Posted on: Friday, June 14, 2002

Hawai'i builders face sharing cost of growth

By Scott Ishikawa
and Jennifer Hiller
Advertiser Staff Writers

The state's decision this week to require that schools be built before residents move into homes proposed by a major developer in Central O'ahu means Hawai'i builders will now have to grapple with government's insistence that they help bear the cost of growth.

Tightened budgets have meant that local governments across the country increasingly require commercial and residential developers to contribute to the cost of school construction and other infrastructure, said Peter Dreier, professor of politics and public policy at Occidental College in Los Angeles.

"In general, housing — particularly housing for families — doesn't pay for itself," Dreier said. "The state is trying to do some forward-looking planning about needs. Ultimately it's going to come out of somebody's pocket."

On Wednesday, the state Land Use Commission reduced the size of Castle & Cooke Homes' proposed Koa Ridge development near Mililani to 3,600 residential units on 761 acres. The nine-member commission also said schools must be built before residents move into the neighborhood. The company was requesting a reclassification of 1,250 acres of agricultural land so it could build 6,200 homes.

At the Department of Education, assistant superintendent Al Suga said yesterday that he welcomes the idea of having the developer pay for the school construction upfront, with the state later reimbursing the builder in full or leasing the campus.

"We're trying to put it so the developer designs and builds a school and then we pay them back over time." Suga said. "That's one way we thought that we could stretch the dollar."

Getting developers to help build schools is not a new concept, although it has never been a requirement in Hawai'i.

Suga said construction of Waikoloa Elementary on the Big Island, Kamali'i Elementary on Maui, and Kapolei Middle School on O'ahu were all handled by respective developers in the 1990s. The state repaid the developer when the campuses were turned over to the DOE.

"When it's done by the developer, it's cheaper and quicker," Suga said. "If the developer can lay a hand in school construction, we're not going to turn them down."

The state needs to spend $2 billion on school construction in the next 10 years to keep pace with the demand in developing parts of O'ahu and Maui. That would be about $200 million a year, but the Legislature the past several years has had to keep the budget at around $45 million — leaving the Department of Education and the Department of Accounting and General Services far short.

"We just don't have enough money to build new schools anymore," Suga said.

A final vote by the commission on Castle & Cooke Homes' proposal is scheduled for next Friday.

Company president Harry Saunders said yesterday that he was still not sure what would be required.

"It's not only a cost issue, but a critical-timing issue," Saunders said. "Not only are we concerned if we have to pay for the elementary or middle school, which can cost $25 million and $45 million. But how do you plan and build a school, which takes about five years, when we're not even up for rezoning for another two years?"

Saunders, who said the company plans to spend an estimated $20 million to $30 million in infrastructure costs before the homes are built, said: "We're asked to build a $25 million school before we can even sell a home to get some revenue back."

Officials from Castle & Cooke and the state Department of Education were to meet last night to discuss the issue.

"I think one shouldn't go as far as to think that the (commission) wants the developer alone to be responsible for free and appropriate public education," said Land Use Commission executive officer Anthony Ching. During the next several days, the parties can meet and determine how the costs would work, he said.

"It offers an opportunity where the commission is seeking to endorse, with as much creativity and flexibility as possible, to see if this can work as a good coincidence that these homes and schools open together."

Saunders said he supports the concept of the developer paying for construction of schools and getting reimbursed by the state, but is worried about the commission's insistence that the campuses be ready before homebuyers can move into the housing units.

Allen Hoe, a Land Use Commission member from 1988 to 1996 and its chairman in 1995 and 1996, said Central O'ahu landowners should be motivated to set aside something more for building a good education system.

"I think the message I get is that the developer can no longer assume the role of builder and profiteer," Hoe said. "He's part of the community. If he wants his project to succeed, he has to do something that helps the quality of life in the community. I can't believe they wouldn't want to do that."

Although governmental entities across the nation have required developers to build schools, police stations and other public facilities, the requirement is the first time the commission here has imposed it on a developer.

One legal expert questioned the legality of the commission's decision, but Saunders said he wants to find a compromise to save the project rather than challenge the requirement in the courts.

Jeff Mikulina, director of Sierra Club Hawai'i, which opposes the project, said the commission's position indicates the panel felt it is time to require infrastructure, including schools, for new developments. "I think the commission felt the developers have gotten their way for a while," Mikulina said.

David Callies, a University of Hawai'i law professor, said the commission's requirement may have legal problems if challenged in court. He said the commission has the authority to reclassify land from agricultural to urban, but the city grants the building permits that allow development to move forward.

Callies said the city — not the state commission — should be the one placing the requirements on developers. Under the commission's proposal, the state body is requiring something of a builder who can't control whether the development will be approved, he said.

But Saunders said the company has no intention of taking the matter to court.

"We want to find a solution by sitting down with everyone and talking this out," he said.