “Essentially it’s a new project.”

Maui Tomorrow Foundation and South Maui Citizens for Responsible Growth, as well as a local resident, filed a request with the LUC to revisit the case, as did the state planning office, which is a required party in all deliberations before the commission.

“In short, the LUC petition was submitted with one project. The petitioner is now developing a different project,” wrote Souki in the department’s mid-July filing with the LUC.

Commissioners will meet later this month to rule on whether Eclipse Development Group must prove its case as to how its project fits with the original conditions of the approval.

Eclipse’s response to the LUC argues that the community groups have no justification for intervening in the case and that the shopping center is in compliance with the conditions of the original order. It also argues that the LUC does not have the power to require Eclipse to show how it’s meeting the conditions of the original order.

Daniel Orodenker, executive director of the LUC, told Civil Beat that the commission does have that authority.

Blackburn-Rodriquez said that the shopping center falls within the range of businesses that can be sited in light industrial sections. He said state and county officials couldn’t foresee the ultimate outcome of the project when it was approved back in 1995 and subsequently reviewed by the county for zoning.

“What it ends up, nobody knows,” he said. “Because market conditions in 2012 are different than in 1995.”

Enforcement Falls Through the Cracks

How the project has gotten this far — the developer is already advertising spaces for lease — is a subject of dispute.

For the past 17 years, the landowner has been required to file annual reports with the LUC detailing its progress, which are distributed to the state and county planning offices, according to Souki.

But there have only been two reports filed, in 2010 and 2011, and neither of them mentioned any plans for a mall, according to the state planning office.

Souki said it was a gray area in the law as to who is responsible for making sure the developer filed the reports, but ultimately such enforcement falls to the county.

“If I was the county, I would probably want to see the annual report because it makes my job easier because it allows me to see if they are compliant,” he said. “I would probably start off by asking for it.”

The requirement was never enforced. And project opponents say that the county illegally granted permits, including a grading and grubbing permit, even though the project was not aligned with the LUC 1995 decision and order.

David Goode, director of public works for the county said this was not the case.

“Grading permits are not project specific, they are dirt specific,” he said. “They don’t take into account any proposed building. They don’t take into account land use decisions. They just say they want to move this dirt over here and this dirt over there.”

However, Souki, in documents filed with the LUC, said that the developer filed a report along with its application for the permit that described the proposed shopping center.

“This is the first government document discovered by the Office of Planning which describes a proposed shopping center for the Petition Area,” Souki wrote. “Paragraph 2 of the Introduction in the Subsurface Investigation Report states that the development is for ‘Two related shopping center complexes … the shopping centers will house a number of retail shops of varying sizes, including large national retailers.'”

Mayor Supports Jobs

Critics, including Sen. Roz Baker who represents Maui, say Maui Mayor Alan Arakawa is influencing the process behind closed doors.

“All I know is that the mayor was very interested in moving the project along because he’s interested in jobs as mayor,” said Sen. Roz Baker, who represents Maui. “I just think there’s a greater issue of transparency that needs to occur.”

Baker said that the mayor fast-tracked the permits, something that Arakawa’s spokesman, Rod Antone, denies.

“As far as allegations that somehow he is behind the project, that is ridiculous,” he said. “And he is not giving any added weight to it. He’s just going through the process.”

Project supporters have made substantial donations to Arakawa’s reelection campaign in recent months, totaling more than $22,000. The mayor is not up for reelection for a couple of years.

Eclipse Development Group donated $2,000 in June. Chad Goodfellow, president of Goodfellow Brothers, who Fontaine says was awarded a $20 million contract for the project, donated more than $4,000 in May. Goodfellow did not return a call for comment.

Union money — about $16,000 — also poured into the mayor’s campaign during the past few months from the International Brotherhood of Electrical Workers Local 1186, the International Longshore and Warehouse Union Local 142, the International Union of Bricklayers and Allied Craftworkers, the Hawaii’s Mason’s Union Local 1 and the Plumbers and Fitters Union Local 675.

Antone said the donations were immaterial.

“The mayor doesn’t make decisions on who donated to his campaign,” he said. “And again, he doesn’t have any power over the project.”

The unions have donated heavily to the mayor in previous years. Arakawa was formerly a supervisor in the county’s Department of Public Works wastewater division and was a chief steward of the United Public Workers and a union representative for the Hawaii Government Employees Association.

Antone said that the mayor supports jobs, but isn’t for or against the project.

He criticized the groups that were trying to intervene in the project with the LUC.

“The only problem people have with this project is that it started 15 years ago,” he said. “There’s a lot of people in these environmental groups that haven’t been living on Maui that long. So naturally, they don’t feel that they were part of the process. But we can’t help that. We can’t help that they weren’t part of the process 10 to 15 years ago.”

In the Hands of the LUC

The state planning office, which has substantial influence in the Land Use Commission’s decisions, has concluded that the project approved in 1995 and the mall that is now proposed is not the same.

“In short, the LUC petition was submitted with one project. The petitioner is now developing a different project,” wrote Souki.

It’s now up to the LUC as to how it wants to proceed in the matter.

Souki said the state planning office wasn’t for or against the project. But absent prior remedies by the county, or a request to amend the decision or conditions by the developer, the LUC is faced with whether or not it will convert the land back to agricultural uses.

“This is the nuclear option,” said Souki, who added that reclassifying the land was “probably not the most rational way to deal with land use.”

“It takes a lot to get the parcel from from ag to urban — it gets rezoned and sub-divided. It’s so far down the land use process that it’s really a hardship to have it reverted back to its original classification,” he said.

In the meantime, developers and government officials await a final outcome of the appeal in the Villages of Aina Lea case. And for those concerned about the state holding developers to their promises, the ramifications of a decision could be far-reaching.

“I feel pretty confident they will rule in the LUC’s favor,” said Harris. “That being said, if the Supreme Court or intermediate court doesn’t rule in the state’s favor, it really throws into doubt any condition of the LUC to essentially be enforced or enforced effectively,”

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