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Aloha Tower has new shot at redevelopment

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The effort to redevelop underused state land around Aloha Tower fell dormant for a year after Hawaii lawmakers killed the budget of a troubled state agency spearheading the effort last year. But the agency is now on the verge of being revived.

State House and Senate legislators unanimously approved a bill Tuesday to reconstitute the Aloha Tower Development Corp. with a slimmed-down board dominated by the state Department of Transportation. The bill now heads for consideration by Gov. Neil Abercrombie.

If the bill becomes law, it would rekindle a 30-year-old mission to transform a valuable section of waterfront fronting downtown Ho­no­lulu through redevelopment into more of a "people place."

Under House Bill 1020, the ATDC would be led by three board members — the Transportation Department director, the department’s harbors division deputy director and the director of the Department of Business, Economic Development and Tourism.

Previously, ATDC had a seven-member board comprised of three state government officials, a county official representing the mayor and three private individuals.

The bill also reduces the land under ATDC’s jurisdiction to between Piers 4 and 11, eliminating jurisdiction from Piers 11 to 23 and inland into part of Iwilei.

One role the agency was given in 2008 — leading a roughly $600 million state initiative to modernize harbors statewide — was assumed by the Transportation Department last year and won’t be part of ATDC’s duties under the bill.

The bill received support from the Transportation Department, which owns much of the land pursued for redevelopment by ATDC.

However, it remains to be seen if the overhaul results in better productivity by the agency that has long struggled with achieving its primary goal.

Transportation Department spokesman Dan Meisenzahl said it will take some time to establish a redevelopment strategy, but the department will begin to receive roughly $1 million in annual rent through ATDC from Aloha Tower Marketplace that will help planning efforts.

"We hope to move foward eventually pretty aggressively," he said.

ATDC was created in 1981 largely to manage prime waterfront land that could enhance revenue for the state and improve a run-down industrial section of Oahu’s main commercial harbor through private development partnerships.

State officials at times pinned big hopes on opportunities in the special redevelopment zone.

The first two private development proposals in the early 1980s fizzled, including one that planned a 411-room hotel, offices, retail shops, cruise ship terminal facilities and a pedestrian overpass over Nimitz Highway.

It appeared the agency hit a home run in 1989 approving a developer’s plan projected to produce $4 billion in ground rent payments to the state over a 65-year lease for 17 acres between piers 5 and 14.

The plan called for a retail marketplace, two condo towers, an office tower, a 109-room business hotel, a cruise terminal, 2,000 underground parking stalls and a Nimitz pedestrian overpass.

But pieces of that plan began to unravel with the softening economy and withdrawal of financing in the early 1990s. Ultimately only the retail piece, Aloha Tower Marketplace, was built. But it opened in 1994 without sufficient parking, and since then has struggled.

In the Past decade, a handful of development proposals and attempts to fix the parking shortage were stymied.

The most recent development effort — a plan by Texas developer Ken Hughes that included residential, hotel and time-share units, retail and restaurant space, 850 parking stalls and a public pedestrian promenade around the water’s edge — dragged on for six years and devolved into litigation. An arbitrator awarded Hughes $1.6 million in damages in 2009.

Though some development failures were due to missteps by developers or economic pressures, the debacle with Hughes created an embarrassment that pushed the Legislature to prohibit the agency from spending any money in its special fund last year, effectively putting the ATDC out of commission.

A state audit that recommended ATDC be abolished also was produced last year.

The audit said ATDC responsibilities should be split between the Transportation Department and an agency overseeing development in Kakaako, the Hawaii Community Development Authority.

A bill proposing that split, Senate Bill 1247, advanced to a House and Senate conference committee, but was rewritten last week in a failed attempt to authorize a casino in Waikiki.

Under HB1020, the new ATDC board will pick up where the old board left off. Since terminating the development agreement with Hughes, the agency produced an updated development plan that includes an idea to fill in seven acres of harbor between Piers 6 and 8 to create new waterfront land for development tied to a nearby transit station planned by the city.

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