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State again turns down housing project

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The state Land Use Commission was unwilling yesterday to change its January ruling that revoked permission for a company to develop a $1 billion residential community near Wai­ko­loa on the Big Island.

The commission voted 6-2 to uphold the earlier ruling made after the company planning the 2,300-home proj­ect called the Villages of Aina Le‘a failed to meet a five-year deadline to complete 385 affordable homes.

DW Aina Le‘a Development LLC had petitioned the commission to reconsider its January decision, saying the action was insensitive to extraordinary economic and regulatory difficulties that delayed financing and construction.

The development firm called yesterday’s decision absurd and suggested the commission’s ruling might be tested in court.

"DW Aina Le‘a Development LLC will pursue all legal remedies available to protect its rights, to continue development of The Villages of Aina Le‘a, and to fulfill its commitment to the community."

During yesterday’s meeting, several pleas delivered by proj­ect supporters — from construction industry representatives to cable TV and gas company officials — didn’t sway commissioners.

"I have 135 employees who would benefit from this proj­ect — not only now, but 20 years down the road," said Jack Hol­shue, manager of the Home Depot store in Kailua-Kona. "How could we not allow this (proj­ect) to succeed? Who would win if this does not succeed?"

DW Aina Le‘a also has strong support from Hawaii County officials, including the planning director and mayor, who feel the proj­ect site should be used for housing to help more Kohala Coast hotel workers avoid commutes from the other side of the island.

Bobby Jean Leit­head-Todd, director of Hawaii County’s Planning Department, disagreed with the commission’s removal of the proj­ect site from state urban land boundaries. She said the completion of all 385 affordable homes wouldn’t likely have produced much immediate benefit given weak demand for homes and difficulties moderate-income families have qualifying for mortgages.

There was no public testimony against the proj­ect yesterday. However, the state Office of Planning advocated for enforcing the deadline and rescinding an old commission decision to urbanize 1,060 acres for the proj­ect.

Several commission members commented that not enforcing the deadline agreed to by the developer would diminish the credibility and purpose of the commission.

"If we don’t revert this, then why have a commission?" asked Thomas Con­tra­des, a commission member.

Commission members Duane Kanuha and Charles Jencks cast dissenting votes.

Jencks suggested the commission forgive what he called a mistake the developer made agreeing to a deadline. "This is a complex world and these are difficult proj­ects," he said. "Let the county deal with this issue."

Kanuha also said the county should be the one determining whether a delivery timetable for affordable homes should kill the entire proj­ect.

Some development proj­ects that need commission approval to urbanize land in the state’s agricultural land district have had affordable-housing requirements set by counties. But in other cases, including Aina Le‘a, the commission set that requirement.

For Aina Le‘a the requirement dates back to 1989 when the commission urbanized the site for a California developer, Signal Puako Corp., which proposed building 2,760 homes and agreed to make 60 percent of the homes affordable to moderate-income buyers.

The 60 percent requirement was an element of state housing policy under former Gov. John Wai­hee in the 1980s. The policy was later relaxed after being criticized as too onerous, but the 60 percent requirement remained tied to the Wai­ko­loa property.

Another developer, Japa­nese firm Nansay Hawaii Inc., took over and amended the site plan in 1991 to 1,550 homes and six golf courses.

Nansay, however, ran into financial trouble amid Hawaii’s flagging economy in the early 1990s and managed to build only about 100 affordable homes.

In 1998 the land was sold at foreclosure; it was acquired a year later by an affiliate of Bridge Capital, a real estate and lending company based in the U.S. Virgin Islands.

In 2005, as Hawaii’s real estate market was booming, Bridge Capital proposed building 2,300 homes, two golf courses, a regional shopping center, a public school and 26 acres of park space.

But Bridge Capital said it would be cost-prohibitive to produce 1,300 affordable homes under the 60 percent requirement.

The firm asked the commission to reduce the requirement to 20 percent, or 385 homes, a more common pres­ent standard.

The commission agreed but imposed the five-year deadline to deliver all the affordable homes after Bridge Capital said five years, including time for possible delays, would be reasonable.

After encountering financial difficulties and permitting delays, including a new requirement in late 2007 to produce an environmental impact statement in the wake of a legal ruling over the Hawaii Superferry, Bridge Capital sold its development rights to DW Aina Le‘a in 2009.

DW Aina Le‘a, which said it has spent $25 million largely on infrastructure, failed to complete 385 homes by the November 2010 deadline. As of January, only about 60 affordable homes were in various stages of completion. The developer vowed yesterday to complete all 385 affordable homes.

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