UPDATED 11/17/11 9 a.m.

The state of Hawaii is proposing to give the Office of Hawaiian Affairs ocean-front property to settle $200 million in past due claims on lands formerly owned by the Hawaiian Kingdom.

If approved by the Hawaii Legislature, OHA would own about 25 acres in the Kakaako Makai area, where the John A. Burns School of Medicine, the Hawaii Children’s Discovery Center and a large park are also located. But those properties would not go to OHA as part of the deal.

The settlement would conclude a contentious issue that dates from 1978, when OHA was created. The Hawaii Constitution requires OHA receive a share of revenue from what are known as ceded lands.

“This is an integrated proposal in the Kakaako area,” Gov. Neil Abercrombie said at a press conference Wednesday afternoon at the Capitol. “This is in fact a settlement.”

OHA Chair Colette Machado expressed gratitude to the state for the offer, saying, “When love is given, love is returned.”

‘Prime Property’

If it succeeds, the Kakaako deal — announced on the 175th anniversary of the birth of King David Kalakaua — would represent an historic moment for the state and Native Hawaiians.

(Read the full press release from the governor, which includes a map of the properties and an accompanying key listing addresses, land areas and property values.)

As explained in a Civil Beat article by Jon M. Van Dyke, a professor at the William S. Richardson School of Law, University of Hawaii at Manoa, ceded lands are about 1.8 million acres “ceded” by the Republic of Hawaii to the United States after the fall of the Hawaiian monarchy.

As Van Dyke explains, it is a highly complicated matter, with some arguing that the ceding was legal and others say it was theft. Ceded lands also lie at the heart of any future Hawaiian nation, as outlined in the Akaka bill that still awaits federal approval.

Federal recognition aside, the state is obligated to pay OHA revenue that is generated from ceded lands. Yet, Hawaii governors and lawmakers have struggled to make good on payments acceptable to OHA.

OHA has sued three times to get the money, but each time the Hawaii Supreme Court has ruled that it is a political matter up to the Legislature.

Abercrombie described the Kakaako proposal as “comprehensive,” not “universal.” But, he said the settlement would well exceed $200 million because the land — described by the governor as “prime” — would grow exponentially in value.

The Kakaako settlement was put together by OHA attorney Bill Meheula and Attorney General David Louie. But, there is no signed agreement.

Rather, it is up to the Legislature to finalize the agreement. To that end, the governor said his administration has consulted with lawmakers. Sens. Brickwood Galuteria and Pohai Ryan, both Hawaiian, were in executive chambers for the settlement’s announcement.

Not a Done Deal

It is unclear, however, whether the Kakaako settlement will garner the support of other key Hawaiian lawmakers like Sens. Clayton Hee and Malama Solomon. Both are former OHA board members, and as OHA chair Hee spent considerable energy fighting for ceded land money.

Abercrombie said he had told Solomon, a political ally, about the settlement, and left a message with Hee, a longtime friend of Abercrombie’s but also a man known for having his own strong views, particularly on matters regarding Hawaiians.

The settlement also calls for OHA to own the lands but for the Hawaii Community Development Authority, a state agency, to manage them. That will allow for community input on proposals for what to do with the land.

What to do with Kakaako Makai, though, has long been controversial. It was the Legislature that essentially scuttled Alexander and Baldwin’s ambitious development plans for Kakakao only a few years ago.

The Kakaako settlement will be one of the most significant issues facing the Legislature when it begins Jan. 18. Abercrombie will no doubt rely heavily on the counsel of his new deputy chief of staff, Blake Oshiro, the former House majority leader.

Deal Won’t Settle All Claims

As AG Louie made clear in his remarks at the governor’s press conference, the Kakaako settlement only applies to ceded land payments past due between 1978 and July 1 of next year. Act 178, passed in 2006, gives OHA a $15 million annual share of ceded land receipts.

The settlement also has no effect on other claims related to the overthrow of the kingdom or sovereignty movements. The state is not giving up any “mineral, surface of ground water rights” to the Kakaako land. And all current leases remain valid until they expire and pass to OHA.

Louie said that the settlement required compromise and that no one was “100 percent happy.” The state also chose to swap land for revenue payments because it has no money.

OHA is also allowed to conduct due diligence on the Kakaako property, some of which is contiguous. If OHA decides there are “defects” or “problems,” it can walk away from the deal.

Still, Louie said, the settlement could “put to rest once and for all these claims, get rid of it, take it off and move forward.”

Machado also recognizes the significance of the proposal.

“I’ve been with OHA for 15 years. When’s the last time something was given to Native Hawaiians in this manner?” said Machado, who promised to work diligently on getting the settlement approved. “Politically we always came up empty. We learned hard lessons.”

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