Mismanagement plagues leases

FIRST OF 3 PARTS

Dozens of tenants are leasing more than 38,000 acres of mostly undeveloped land from the Department of Hawaiian Home Lands for as little as pennies per acre monthly, with the deals administered through a revocable-permit program plagued by lax oversight and selective enforcement, a Star-Advertiser investigation has found.

The oversight is so shoddy that unauthorized uses in some instances have gone unchecked for years, including a case of a DHHL commissioner who violated his month-to-month rental agreement for the six years he served on the commission by living in a house on property that is not supposed to contain permanent structures.

Even though two Kauai residents told the department about the home in November 2010, it opted not to investigate for the next 21⁄2 years — until the Star-Advertiser started asking about the case.

One offshoot of the ill-managed program has meant that Native Hawaiian beneficiaries — the people the department was created to serve — sometimes are shut out from their own land. Only about a third of the tenants are Native Hawaiian.

On Maui, for instance, a nonbeneficiary couple rents 80 percent of the roughly 6,300 acres being leased under the program on that island. The couple has had that ranch land, about 5,000 acres, for 17 years.

The program, which makes otherwise unused, undeveloped property available to anyone via month-to-month revocable permits, doesn’t have administrative rules governing how leasing decisions are made and rental rates are set. Internal guidelines are used instead, and permits need only the approval of the commission chairman, not the full panel.

The absence of rules was especially problematic because the program until a year ago lacked any transparency. Before the commission adopted a new policy in April 2012, no information was publicized about these privately negotiated deals until the permits were listed in DHHL’s annual report, typically months after they took effect.

The department also has no public inventory detailing what lands are available through revocable permits, meaning people most familiar with the agency’s land-use plans can capitalize on what DHHL acknowledges is a "first-come, first-served" process.

The former DHHL commissioner, a state senator, two former DHHL employees and a former Department of Land and Natural Resources administrator have been among those who have benefited.

"This isn’t even a broken system," said Kahaunani Mahoe-Thoene, a beneficiary advocate on Oahu. "There’s no system."

Though the permits are meant to be short-term and the properties can be reclaimed with just 30 days’ notice, which the department cites to justify the deeply discounted rents, the agreements frequently become long term, giving tenants sizable rent breaks for much longer than what was envisioned. Several permits have been in place for more than 30 years, and dozens are at least 15 years old. The average age is 11. Rents are reviewed annually.

"I would hate to use the word (corruption), but I believe it to be so," said Renwick "Uncle Joe" Tassil, a commissioner who is pushing for reforms. "It is, in fact, part of government corruption."

The department, responding to the Star-Advertiser’s findings, said it is instituting a 60- to 90-day moratorium on issuing new permits and intends to review all existing ones — about 180 — to determine whether they should be continued, modified or terminated. Ranching and farming are the two most common uses of the land.

Permit holders found to be violating terms of the agreements will be directed to correct the problems, the department said.

DHHL also intends to look for ways to make the awarding of permits more transparent and productive, Deputy Director Darrell Young said in written responses to Star-Advertiser questions. The policy adopted by the commission a year ago requires nonhomesteading land applications, including permit requests, to be posted on the agency’s website for a 30-day comment period.

Young disputed the notion that the agency selectively enforces permit regulations or engages in favoritism.

He noted that the agency’s limited staff — four land managers are responsible for roughly 200,000 acres statewide — tries its best to oversee land management activities on each island.

"With travel restrictions and lack of presence in recent years, the ability and resource to investigate every complaint or concern is not possible," Young wrote.

But the Star-Advertiser found multiple cases in which the department’s failure to deal with land abuses seemingly had little to do with resources.

The most significant one involved Stuart Hanchett, who began leasing 316 acres of ranch land from the agency in 2003 and served as DHHL’s Kauai commissioner from July 2005 until June 2011. He was appointed by then-Gov. Linda Lingle.

Hanchett told the Star-Advertiser that he built a house on the property before he became a commissioner and began living there around 2004 — even though the revocable permit specifically prohibited residential use.

Hanchett said he knew he wasn’t supposed to construct a home but did so anyway, without informing the agency. He said he needed to establish a full presence on the property to combat a serious theft and vandalism problem that threatened his ranching operation.

In November 2010 two Kauai homesteaders wrote the agency to protest a proposal to convert Hanchett’s revocable permit to a 20-year license to a newly formed nonprofit that he heads. The protests prominently mentioned the unauthorized home.

But Linda Chinn, the DHHL administrator who oversees revocable permits and other nonhomesteading leasing programs, recommended that the commission approve Hanchett’s licensing deal without determining whether Hanchett had indeed built a home on DHHL land. In her written recommendation, Chinn didn’t mention the house controversy.

Asked last month why she didn’t investigate the matter in 2010, Chinn told the Star-Advertiser that the department was under the assumption that the home had been built on an adjacent, privately owned lot. It is in the middle of DHHL’s parcel.

Other cases raise similar questions about the department’s inaction.

» In March 2009 the commission revoked the permit held by brothers Weston and Nowlin Correa for 105 pastoral acres in Wai­ma­nalo. The commission took the action after the brothers had committed multiple permit violations, including holding large commercial gatherings on the property, known as Correa Ranch, and accumulating more than $200,000 in city fines for grading land without a permit, according to DHHL records. Today, more than four years later, the Correas still have the property. As recently as last month, a company that arranges commercial wedding packages touted Correa Ranch as a venue.

The department said the current administration is looking into the Correa case and was unable to comment.

The brothers’ late mother, Naomi Correa, was a longtime Demo­cratic Party of Hawaii vice chairwoman. Asked whether the family’s political connections were a factor in explaining why the brothers haven’t been evicted, the department declined comment, citing the ongoing inquiry.

Nowlin Correa did not respond to multiple requests for comment.

» A prime beachfront parcel along Ana­hola Bay on Kauai suffered from years of neglect while under a revocable permit. Several structures on the 5-acre site were practically falling apart during a Star-Advertiser visit in April, eight months after the tenant, Lihue First Church, vacated the land. Ana­hola beneficiaries said they complained for at least 15 years about the site, called Camp Faith, but the agency did nothing until last year, after a written complaint was lodged. DHHL subsequently revoked the permit, citing the severely dilapidated buildings and homes being rented to non-Hawaiians. A church spokes­man disputed those characterizations. Young said the department took action after receiving its first letter about the property in April 2012.

» Residents of private million-dollar homes along a nearby stretch of the Ana­hola coastline for years have been using a sliver of DHHL beachfront property as their backyard without paying for it.One home has a rock fire pit, horseshoe pit, hammock and underground sprinkler system on the land and used to have a single-hole putting green there. Another home used to hold commercial weddings on the DHHL property, a neighbor said. Most of the homes are vacation rentals owned by absentee owners. Yet when an Ana­hola homestead group asked for a revocable permit to use the property, the homesteaders said that DHHL’s Chinn told them no, citing concerns about disturbing the homeowners. Chinn denied saying that.

Young said a department staff member has been assigned to investigate the beachfront properties and make a recommendation.

The department’s failure over decades to develop administrative rules for the permit program also seems to have little to do with a lack of resources.

As far back as 1983, a federal-state task force urged DHHL to establish such rules to ensure permits were issued in a fair and uniform basis. The department never heeded the advice.

With a federally established land trust of about 203,000 acres, the department’s main mission is to get beneficiaries — those who are at least 50 percent Native Hawaiian — onto residential, ranching or farming homestead lots. The homestead leases are for 99 years at $1 a year.

But the agency has long been criticized for the slow pace of fulfilling that mission. More than 26,000 beneficiaries are on homestead waitlists, and some have died waiting.

The department uses the revocable permits to lease trust lands that have no infrastructure and are considered too costly to develop for homesteading or are not expected to be developed for years. The idea in part is to raise revenue in the interim that can go toward homesteading.

For the fiscal year that ended June 30, 178 permits generated nearly $2.7 million in rental income for the department.

The permits typically are good for a year and are brought as a group for renewal by the commission. DHHL has the authority to reclaim the land with just a month’s notice — the reason permanent structures generally cannot be built on such lands.

The department also uses the permits as management tools. By getting tenants onto the land, the tenants — not the department — shoulder the responsibility and cost of maintaining the property.

"I don’t have to go in and cut the grass. I don’t have to go in and kick out squatters," said Chinn, administrator of the agency’s Land Management Division, which oversees the issuing of permits, licenses and general leases for nonhomestead lands.

According to Chinn, the department uses a general rule of thumb to set rental rates: Take the parcel’s assessed value, apply a 6 percent rate of return and then discount that amount by 50 percent because of the 30-day take-back provision.

As a result, monthly rents to individuals for ranch or pastoral land are as low as 12 cents an acre, while similar rates for for-profit companies are as low as 17 cents an acre, according to a Star-Advertiser analysis of DHHL data.

Such low rates, especially over years, cost the trust money, according to critics of the system. They say the deep discounts are particularly troubling when the tenants aren’t even beneficiaries.

Only 36 percent of the permit holders are Native Hawaiian individuals or organizations, according to DHHL data. The department is not required to give preference to beneficiaries in awarding permits, but that will be among the issues considered during the overall review of the program, Young said.

The agency also plans to examine the duration of permits. Young said the lack of consistent state funding for personnel and infrastructure development of homestead lands has meant that the permits over time have evolved to become longer than intended or conceived.

"The current administration of DHHL agrees that this situation is of concern," he wrote.

The problems plaguing the permit program are not new, critics say, and reflect broader issues that touch on the state’s failure to adequately fund DHHL and to achieve sufficient progress in getting beneficiaries onto trust land.

Said Alan Murakami, a Native Hawaiian Legal Corp. lawyer, "This is just the tip of a larger iceberg, which is the failure of the state to live up to its promise."

Correction: The first name of Weston Correa was misspelled in an earlier version of this story.