A plan to open a Seagull Schools preschool on state land in Kakaako Makai got suspended Wednesday by the board of a state agency that had encouraged the project on which the nonprofit private school had spent $427,000.

Board members of the Hawaii Community Development Authority voted 7-0 to terminate lease negotiations with the preschool after raising concerns about a school on the site.

Seagull representatives expressed frustration after the board’s decision.

“Basically we got led down a primrose path to a dead end,” said Gary Gill, a Seagull board member and former deputy director of the state Health Department’s environmental health administration. “It’s a huge disappointment.”

The move by HCDA’s board came about three years after Seagull began working with the agency to transform a dilapidated maintenance yard and building at Kakaako Waterfront Park into a preschool.

Following preliminary discussions, HCDA’s previous board voted 6-1 in March 2014 to allow agency staff to negotiate a lease for the site that includes a deteriorating 4,000-square-foot warehouse next to the park owned and maintained by HCDA.

Since then, Seagull worked to advance its plan in an effort that included producing an environmental assessment, a traffic study, soil sampling and building designs at a cost of $427,000. Development of the new school with a capacity for about 120 students was estimated to cost 2.6 million.

Seagull had proposed leasing the site for $1 a year. HCDA staff recommended lease terms that included monthly rent that started at $1,000 and rose to $6,000 with potential for more after 15 years, in addition to a monthly parking rate of $100 per stall with one stall required for every 10 children. HCDA’s lease terms were largely acceptable to Seagull.

Glenn Mason, a local architect and Seagull board member, told HCDA directors before Wednesday’s vote that he was disappointed to learn that there was even a remote possibility that the agency was inclined to terminate lease negotiations.

“We’re now $427,000 into this, going on good faith that this was going to work,” he said.

Public testimony was overwhelmingly in favor of Seagull’s plan, and included 45 written comments supporting the school.

Loretta Yajima, president of the Children’s Discovery Center on state land next to Kakaako Waterfront Park, wrote that she envisioned synergy from a nearby preschool that would help counter the increasingly marred image of the area overrun by homeless camping on sidewalks.

“I have always hoped that Kakaako Makai would someday become a ‘learning campus’ benefiting of its prime location and once beautiful setting,” Yajima wrote.

Two people submitted written testimony opposing the school plan as an inappropriate use of state land in a public park setting — Sharon Moriwaki of community group Kakaako United and Michelle Matson of the Kakaako Makai Community Planning Advisory Council.

Matson told the board in person that Seagull’s proposal would create a “private luxury preschool campus” on public land.

Chuck Larson, executive director of Seagull, said the preschool is not luxurious. Monthly tuition ranges from $710 to $975. Larson said 40 percent of students receive financial assistance.

Gill added that the school would enhance the park and not take away from public use given that the maintenance facility is outside the park next to the parking lot. “This facility is empty,” he told the board. “It is not an active park.”

Gill and Larson said it appeared that a new HCDA board appointed after Gov. David Ige took office in December had an opposing view of what the previous board had tentatively endorsed. They said they don’t expect the board to reopen lease discussions.

Steve Scott, an HCDA board member, said the board felt that it was premature to continue lease negotiations while the agency prepares an environmental impact statement for a master plan that envisions more active uses for Kakaako Makai parks.

HCDA filed an EIS preparation notice in March and could finish the report in about six months.

Mary Pat Waterhouse, another HCDA board member, said the board supports education. “We all see the value of early education,” she said. “That is not the issue here.”

Seagull, which operates five preschools on Oahu and one on Hawaii island, initially explored possibilities for a new preschool in Kakaako as a replacement for its only facility in urban Honolulu, adjacent to the Frank F. Fasi Municipal Building on the landscaped roof of a city parking garage.

Seagull’s Honolulu school, which has about 265 students, was slated to be displaced by garage leak repair work and led the school to seek a replacement. Larson said Mayor Kirk Caldwell told him recently that the school won’t be displaced under current administration plans. However, Larson also said Seagull wants to satisfy demand from a wait list of more than 500 children wanting to enroll at the Honolulu school.

Gill added that plans could change with the next city administration so the school remains in jeopardy. “The heat is off, but it’s just been deferred,” he said.