Raceway measure rolls on to Senate

Oahu car-racing enthusiasts have picked up some traction on a drive to finance a new motor sports raceway on the island after the demise of two track facilities in the past eight years.

Several nonprofit companies involving former racetrack operator George Grace III would be able to use state revenue bond authority to sell $100 million in bonds to investors for a motor sports complex under a bill that has cleared the state House.

House Bill 1329 now awaits consideration from two Senate committees.

Establishing a raceway has been a goal endorsed by local political leaders as well as racing enthusiasts since Hawaii Raceway Park closed in 2006 after 44 years at Campbell Industrial Park.

Grace subsequently got a new track running in Kalaeloa in 2010 but was forced to shut it down last year after disputes over a state land lease and city fines that remain unpaid.

Project supporters say organized and insured facilities provide a safe venue that reduces illegal racing while also generating jobs and tax revenue.

"Our motor sports community is in a very dire situation," Michael Kitchens, Hawaii Raceway Park’s former operator, said in written testimony on the bill. "Currently, there are no viable alternatives for the majority of racing activities that have existed since the early 1960s."

The new initiative, however, faces major obstacles.

For one, the state Department of the Attorney General said the racing-related facilities proposed in the bill don’t appear to qualify as industrial enterprises eligible for Hawaii special-purpose revenue bonds.

Of the $100 million in bonds proposed, $35 million would be for a motor sports center for racing, $30 million would be for an education facility, $20 million would be for a manufacturing facility and $15 million would be for a training facility. Each piece of the project is proposed under nonprofit entities with the root name Paradise Ohana.

The attorney general said only the manufacturing facility may qualify, though the bill doesn’t specify what manufacturing would take place.

In response, attorneys from local law firm Alston Hunt Floyd and Ing, representing the Grace companies, contend that revenue bonds can be for any general business activity under a broadly construed definition of "industrial" or "industry."

Special-purpose revenue bond financing is something that private entities can seek through the state if their projects have a public benefit and are within a few allowed industries that include agriculture, health care and nonprofit schools. The state does not incur a financial obligation for the bonds.

Private projects that have tapped such financing include a system to air-condition downtown buildings using cold seawater, a cacao processing facility, and electric power generation plants based on wave energy and solid-waste gasification.

Another obstacle to the raceway project is finding a site for the complex, envisioned to include a drag strip, road racing course, off-road course, dirt oval and motorcycle track.

The bill refers to the project only as generally on a portion of 400 acres in West Oahu.

Rodney Sato, a local attorney working with Grace, said various sites in West and Central Oahu have been studied, though efforts to secure a feasible site have not yet begun.

Dhevhan Keith Marcelino, also affiliated with the Grace nonprofits, included an image of proposed raceway facilities on a few hundred acres in Kalaeloa that includes land controlled by Hunt Cos., the Federal Aviation Administration and the Navy, which intends to give its portion to the city.

Sato said the image was prepared to show how much land the tracks and buildings might occupy, and that there are no plans to use the Kalaeloa site.

The most immediate obstacle is getting the bond bill approved.

Few people not affiliated with Paradise Ohana or Grace have testified on the bill.

The bill was among several rushed into a crucial vote earlier this month.

On March 5 public notice on the bill’s hearing before the House Finance Committee was given less than an hour, rather than the required 48 hours, before the hearing began.

Paradise Ohana representatives tout that racing is the fastest-growing spectator sport in the country and will create jobs, generate taxes and promote education and training. It also could increase tourism in Hawaii, some contend.

"We would see more people vacationing on Oahu, particularly during winter, where the mainland is mostly too cold to race," Harry Hansen wrote in written testimony.

Grace, in written testimony, gave examples of estimated annual economic impacts from mainland motor sports facilities that include $200 million at Las Vegas Motor Speedway and $727 million at Indianapolis Motor Speedway.

Persuading Hawaii lawmakers to help finance a local speedway has been difficult in the past. In 2005 and 2006, proponents of a raceway failed to persuade the Legislature to provide $50 million in state tax credits for such a facility.

The bond bill is at the midpoint of this year’s legislative session, but the measure did not pass the House cleanly. The House Finance Committee removed all dollar amounts for the bonds and changed the bill’s effective date to July 1, 2030. That guarantees that the bill, which was passed by the full House March 10, will have to be decided in a joint House-Senate conference committee if the Senate passes the bill.

There is some question as to whether Grace’s former troubles with the city and state Department of Hawaiian Home Lands might negatively influence the bond bill.

Grace established Kalaeloa Raceway Park in 2010 through Save Oahu’s Race Tracks LLC on 38 acres of DHHL land in an attempt to replace the 69-acre Hawaii Raceway Park. But the operation, which included a dirt drag strip and oval track, was evicted after DHHL claimed that Grace was about $40,000 behind on utility and rent payments and had engaged in unauthorized construction and mining.

Grace argued that DHHL did not properly inform him of lease regulations and unfairly refused to resolve the issues after he had invested about $300,000 improving the site.

Part of the trouble, according to Grace, was that officials with DHHL, which is exempt from certain county regulations, incorrectly told him he didn’t need city permits to grub the land and stockpile dirt.

The city issued citations to Save Oahu’s Race Tracks for those activities. Though Grace corrected three violations, he accrued $340,000 in fines that remain unpaid. A fourth, unresolved violation continues to earn Save Oahu’s Race Tracks a penalty of $1,000 a day and was up to about $335,000 as of last week.

Grace sued DHHL but lost and was evicted from the site, which is adjacent to the site identified in Marcelino’s testimony.

Despite his difficulties with DHHL and the city, Grace has garnered support from some government officials, including state Sen. Maile Shi­ma­bu­kuro and City Council Chairman Ernie Martin, partly due to the community value of a raceway. Shi­ma­bu­kuro and Martin wrote letters of support for Grace during his dispute with DHHL.

Shimabukuro introduced a bill in the Senate mirrored on HB 1329, which was introduced by House Speaker Joseph Souki. The Senate bill was not heard, allowing the House bill to be the vehicle to decide whether Paradise Ohana can float the requested bonds.

"We are very thankful to state Sen. Maile Shi­ma­bu­kuro and House Speaker Joseph Souki for introducing these bills in the Senate and the House," Grace said in written testimony. "Hawaii needs a motor sports center."