City Council postpones vote on Waikiki condemnation

By Robbie Dingeman
Advertiser City Hall Writer

Representatives of Outrigger Enterprises and owners of properties that the company wants the city to condemn to clear the way for a massive $300 million Waikiki project have agreed to try to iron out their differences.

The Honolulu City Council's Policy Committee yesterday postponed until January any action on a proposal for the city to condemn five properties in the Lewers Street-Saratoga Road area to accommodate Outrigger's ambitious plan for 7.9 acres in the heart of O'ahu's famous resort destination.

Eight of the nine council members sit on the Policy Committee, and it was clear yesterday that the group has mixed feelings about the concept of the government taking one landowner's property to turn it over to another. In condemnation, the property owner who loses the land is paid fair market value for the land.

Council Policy Committee Chairman Romy Cachola recommended deferring action after about 2 1/2 hours of discussion.

"This proposal is difficult, emotional, and involves very complex issues," he said.

Mel Kaneshige, chief operating officer for Outrigger Enterprises, said the company will try to talk further with the property owners and see if agreements can be reached.

Kaneshige said that it will be "extremely difficult, if not impossible," to acquire financing for the project with 10 percent of the 7.9-acre site held in leasehold. "If we are not able to raise the capital required, obviously, we won't be able to do the project."

Kaneshige said the company wants to move forward with the plan to revitalize a part of Waikiki that has become "rundown and obsolete." The plan calls for upgrading five hotels, demolishing six older ones and building a new hotel/retail-/entertainment complex with more open space.

Owners of the three of the parcels protested the condemnation plan even though they said that they support the Outrigger project.

Landowner Jackie Johnson told the council that she and her sister, Bronwen Welch, support the improvement project and recently negotiated a 65-year lease with Outrigger. Johnson said they can't understand why the city would act to force them to sell the land to Outrigger.

"It is not right, and it is just not necessary," Johnson said.

Former Hawai'i Supreme Court Justice Robert Klein represents Johnson and Welch as owners of two of the three parcels. He said Outrigger's justification of the condemnation seems to hinge on its effort to get easy financing.

"Whether condemnation is legal here remains to be seen," Klein said. "Whether its use is right under circumstances where private parties are in negotiations seems clear: Government should not tilt the playing field toward either side."

The council's Policy Committee is scheduled to discuss the proposal again on Jan. 9.

Attorney Crystal Rose, who represents landowners from the Joseph Andrade trust, Pam Anderson and Joan Brown, said Outrigger had discussed the company's effort to buy the property but had not negotiated agreements that would allow the development.

Kaneshige said that in 1999, his company had offered about $350 a square foot for the property, only to have the owners come back with an estimated value of $1,040 a square foot.

Both Rose and Klein said their clients are willing to discuss how Outrigger could move forward without condemnation, a move Kaneshige said he would welcome. "Condemnation, we feel, is really the last thing that we want to do," Kaneshige said.

Councilman Steve Holmes questioned the wisdom of the city's condemning property on behalf of another owner's private development. "Is this a good precedent to be setting?"

Holmes called it "a very unusual situation" to support a single property owner over others. "The usual public purpose doesn't seem to be there."

But City Corporation Counsel David Arakawa said the courts have upheld the power of government to condemn in most cases. "The city has broad condemnation powers, and those powers have been delegated to the city by the state."

The issue of government condemning land has been raised across the country for years, including here in Hawai'i when the U.S. Supreme Court ruled in 1984 that the state could condemn Bishop Estate land to allow lessees to buy the fee title of the land beneath their homes.

According to experts in the law of "eminent domain," the U. S. Constitution supports the taking of private property for "public use" such as roads and parks, but the key is whether or not a public or a merely private purpose is being served.

In Arizona, landowners are fighting back against the Mesa city government, which is trying to condemn sites of a paint shop and a lube shop to make room for a hardware store's expansion. Phoenix property owners are contesting that city's efforts to condemn an older motel so another owner can build a new motel on the same spot.

In California, the owner of a 99 Cents Only store went to federal court to block the Lancaster city government from condemning the store site to make room for an expanding Costco store.

In Illinois, the state supreme court will decide a case in which a redevelopment agency tried to condemn a recycling company's land so a neighboring auto racetrack could have more parking.

Dale Zeitlin, a Phoenix attorney and condemnation law expert handling several of the Arizona cases, said Honolulu has to ask if Outrigger's proposal is really a redevelopment benefiting the public or a device to help a private owner achieve a private goal. The more specific the property, the more suspicious it looks, said Zeitlin, who represents landowners fighting the condemnation process.

Advertiser staff writer Walter Wright contributed to this report.

Reach Robbie Dingeman at rdingeman@honoluluadvertiser.com or 525-8070.