Kamehameha Schools' 2000 revenues near $1 billion
By Frank Cho
Advertiser Staff Writer
Revenue at Kamehameha Schools skyrocketed to nearly $1 billion last year, propelled by real estate and investment sales.
But despite the record performance, spending on education by Hawai'i's biggest private educational trust fell 7.2 percent during the same period, according to the trust's annual income tax return filed Tuesday with the Internal Revenue Service.
The trust said total revenues hit a record $995.9 million in 2000, up from $839 million the previous year. It reported spending $132.7 million on educational programs and school construction last year, down from $143 million in 1999.
Kekoa Paulsen, spokesman for the trust, said the drop primarily occurred because the 1999 budget included construction of a Maui campus.
"In our core programs, preschool and campuses, our spending actually went up," Paulsen said.
While the trust spent 2.76 percent of its $4.8 billion endowment on educational and construction programs — short of its goal of 4 percent — executives said it was still in line with expectations.
"We will reach our target, and we will do so in a way that can be sustained over a long period of time," said Hamilton McCubbin, Kamehameha's chief executive officer.
The trust plans to increase its spending on education to more than 3 percent this year.
The filings are the first look at the financial health of the former Bishop Estate under its new chief executive-based management structure since McCubbin took over Feb. 1, 2000.
The estate grossed $881.7 million from the sale of its substantial holdings of stock in the New York investment firm Goldman Sachs & Co. and another $44.8 million from land sales.
The estate said it also collected $3.8 million in tuition last year and made $2.1 million from its cafeterias. It also had $2 million in other revenues.
Net assets were $3.4 billion at the end of fiscal 2000.
Kamehameha Schools is a nonprofit, private charitable trust created by the 1884 will of Hawaiian Princess Bernice Pauahi Bishop, great-granddaughter of King Kamehameha I, to educate children of Hawaiian ancestry.
The revenue from 337,000 acres of Hawai'i land — and worldwide investments that include shares of the Wall Street firm Goldman Sachs & Co. — is used solely to finance Kamehameha Schools, a 600-acre campus in Honolulu and several other educational and scholarship programs around the state.
Last year, Kamehameha Schools revamped its financial and management after its beleaguered former board of trustees — Richard "Dickie" Wong, Henry Peters, Lokelani Lindsey, Gerard Jervis and Oswald Stender — were removed or resigned following a lengthy court fight and a threat by the IRS to revoke the trust's tax-exempt status.
Under the new management, gone are trustee salaries that reached more than $1 million annually.
For the 1999-2000 fiscal year, the chairman of the interim board, Adm. Robert Kihune, earned $203,500; the school's other interim trustees each earned $192,500.
Under a new compensation plan that started Jan. 1, trustee compensation will be capped at $97,500 for members and $120,000 for the chairman.
The interim trustees were retired Kihune, American Savings Bank executive Constance Lau, former Iolani School headmaster David Coon, attorney Ronald Libkuman and former Honolulu Police Chief Francis Keala.
In the last fiscal year, Kamehameha Schools spent $1.9 million on salary and benefits for its executives and trustees.
Its chief executive, Hamilton McCubbin, earned only $122,000 because he was with the estate for only the last five months of the fiscal year, according to the estate's tax return.
McCubbin is expected to earn $350,000 this fiscal year, the second year of a three-year contract. Chief Investment Officer Wendall Brooks took home $121,000 in fiscal 2000.
Among the estate's highest-paid employees last year were Rodney Park, who retired in December, but not before taking home $175,374 in fiscal 2000.
The estate's director of facilities, Yukio Takemoto, earned $167,506; executive director Rockne Freitas made $156,753.
Kamehameha Schools' highest-paid employee last year was schools President Michael Chun, who earned $217,224 in salary and benefits. Chun, who has been president of Kamehameha Schools since 1988, also received $5,700 for expenses and other allowances.
Such expense accounts will no longer be allowed under the the estate's new compensation plan, estate spokesman Kekoa Paulsen said.
The estate spent about $7 million last fiscal year in legal fees, with nearly half of that, or $3.4 million, going to the law firm of Miller & Chevalier.
The estate's chief legal officer, Colleen Wong, said that $7 million legal bill should be cut in half this fiscal year.
Other big beneficiaries of the estate's legal woes last year were KPMG Consulting, which was paid $1.3 million for consulting services. Honolulu law firms Cades Schutte Fleming & Wright and Watanabe Ing & Kawashima earned $1.3 million and $1.2 million respectively in legal fees, according to the estate's tax return.
Frank Cho can be reached by phone at 525-8088, or by e-mail at fcho@honoluluadvertiser.com
