The Hawaii City Plaza story is a cautionary tale for Honolulu, a not-so-gentle reminder that transit-oriented development (TOD) is a process with great potential but with risk, as well.

The risk is that city leaders might pull their punches with those who bring money to the table, and then end up with little improvement to offer local residents. The community benefits — filling the need for housing, community amenities and economic growth — rank atop the wish list the city has for TOD.

It’s critical that the Honolulu City Council keeps that in mind when it decides what to do with Hawaii City Plaza, a proposed luxury condominium for which developers want a permit to build within the Ala Moana TOD district.

Hackles were raised as a TOD bill was being heard recently, and unless the developer comes to terms with Honolulu’s needs, this project would be a bad fit.

The complex of condos, eating and drinking establishments and other amenities, would be built at 710 and 730 Sheridan St. and 733 Cedar St.

It would entail the demolition of single- and two-story warehouse structures to be replaced by a 250-foot-high mixed-use tower, with 154 units, 33 of which are to be affordable.

In October, the city Department of Planning and Permitting had recommended approval of the project. The Council has yet to sign off on the permit, and the developer’s frustration has been mounting.

The occasion to vent that frustration was a May 4 Zoning Committee hearing over Bill 15, making amendments to the TOD requirements. Transit-oriented development loosens rules governing density, parking and other standard issues to encourage development, and in return the developer includes some affordable units in the mix.

TOD has been seen as a one-time opportunity to whittle away Oahu’s critical shortage of affordable housing.

Now the Council is getting pushback from entities such as Hawaii City Plaza LP, and it must hold its own in defense of its rules.

Hawaii City Plaza executives were among those testifying at the hearing. Among other issues, they objected to the way the affordable-unit requirement was calculated for the site, arguing that 15 units at affordable prices should suffice.

They also folded in a complaint about unionized workers being the ones to build the rail system, insisting that non-union labor would solve that project’s cost overrun problems and asserted that they would provide non-union jobs for their project as well.

But it was an assortment of statements by the chairman and CEO, Johnson Fang, that really illustrated how unclear on the concept of TOD this particular developer is.

After the zoning hearing, Fang wrote a barbed letter addressed to City Councilman Ikaika Anderson. The councilman opposed the project, he said, because much of it is being pre-sold to Chinese buyers.

“I will call on Chinese to not visit Hawaii,” Fang wrote. “I will also call on them to not make investment or buy any property in Hawaii because some Hawaiian(s) do not welcome Chinese.”

That was an unfortunate threat from Fang, the senior executive and family member in the company. He clearly misconstrued Anderson’s critique as racist, when the councilman is correct.

The problem is in allowing a project that hands out developer incentives without producing what Honolulu needs in return: more housing stock for its own residents. Pre-selling the bulk of a project to offshore buyers, of whatever national origin, defeats a primary purpose of TOD.

Fang also wrote that during the Council hearing, the company had floated the idea of donating $2 million to the transit project: “The prerequisite is to not push us to hire union labor whose price is 200 percent to 300 percent above the market.”

Such issues are peripheral to the TOD debate, but this sounds like a developer who wants to define all the terms, when such a project should be a win-win.

For its part, the current draft of Bill 15 has some laudatory affordable housing provisions:

>> For any project of 10 dwelling units or more, 30 percent must be affordable.

>> Of the affordable units, at least two-thirds must be affordable to households earning no more than 100 percent of the area median income (AMI), and the other third must be priced at 80 percent AMI.

>> The required units must remain affordable for at least 30 years.

>> All must be provided on-site or within the project’s TOD area, and there is no other option available — including fees paid in lieu of building the homes.

These point to a stronger TOD policy for the city to adopt. The messaging should be clear, that the benefits of TOD should be mutual for developers and Honolulu residents. Money doesn’t compensate for a project’s failure to deliver what the city really needs.

Ala Moana TOD Plan Report by Honolulu Star-Advertiser on Scribd