If they have a plan, it’s unclear.
Not even some of the bosses know what’s going on.
Starting in the fiscal year that begins in July, the Department of Hawaiian Home Lands will receive the last of the $30 million in payments the state has made annually for the past 19 years.
That installment will bring the two-decade total to $600 million — the amount agreed to by the state to settle breach-of-trust claims from 1959 to 1988 involving the 203,000-acre trust that DHHL oversees.
The federally created trust was established nearly a century ago to place eligible Native Hawaiians onto their ancestrial lands through homestead leases. The state took on that trust obligation as a condition of statehood but in the subsequent years misappropriated land from the trust.
The settlement money compensated DHHL for those wrongs.
Once the payments stop, the agency — already strapped for funding — faces a dilemma.
It either finds a way to replace that $30 million annually or makes difficult adjustments to account for any shortfall.
The $30 million represents the primary funding source for a department trust fund devoted to homestead development, infrastructure improvements, and repair and maintenance at existing subdivisions. The trust fund budget accounts for nearly 40 percent of DHHL’s overall budget.
Recognizing the potentially serious ramifications of a shortfall, legislators, trust beneficiaries and others say they have asked DHHL about its plan to replace the settlement revenue. But they say they have received no response.
“They don’t have an answer,” said Sen. Clayton Hee, vice chairman of the Senate Committee on Hawaiian Affairs. “That’s the problem.”
Even some members of the Hawaiian Homes Commission, which oversees the department and is headed by Jobie Masagatani, are in the dark about any plans.
Kama Hopkins, who was appointed to the commission in 2011, said in an email to the Star-Advertiser that he doesn’t recall any commission discussions about “solid plans” to replace the settlement money. He even double-checked past commission agendas to make sure he didn’t miss anything.
Likewise, Renwick “Uncle Joe” Tassill told the newspaper he wasn’t privy to any plan. “If Jobie knows something, she ain’t telling us,” said Tassill, who also has been on the panel since 2011.
For nearly three weeks, the Star-Advertiser unsuccessfully pressed DHHL for details of the financial plan. Only after being told last week that an article would run with or without DHHL comments did the department provide a response — at about 6:30 p.m. Friday.
The response contained mostly generalities about strategies to improve DHHL operations, control costs and “enhance revenue sources.”
But DHHL spokesman Punialoha Chee did not include any estimates on how much the department expects to generate in new revenue from the initiatives, except one, making it impossible to tell how much of the $30 million is projected to be recouped through such efforts. The only exception was saving $500,000 by refinancing a debt payment.
The strategies, for instance, included “increasing performance of DHHL’s financial assets” and “encouraging renovations/reinvestments in leased properties to increase revenue to DHHL.” No dollar amount was pegged to those actions.
“It’s not much of a response,” said Ian Lee Loy, a Hawaii island police detective whose term on the commission ended June 30 and who reviewed DHHL’s answers at the newspaper’s request. “I’m very disappointed by the lack of details.”
Tassill, who likewise was asked to review the answers, said the agency appeared to string together a series of general strategies so it could provide a response to the newspaper. But there’s little substance, he added.
“It’s all show and no go,” Tassill said. “It’s not a plan by far.”
Lee Loy said the commission needs to “think outside the box” for ways to replace revenue to be lost when the settlement payments stop. While he was on the commission, he said, he asked whether DHHL had exclusive mineral rights to its land.
If it did, DHHL potentially could work with a developer of a geothermal project on trust land and receive royalties in return, Lee Loy said, adding that the agency’s tendency to rely just on land rents isn’t enough.
But by the time he left the commission at the end of June, the mineral-rights question had not been answered, nor had there been any discussions about how to replace the settlement money, according to Lee Loy.
“That’s alarming, for sure,” he said.
Most of the settlement money to date has been used toward the development of homestead lots.
That spending has helped the agency develop housing and issue homestead leases to beneficiaries, some of whom have waited years for lots. The property leases are for 99 years at $1 annually.
Largely because of insufficient funding, DHHL historically has been slow to get beneficiaries onto their home lands. More than 26,000 are on waiting lists, with some having spent decades waiting.
In an ongoing class-action suit known as Kalima v. State involving more than 2,700 beneficiaries, the court ruled a few years ago that the state was liable for breach of trust from 1959 to 1988 because it failed to issue homesteads on a timely basis.
The lawsuit focuses on damages suffered by the plaintiffs because of the breaches, while the $600 settlement compensated DHHL for the state’s past misappropriations of trust land.
Given the homesteading mission of the department and the slow pace at which it historically has awarded leases, any financial hit DHHL takes in developing lots will hurt beneficiaries on the waiting lists, they and their advocates say.
That’s why the department needs to sufficiently plan for the ending of the settlement payments, according to some beneficiaries, yet its efforts to date seem inadequate.
Blossom Feiteira, president of the Association of Hawaiians for Homestead Lands, an advocacy group for those on the waiting lists, said the last time she remembers the commission discussing a plan was when Gov. Linda Lingle was in office.
That plan called for increasing the department’s revenue base through the leasing of trust lands for non-homesteading purposes, such as for commercial projects, with the aim of self-sufficiency, she said.
Normally, she said, self-sufficiency is a good goal of any public agency.
But because of DHHL’s unique mission and a Hawaii Supreme Court ruling requiring the state to provide sufficient funding to cover the department’s administrative costs, money generated from the trust, including through general leases, cannot be used to cover operating expenses, Feiteira said.
Yet the Legislature this year appropriated only $9.6 million from the state’s general fund, short of the nearly $15 million requested by Abercrombie and the $25 million that the commission sought to operate efficiently. It was the first time in four years that state general funds had been appropriated for DHHL operational costs and the highest amount ever received by the department for that purpose.
In his response to the newspaper, DHHL’s Chee said the department’s current financial situation resulted from spending decisions made by prior administrations. For example, he said, more than $220 million in trust funds was spent in fiscal years 2007 and 2008 to aggressively develop homesteads.
“These are the inherited realities at the department,” he wrote. “Moving forward, DHHL is proceeding prudently, focusing on controlling fixed costs, enhancing revenue sources and leveraging DHHL resources with other federal and state funds,” Chee wrote.
Asked how the $600 million in settlement money has helped beneficiaries, Chee listed a half-dozen completed and ongoing development projects on Oahu, which have created housing opportunities for hundreds of families.
Hee, the state senator, said the department’s financial challenges will become much tougher once the settlement money dries up.
“If people think the wheels are coming off the Department of Hawaiian Home Lands presently, there will be no wheels in 2015 because there will be no vehicle,” Hee said.
__________
THE FULL DHHL RESPONSE
Below are the Department of Hawaiian Home Lands’ responses to the Star-Advertiser’s written questions on how the agency plans to make up for the impending end of $30 million annual payments from a state settlement:
Star-Advertiser: Does DHHL have a plan to replace that revenue stream? What is the plan?
DHHL: Foremost, funding for DHHL’s programs remains a constitutional obligation of the State of Hawaii. This is the basis of the recent Nelson litigation that dealt with the State’s responsibility to provide DHHL with "sufficient" resources for its programs. The Supreme Court decision requires the State to provide sufficient sums for the department’s administrative and operating expenses. DHHL requested and advocated for $25.7 million in general funding for FY 2013-14 operating costs. The Legislature funded $9.6 million in general funds, the highest ever received in the Department’s history. The last time DHHL received any general funds for its operations was in FY 2009, four years ago.
With regard to the department’s present financial environment, the current situation is the result of spending decisions that were made by prior administrations. For example, over a two year period (FY 2007 and FY 2008) over $220 million in trust funds were spent to aggressively develop homesteads on DHHL lands. These are the inherited realities at the Department. Moving forward, DHHL is proceeding prudently focusing on controlling fixed costs, enhancing revenue sources, and leveraging DHHL resources with other federal and state funds.
To this end, the Department is employing a multi-tiered strategy. Projects that are completed or underway include:
>> Utilizing other sources of funds including United States Department of Agriculture (USDA), HUD, and Sandwich Isle funding. (Two projects currently underway funded with this partnership, Waimanalo (44 units) and Anahola (51 units) to cover the costs to develop lots).
>> Requesting and advocating for "sufficient" funding of the department’s administrative and operating expenses from the State pursuant to the decision in the Nelson case. (Discussed Above)
>> Lowering fixed costs by refinancing debt to HHFDC; payment reduced by $500,000 (July 2013)
Strategies that are underway include:
* Advocating for Congressional re-authorization of NAHASDA to maintain federal funding level of $12M/year.
* Accessing USDA RD funding to improve the operations of existing water systems on Hawaiian Home Lands.
* Increasing performance of DHHL’s financial assets.
* Addressing DHHL’s loan portfolio risk identified in the 2013 legislative audit.
* Increasing performance of trust lands through:
1. Reforming the revocable permits land management program to increase revenues.
2. Assessing vacant general leases (Shafter Flats, Hilo).
3. Pursuing revenue generating opportunities on the home lands particularly in the alternative energy arena (Letters of Interest were received in the spring of 2013 for Maui properties).
4. Encouraging renovations/reinvestments in leased properties to increase revenue to DHHL.
— To encourage reinvestment, DHHL staff just completed a statewide round of beneficiary consultation meetings to discuss proposed rules to implement an amendment to the Hawaiian Homes Commission Act that would allow an existing revenue-producing general lease to be extended an additional 20 years in order to encourage renovation and reinvestment in existing leased properties. Hundreds of beneficiaries turned out to hear and participate in these meetings.
Star-Advertiser: What has the $30 million been used for in recent years? Administrative costs? Infrastructure development?
DHHL: The $30 million settlement payment has been the primary source of funding for the Hawaiian Home Lands Trust Fund. Expenditures from the Home Lands Trust Fund primarily fund homestead development, infrastructure improvements, and existing subdivision repair and maintenance projects.
Star-Advertiser: When beneficiaries ask how has the $600 million benefitting them, what would the department’s response be? What have been some measurable results in terms of what that money has paid for?
DHHL: DHHL will always be measured by its ability to place native Hawaiians on the land. To that end, the department’s development efforts are ongoing with the projects listed below.
Maluohai – 226 lots (occupancy completed)
Kaupea – 325 lots (occupancy completed)
Kanehili (East Kapolei I) – 403 lots (334 occupied)
House construction on-going
East Kapolei II – 1,000 (estimated) single-family lots
1st residential subdivision (160 lots) scheduled to start late 2013
Kumuhau Subdivision, Waimanalo – 52 lots
House construction (45 turnkey): occupancy complete
House construction (7 self-help): on-going
Kakaina Subdivision, Waimanalo – 45 lots
Infrastructure construction: December 2012 – January 2014 (est.)
Another important aspect of what DHHL does requires the accessibility of the commission to their native Hawaiian constituency. This aspect includes convening monthly commission meetings around the state to consider various administrative and policy issues that effect the department and its beneficiaries.
Star-Advertiser: What percentage of DHHL’s annual budget does the $30 million represent?
DHHL: In the current Fiscal Year the Department’s Home Lands Trust Fund Budget accounts for 38.1 percent of the Department’s Total budget including its capital improvements projects, operating, and federal funds budget.
