State might have to pay $1 million over zoning

Hawaii taxpayers are on the hook to pay a Hawaii island developer $1 million after a state agency scuttled plans that had languished for more than two decades for a sprawling subdivision equipped with luxury homes, a golf course and shops.

The Hawaii Land Use Commission said developers Bridge Aina Lea and DW Aina Lea had failed to meet deadlines for developing mandated affordable housing on the property, and in 2011 changed the South Kohala property’s land use classification from urban back to agricultural.

The unprecedented move by the LUC halted development of the estimated $1 billion project and sparked protracted litigation. At the time, Bridge Aina Lea was selling the property to DW Aina Lea, a Nevada company.

The Hawaii Supreme Court ruled three years later that the LUC shouldn’t have changed the land’s classification, because developers had already invested some $20 million in planning and other preparation.

Bridge Aina Lea had sought $15 million in damages from the state, according to Honolulu attorney Bruce Voss, who represents the company.

The state negotiated the amount down to $1 million. The state Attorney General’s Office has also agreed as part of the settlement to provide a letter of support if Bridge Aina Lea petitions the LUC to reclassify a separate 1,900 acres of surrounding land that it owns from agricultural to rural use, according to a copy of the settlement agreement.

The land reclassification would allow for additional residential development in the area.

The Legislature must approve the settlement, though this likely won’t spell the end of a development debacle that has been closely watched by land use attorneys and state legislators concerned that the state lacks sufficient power and resources to hold developers to their promises.

DW Aina Lea, current owner of the property, is also seeking $100 million in damages from the state, according to Robert Wessels, the company’s CEO.

“The substantial losses were ours,” he said, citing increased project costs due to delays in development.

Wessels said he had sent a letter to the Attorney General’s Office laying out the costs and was hoping to resolve the issue without resorting to litigation.

The Attorney General’s Office didn’t respond to a request to comment on the claim.

Meanwhile there has yet to be a single housing unit — whether it be luxury or affordable — completed on the property, which spans dry, black lava fields on the west side of Hawaii island. The site won LUC approval for development in 1989, and is supposed to include 2,300 homes.

The property has had a succession of owners over the years, and the original plans for the development have changed. When the original developer gained LUC approval in 1989, the commission required that 1,656 affordable housing units be built on the property, according to court documents. This requirement was later reduced to 1,000 affordable units.

In 2005 Bridge Aina Lea went back to the LUC and asked that the affordable-­housing requirement be reduced even further, to 385 units. The commission approved the request under the condition that the housing be built by certain deadlines, which were missed.

Wessels said Monday that the company has prioritized the affordable units and hopes that some of them will be finished and on the market in the next 90 days.

He said about 29 units are about 85 to 90 percent complete.

Several bills have been proposed in the Legislature in recent years that would provide the LUC with more authority to enforce the conditions it imposes on land classification approvals, but haven’t been passed.

This year lawmakers are debating Senate Bill 1136, which would provide the LUC with funding to hire someone to monitor and ensure compliance of conditions attached to land use approvals.

The bill was passed Friday by the Senate Water and Land Committee and must gain approval from the Senate Ways and Means Committee before moving over to the House.

The LUC has approved 800 petitions for redistricting, “often with conditions attached to protect the public welfare and Native Hawaiian rights and assets,” according to a recent committee report on the bill. “The LUC currently lacks adequate staff to monitor compliance with the conditions attached to their decisions, and those conditions are only enforceable by the LUC prior to substantial commencement of construction of a project.”