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Senate reviews Lihue land deal

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The state Legislature appropriated $17.1 million in 2006 to buy 140 acres of land adjacent to Lihue Airport on Kauai for more parking, a new rental car facility, expanded helicopter operations and to protect the airport from urban encroachment.

Now the state has agreed to buy about half the land for twice the money.

In May the state airport division spent $16.5 million to buy 31.2 acres from Lihue Land Co., which is affiliated with Grove Farm Co., one of Kauai’s largest private landowners. Both companies are owned by AOL co-founder Steve Case. The state hopes the federal government will reimburse most of the $16.5 million. The state also has a two-year option to buy another 40.7 acres from Lihue Land for $18.7 million.

In all, the state now plans to buy 71.9 acres for $35.2 million.

The price increase is a result of several factors, according to state transportation officials. The state’s original appraisal, done around 2005, was based on about 140 acres of industrial zoned land.

However, the appraised value was well below what Lihue Land was willing to accept.

Michael Tresler, senior vice president for Lihue Land and Grove Farm, said the state’s original appraisal was well below the land’s actual value. Two subsequent appraisals by the state and Lihue Land reflected substantially higher prices for the land because of its industrial zoning and the fact that Grove Farm controls the only available water source in the area, said state Department of Transportation spokeswoman Tammy Mori.

The higher price also accounts for Grove Farm providing sewer, water and roads connection to the state parcels.

"Grove Farm could better build upon their existing infrastructure for these improvements at a cheaper faster rate than the state could do it, so they agreed to make these infrastructure improvements within three years of the closing date," Mori wrote in an e-mail to the Star-Advertiser.

"So we paid the fair market value for about 80 acres of land, based on three separate appraisals, and got the best deal possible."

However, that deal has attracted scrutiny from the state Senate Committee on Ways and Means, which is reviewing the land deal and other state airport deals. State Sen. Donna Mercado Kim, committee chairwoman, has questioned whether the real estate deal is in the state’s best interests.

The committee held an informational briefing with state airport officials last week, and another is scheduled for Monday. Kim said she plans to ask state officials about advice from the state attorney general suggesting the state could acquire the land through condemnation. The attorney general ultimately approved the deal as is.

State airport officials said the acquisition could have been tied up in court for decades if they had pursued condemnation.

Kim also has questioned why the state paid $12 million out of the $16.5 million upfront for the land and why it is paying Lihue Land to provide needed infrastructure. Under terms of the deal, Lihue Land has three years from the date the state exercises an option to buy the added 40.7-acre lot to complete the installation of roads, sewer and water on the state-acquired parcels.

That means the state might be unable to develop the land for several years. It’s also unclear when or whether the state will be reimbursed for the land buy, said Kim.

"What happens if we don’t get the federal funds? Where is the money going to come from?" she asked.

The state expects the Federal Aviation Administration to reimburse 95 percent of the $16.5 million spent to acquire the first 31.2 acres of land. The optional parcel would be paid for via a statewide $4.50-a-day car rental fee.

Brian Sekiguchi, state deputy director for airports, said the state is applying for the federal Airport Improvement Plan reimbursement. He didn’t know when the state would get its money back.

The FAA has yet to receive the state’s application for reimbursement, according to agency spokesman Allen Kenitzer.

"Until FAA receives (and reviews) the application we cannot comment on the likelihood for reimbursement nor can we comment on the amount … the State could possibly receive," he wrote in an e-mail to the Star-Advertiser.


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