The plans a California-based development group announced for the first new hotel construction on Kaua‘i in more than three decades called for a resort and wellness center featuring 85 rooms, a spa and 115 residential units. The Ohia would be set on a former sugar plantation in the growing tourist hub of Poʻipū.

The $227 million hotel was proposed in 2021 as an Opportunity Zone project, making use of a federal initiative meant to spur investment in low-income communities. It is one of at least a dozen projects that appear to have used the program on Kaua‘i.

Created in 2017, the Opportunity Zone program rewards developers with a slate of tax breaks for investing in government-identified economically distressed areas. But on Kaua‘i, quirks in census data caused the luxury resort community of Kukui‘ula and the wealthy town of Hanalei to fall into the island’s two Opportunity Zones.

“The really funny thing is that the Opportunity Zones on Kaua‘i are actually in very expensive areas,” Kela Caspillo, a local real estate agent, said. “I wouldn’t say that these areas are distressed in any way.”

It’s created a situation where developers are rewarded with federal tax breaks for investing in areas that are already pretty well-off. 

Kaua‘i is set to lose its Opportunity Zones at the end of the year, after the 2025 One Big Beautiful Bill Act added more stringent restrictions on which areas can qualify. A representative from the state Office of Planning and Sustainable Development said the U.S. Treasury Department’s new list of eligible tracts no longer includes any areas on Kaua‘i.

But the program has already quietly become a significant factor shaping development on the island.

Cutting Taxes For The Wealthy

Opportunity Zones were a brainchild of former Meta executive Sean Parker, who in 2016 described the program as “a vital new pathway for investors and entrepreneurs to kickstart economic growth in distressed areas across America.” After a lobbying push from Parker’s think tank, Economic Innovation Group, the concept was slipped into the 2017 Tax Cuts and Jobs Act. 

It’s since become the largest ongoing federal community economic development program in the country, facilitating more than $100 billion in investment. Between 2025 and 2034, it’s projected to cost the federal government more than $40 billion.

While there are some examples of the program achieving its stated objective, many economists have criticized it as too broad, benefitting wealthy investors while not actually helping the economically distressed communities it was designed to support.

David Wessel, an economist from Brookings Institute, critiqued the program in his 2021 book, “Only the Rich Can Play,” which details its creation and early implementation.

“Proponents and drafters of the Opportunity Zone legislation were so determined to make the tax break attractive to wealthy investors and so allergic to oversight from Washington … that they avoided the guardrails and oversight that might have directed more money to places and people most in need of private investment,” Wessel testified before Congress in 2021. “I fear that when we finally get all the data, we will learn that Opportunity Zones did more to cut taxes for the wealthy than to improve the lives of people who live in the zones.”

There are no restrictions on what sorts of projects can be built using Opportunity Zone funding, meaning that they aren’t necessarily providing community benefits such as local jobs or affordable housing. The program has been used to fund projects like a gold-bar warehouse, luxury student housing and pickleball courts. Most Opportunity Zone investment has gone to real estate — 75% through 2022, according to one study. 

These projects also tend to be concentrated in the wealthiest zones, which are generally most appealing to investors. A study found that half of all Opportunity Zone investment by 2019 went to the wealthiest 1% of zones.

In 2018, Hawai‘i designated 25 Opportunity Zones — 13 on O‘ahu, six on the Big Island, three on Maui, one on Moloka‘i and two on Kaua‘i. Both of Kaua‘i’s zones are places where a large chunk of the homes are owned by non-resident investors, whose incomes do not factor into the classification system, skewing the data to make the areas appear more economically disadvantaged. One zone, located on the South Shore, has a median household income of $69,750 and a median home value of $620,100, while a zone on the North Shore has a median household income of $35,893, and a median home value of $913,200, according to the census data.

Investors who put their capital gains into an Opportunity Zone Fund receive three tax benefits. First, they are able to put off paying taxes on their capital gains, saving money because those taxes will be comparatively less valuable in the future due to inflation. They also receive a discount on capital put into an Opportunity Zone Fund — 5% if the investment is held for five years and 10% if it is held for seven years. 

Finally, if an investor were to develop and sell an Opportunity Zone project after 10 years, they pay no capital gains taxes on the profits, which could result in an enormous windfall. “With Opportunity Zones on Kaua‘i, the real benefit is long term,” writes Lori Decker, a Kaua‘i real estate agent who often blogs about the program.

‘Do Away With It’

There are no reporting requirements for Opportunity Zone projects, making tracking down data on the scale and cost of the program very difficult. But, through analyzing property tax records and legal filings, Civil Beat identified 13 Kaua‘i projects that appear to have utilized the program, accounting for more than $50 million in property wealth. Properties were identified by keywords “Opportunity Zone, “OZ,” “QOZB,” “QOZ,” and “O’Zone,” located within Kaua‘i’s Opportunity Zones, to produce a list of some likely Opportunity Zone projects.

Most are vacation rentals and second homes in the luxury Kukui‘ula development, which began as a venture of Alexander & Baldwin, and has since sold to Colorado-based Brue Baukol Capital Partners.

An entity called Nakoa Qualified Opportunity Fund has purchased three properties in the South Shore area — a $721,000 vacant parcel in Kukui‘ula, a $1.87 million vacation rental in Poʻipū, and a $386,800 commercial property in Koloa.

Three other entities — Gulari Opportunity Zone LLC, Garden Isle OZ LLC and Emerald City OZ LLC — operate vacation rentals in Kukui‘ula. One project, on undeveloped land in Kukui‘ula valued at $3 million, is owned by six Opportunity Zone entities. Only one property Civil Beat found was located in the North Shore zone, owned by Utah-based Hanalei O’Zone Fund LLC.

These sorts of projects have contributed to the ongoing debate over how best to manage development on Kaua‘i’s South Shore. Elizabeth Okinaka, who lives in Koloa and advocates for limited development through the non-profit Save Koloa, believes the program has accelerated luxury, tourist-centered development.

“People aren’t going to live in those houses in Kukui‘ula,” she said. “They’re going to be on VRBO and Airbnb.”

The One Big Beautiful Bill Act, passed in 2025, added stricter limits on what sorts of places can be designated as Opportunity Zones, which will lead to Kaua‘i’s zones being discontinued. Projects that buy in before the end of the year will still be eligible for tax breaks. Okinaka was happy to see the program coming to an end.

“Do away with it,” she said. “It hasn’t done any good for the local community.”

The bill also added some reporting requirements and increased benefits for rural zones, while making the program permanent. Economist Wessel said the changes didn’t go far enough to fix the program’s flaws, however.

“They did narrow the criteria, meaning the zones that are eligible are poorer, and that’s a good step,” he said, “But they didn’t restrict the type of investments eligible for the tax break.”

The largest Opportunity Zone project on Kaua‘i — The Ohia hotel — never ended up breaking ground. Developer Kupono Resort filed for bankruptcy earlier this year and recently put the property on the market. But that doesn’t mean it won’t ultimately see Opportunity Zone benefits.

Bankruptcy documents show that Kupono Resort plans to sell the property to a Delaware-based entity called Kaua‘i Holdings QOZB 2026 LLC — a common acronym for Opportunity Zone developments. If the sale goes through before the end of the year, the new buyers would still be eligible for the tax breaks.

Civil Beat’s reporting on Kauaʻi is supported in part by a grant from the G. N. Wilcox Trust and its reporting on economic inequality is supported by the Hawaiʻi Community Foundation as part of its work to build equity for all through the CHANGE Framework; and by the Cooke Foundation.