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A Honolulu jury recently awarded $27 million to Ewa homeowners who say they were misled by a developer who planned to build a marina near their homes and delivered a lagoon instead.
Instead of an inlet to the open sea, they got a landlocked body of water.
The homeowners weren’t the only people Haseko Development told about the marina.
The developer described its residential and commercial development plans as the “Ewa Marina Project” in its 1990 proposal before the Land Use Commission seeking to reclassify land from agriculture to urban.
But even though Haseko changed its plans without filing a motion to amend its development agreement, there isn’t anything the LUC can do about it.
That’s because its only enforcement power is to revert land to its previous classification if a developer violates the terms of its agreement. And even that’s not possible if a developer has already completed substantial work on the project, the Hawaii Supreme Court ruled last year.
“There is an inherent paradox when the state is putting on conditions and doesn’t have the ability to make sure they’re followed through,” said Daniel Orodenker, executive director of the LUC.
It’s a problem that Sen. Laura Thielen, who formerly directed the state Department of Land and Natural Resources, has been trying to fix legislatively.
“To me, it is giving the false impression to citizens of Hawaii that when we reclassify lands and zone them for development, that this Land Use Commission can impose conditions that will make sure that the concerns about keeping the environment protected, agriculture protected … will actually happen and it’s not a lie,” Thielen said.
State law allows the LUC to revoke a land use classification if a developer misrepresents the project or doesn’t comply with the conditions set forth in the development agreement.
But when the commission actually tried to use that tool against Big Island developers DW Aina Lea and Bridge Aina Lea in 2011, it sparked a years-long lawsuit.
The LUC revoked the developers’ urban land classification after determining that it broke its promise to build the requisite affordable housing despite investing $20 million in the project.
The case went all the way to the Hawaii Supreme Court, which ruled in November 2014 that if a project has been “substantially commenced,” the LUC can’t revert the property to its previous land classification.
Orodenker said that while their plans often change, developers generally come to the commission to amend their original agreements, or work with the state to resolve the issue.
At Ko Olina Resort, a developer removed a public boat ramp that had been a condition of its land reclassification and replaced it with a private clubhouse. The LUC concluded that the developer violated its agreement, and Ko Olina Development agreed to construct another public boat ramp.
More recently on Maui, Kaonoulu Ranch altered its plans to build two malls in Kihei and the commission determined that the changes violated the terms of the land reclassification approval. The developer agreed to request an amendment to its project and do another environmental analysis in response to community opposition.
“There is an inherent paradox when the state is putting on conditions and doesn’t have the ability to make sure they’re followed through.” — Daniel Orodenker, LUC executive director
But in instances where a developer has completed a lot of work and deviates from the terms of its land reclassification approval, the commission’s hands are tied.
The LUC required developer D.R. Horton to conserve more than 250 acres for “urban agriculture” in its 2012 decision and order granting the controversial land reclassification for its 11,750-home Hoopili project in west Oahu.
None of that is included in the city’s agreement with the developer. If D.R. Horton completes substantial construction on the project and somewhere in its 20-year buildout changes its plan to preserve the farmland, the commission would have no recourse and it would be up to the city whether to try to enforce that condition.
“Unfortunately the only real ultimate enforcement capability is revoking the classification,” said Scott Derrickson, a planner who has been with the LUC for six years. And the Bridge Aina Lea Supreme Court ruling limits the use of that tool.
“It was already difficult, but it’s even more difficult,” Derrickson said.
Given the LUC’s limited enforcement powers, Orodenker said the agency often relies on counties to enforce development agreements. Hawaii has a two-tiered land-use system that involves four state land classifications and multiple types of county zoning.
Relying on counties to enforce LUC conditions works when state and county interests align, and when the state’s conditions are added to county rezoning approvals.
But sometimes, counties act directly contrary to the agreement made between the developer and the commission: In the Ko Olina case, the City and County of Honolulu approved the shutting down of the public boat ramp to create the private clubhouse, Derrickson said.
Orodenker said counties may not place a high priority on enforcement of conditions that primarily affect the state’s interest, such as protecting agricultural land or other public trust issues.
George Atta, who leads the Honolulu Department of Planning and Permitting, said the county does consider the LUC conditions when issuing certain permits.
But when it comes to “compliance and follow-through, that’s a different issue,” Atta said.
“On that one, we depend on the state to monitor and follow through on their own conditions,” he said, adding that unless the state requests the county to enforce conditions, the county generally won’t do anything.
If there is such a request, the county may withhold future building permits, but probably won’t revoke existing building permits, he said.
Atta said the county focuses on the conditions required by the LUC and doesn’t look at the representations of the project that the developer made before the state commission.
There is no specific mandate from the Land Use Commission that the counties enforce its development agreements.
In the case of Haseko’s planned marina in Ewa, the LUC conditions were related to issues such as environmental protection and job creation. Although the project was described consistently as a marina, there wasn’t an explicit condition requiring the building of a marina. It was simply how the project was described when the developer applied for land reclassification, according to the LUC’s 1990 decision and order.
Atta said Haseko has been following proper procedures by reapplying for a zone change and the appropriate permits to move forward with the lagoon. The City Council will take up the zone change application and it will be subject to public input. Already, several Ewa residents have testified in support of the lagoon.
Atta noted that there is no specific mandate from the LUC that the counties enforce its development agreements. When there’s disagreement on issues such as highway conditions, the county, state and developer will often negotiate before the city comes to a decision, he said.
He opposes giving the LUC more enforcement powers because he said it would infringe on Honolulu’s right to govern zoning on Oahu.
Instead, he thinks the LUC should focus on broad boundary changes rather than specific projects, so as not to create unnecessary redundancy.
Earlier this year, Thielen introduced Senate Bill 511 to give the LUC more enforcement powers. But while a version of her proposal passed the Senate, it never got a hearing in the House.
Rep. Ryan Yamane, who leads the House Committee on Water and Land, didn’t schedule a hearing for the bill because he already deferred a similar measure, House Bill 1169.
House spokeswoman Carolyn Tanaka said Yamane deferred that measure because there was a lot of opposition at a hearing Feb. 13.
A look at the written testimony finds support from the state Office of Planning, the Land Use Commission, the Office of Environmental Quality Control and the Office of Hawaiian Affairs.
The sole piece of critical written testimony came from the Land Use Research Foundation, an advocacy group for developers that criticized the proposal as inconsistent with the intent of the Land Use Commission.
The LUC was originally envisioned to focus on broad boundary amendments, but over time has focused more on specific project approvals. As the system has evolved, the number of conditions appended to reclassification approvals has grown.
The foundation said that the bill could potentially harm developers’ ability to get financing for their projects and that adding greater enforcement power “ignores the reality of development projects.”
“HB 1169 is a ‘power play’ to alter and subvert the existing land use enforcement process by giving broad and unbridled enforcement powers to the LUC,” wrote David Arakawa, the organization’s president.
The issue may come up again next year. House Majority Leader Scott Saiki said he thinks it’s worth debating. The biggest question, he said, would be what kind of enforcement tools the LUC should have.
Thielen thinks it might be harder to push the issue next year because she doesn’t chair a committee anymore. But she plans to try.
“I think the Legislature is just sending a horrible message to the development community that they’re not going to back up the state body with enforcement powers,” she said.