A state agency is trying to stop a local nonprofit focused on child care from selling ocean adventure activities at Kaneohe Bay after years of complaints.

The state Department of Land and Natural Resources recently informed Kama‘aina Kids, which serves thousands of Hawaii keiki each year mainly through preschool and after-school programs, that the nonprofit has been violating rules that protect the bay through commercial use limits.

Kama‘aina Kids claims that its activities, which include a $139 guided kayak and snorkeling trip for tourists with lunch and transportation to and from Waikiki, aren’t commercial because the nonprofit runs them and all revenue helps fund Kama‘aina Kids.

But DLNR concluded that the tours advertised under an affiliate of the nonprofit, Holokai Kayak and Snorkel Adventures, are commercial and therefore aren’t allowed under regulations.

The dispute could be decided in a quasi-judicial contested-case hearing, and both sides have a lot riding on an outcome.

From the state’s perspective, more than two decades of work has gone into regulating commercial use of Kaneohe Bay, including an active advisory council and a 1992 master plan created at the Legislature’s direction.

From the nonprofit’s point of view, disallowing activities the organization has run for decades could imperil its ability to help children.

“We’re frustrated,” said Ray Sanborn, who co-founded Kama­‘aina Kids in 1987 and is the organization’s president and CEO. “We’ve always operated within what we thought were the rules.”

Concerns and complaints over Kama‘aina Kids using Kaneohe Bay for paid adult tours go back about a decade to when the organization was awarded management of Heeia State Park after DLNR solicited competitive bids.

The parks division of DLNR granted the nonprofit a 25-year lease for the 18-acre peninsula fronting the bay in 2010.

Under the lease, the nonprofit uses the site for activities for kids that include a summer day camp with sailing and kayaking. Kama‘aina Kids also generates revenue at the park from a gift shop, a banquet hall and by renting kayaks, catamarans, stand-up paddleboards and snorkel gear to residents and tourists. A portion of total income is paid to DLNR as rent.

Sanborn said the ocean equipment rentals and tours represent the biggest source of revenue at the park and help the organization pay for park upkeep and youth programs.

“It only supports the kids,” he said. “If you take that away, it’s going to hamper our ability to do all the good stuff.”

Kama‘aina Kids said it serves nearly 9,700 children and families daily. Its biggest program is A+ after-school care provided at public schools statewide. In 2016 the organization reported to the IRS that it had 1,316 employees, 3,000 volunteers and $27 million in revenue.

The nonprofit’s connection with Kaneohe Bay goes back to 1990 when it opened a waterfront camp at Heeia State Park.

Efforts to regulate commercial activities on the bay also date to about that time, and resulted in the 1992 Kaneohe Bay Master Plan produced by a state task force followed by the Kaneohe Bay Regional Council formed in 1993 and administered by DLNR.

DLNR also established administrative rules limiting the number of commercial activity operators using the bay under a permit system.

Kayaking and other activities by Kama‘aina Kids on the bay historically weren’t subject to permits under an exemption for nonprofits in DLNR rules. Separately, the master plan allowed for nonprofit or educational tours that charge no more than the cost for labor and fuel.

However, after Kama‘aina Kids established Holokai in 2013 and began advertising in Waikiki, complaints from some permitted commercial operators and community members arose over the operation that Kama‘aina Kids said has served 5,500 to 6,100 customers annually in recent years, or 18 to 20 people a day on average during the six days a week that such activities are allowed on the bay.

Meghan Statts, a Kaneohe Bay Regional Council member and Oahu district manager for DLNR’s Division of Boating and Ocean Recreation, raised the issue at a 2015 council meeting in response to complaints.

Joseph Pickard, the council’s commercial boating representative at the time and a member of the task force that created the bay’s master plan, regarded the addition of profit-generating ocean activities by Kama­‘aina Kids as running afoul of the plan, as did Loren Lasher, a former council member representing recreational boaters, according to meeting minutes.

A special council committee formed to examine the issue decided in 2016 that Kama‘aina Kids was operating commercial activities and not meeting criteria for a nonprofit/educational operator, though a minority of committee members disagreed.

In response to the council’s determination, DLNR planned to issue Kama‘aina Kids a commercial permit only for youth after-school and summer programs while prohibiting activities advertised in Waikiki, according to comments from Statts in council meeting minutes.

Yet two years later there were still complaints that Kama‘aina Kids hadn’t ceased commercial-priced tours.

Sanborn said the first permit Kama‘aina Kids ever received was in early 2018, and he told the council that it took the nonprofit and DLNR two years to work out a solution. The permit limited Holokai activities to 16 “seats” per day with a restriction that the price for these tours shall not exceed the cost of labor and fuel.

In an interview, Sanborn said most of what Holokai sells are equipment rental packages that aren’t subject to DLNR rules. Such offerings include a $109 self-guided kayak/snorkel tour with transportation to and from Waikiki, and a similar package with a Hobie catamaran for $199 per person. Activities governed by the permit, he said, cover only escorted tours where the cost of labor and fuel, about $40, is added to the basic rental price.

This arrangement wasn’t well received by the council at a September meeting.

Wayne Tanaka, a member representing the state Office of Hawaiian Affairs, suggested that the state Attorney General look into the matter.

Bob Twogood, owner of a kayak rental business in Kailua, suggested that the council consider legal remedies.

In February DLNR notified Kama‘aina Kids that it wouldn’t renew the permit, which expired Feb. 28, and said the nonprofit’s commercial activities on the bay don’t comply with regulations.

Sanborn responded in a March letter claiming that DLNR isn’t treating Kama‘aina Kids fairly. “We believe we have done all that you have asked of us,” he wrote in the letter.

Attorneys with local law firm Damon Key Leong Kupchak Hastert representing Kama‘aina Kids followed up with a letter saying the master plan is only a planning document that lacks the force of law. The letter also pointed out that DLNR administrative rules specifically exempt nonprofits from Kaneohe Bay permit limits.

This exemption does require that a nonprofit obtain a permit, but the Damon Key letter said no DLNR rule allows such a permit to have activity price restrictions.

The attorneys, Greg Kugle and Loren Seehase, requested that DLNR’s board hold an administrative hearing over the matter. DLNR recommended that its board deny the request. On Friday the board voted 4-1 to deny the request and hold no hearing. Meanwhile, Kama­‘aina Kids continues its Holo­kai operations.