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Land can still raise UH funds

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Land deals often go sour, especially in a still-recovering economy, so a financing scheme for building a new university that is based on land deals is sure to be tumultuous. But in an environment where the University of Hawaii struggles system-wide to underwrite its many facility needs, such private alternatives to taxpayer financing must not be discarded lightly.

Given the shifting financial landscape and its effects in the Kapolei region, it wasn’t surprising that a multimillion-dollar sale of property surrounding the fledgling University of Hawaii-West Oahu campus has fallen through. A letter of intent to sell 39 acres to the Catholic Church, which had envisioned a church and private school on the land, expired earlier this month.

That would have brought in about $12 million to the special fund set up for development of the university campus. UH-West Oahu’s buildout, up until this point, was seen as a venture to be financed almost entirely with private funds, using the 500-acre gift of land from the former James Campbell Estate.

The loss of that prospect is disappointing, to be sure, but that doesn’t mean UH should abandon the notion of using its asset as a revenue-generator for campus development. Although selling land simply to pay operational bills is not a sustainable financial plan, further opportunities to derive lease rent from commercial development of land at least should be explored.

The original plan for selling more than half the site for housing and other projects was hobbled by the collapse of the credit market four years ago. In 2010 the state put up $48 million in general obligation bonds to underwrite the campus’ Phase 1 construction.

The West Oahu administration is concerned because the university has nearly exhausted the funds from the previous transaction: the 2010 sale of a 6-acre parcel to Japan’s Tokai University, which is now constructing an international college adjacent to UH-West Oahu. That money was put in the special fund the Legislature set up.

The money has been spent on paying the debt-financing charges, which is permissible under the rules for the campus development. But those are payments that are part of the school’s operating budget, so officials are rightly worried that this practice can’t continue.

So rather than continue to sell land, the administration has decided to seek a $3.5 million appropriation from the state’s general fund to cover the debt servicing. It’s also looking at revenue bond financing — which is typically repaid with student tuition — as well as additional funds from the UH system and private donations.

The alternative, they said, would be to severely cap the student enrollment, although they acknowledge that would not be their preference.

It would be a bad idea to implement a no-growth plan for the student population in an area that ultimately is pegged for immense expansion and in a region that is so deeply underserved where educational opportunity is concerned.

Donna Kiyosaki, UH-West Oahu’s vice chancellor for administration, said there are other elements in the campus financial plan that are being developed. For example, she said, UH is pursuing the federal EB-5 Visa program, through which it took out an $18 million loan capitalized by Chinese investors. Under EB-5, wealthy investors receive visas in return. There is $17 million still remaining in that fund.

In addition, she said, the campus administration is planning to hire a real estate land management consulting firm to guide them in the use of the acreage to its best advantage. That is a logical move, because finding those elusive opportunities is a job for the land-management experts.

There will be many agencies seeking supplemental funds in the coming legislative session and, while $3.5 million is a modest request, UH-West Oahu can’t assume they can always tap that well.

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