Posted on: Friday, June 21, 2002

OHA sticks with Maui project

By Johnny Brannon
Advertiser Staff Writer

Despite concerns that they would be throwing good money after bad, a deeply split Office of Hawaiian Affairs board of trustees voted yesterday to commit up to $1.5 million to a long-stalled Maui shopping center project that is in danger of defaulting on a $1.7 million federal loan that OHA guaranteed.

The board also narrowly rejected OHA's proposed $16.2 million annual operating budget after several trustees discovered that some programs they favored had been eliminated from the fiscal blueprint without any public discussion. The spending plan was referred to the board's budget and finance committee for further consideration.

Regarding the shopping center, committee chairman Oswald Stender acknowledged that the Hana Village Market Place project has a dubious history of financial problems. But he said failure to bail it out would leave OHA with a total loss.

"We're caught between a rock and a hard place, and the chances of survival are better if we move forward," he said.

Others questioned whether it would be fiscally responsible to commit further resources without stronger evidence that the investment would pay off.

"The way I see this project is transferring from a cesspool to a septic tank," said trustee Charles Ota, the board's Maui representative. "As far as I'm concerned, it's still foul."

The project, begun by the Hina Malailena nonprofit group, has limped along since 1989, and much of the property remains vacant and incomplete. Stender said there was little accounting for money already been spent, with the project currently owing up to $50,000 in rent on its $39,000-per-year lease.

"We've visited the property, and all they put up is a shell," he said. "Where the money went, I have no idea at all. ...The choice is to either abandon the project or make it work. Every day the project sits empty, it deteriorates."

Trustee Rowena Akana worried that OHA had been "duped into a black hole" of debt that the agency could ill afford.

But Stender said the 1.12-acre center on Hana Highway currently has two tenants — a restaurant and a credit union — and he said others want to move in once the facility has been completed. OHA administrator Clyde Namu'o said that the finished project would have 9,000 square feet of space to rent and that a 70 percent occupancy rate in the first year would be a reasonable goal.

The plan is to form a limited-liability corporation to take over the project but shield OHA from further financial liability if it does not work out, and to renegotiate the lease to wipe out the rental debt, Stender said.

Trustee Clayton Hee said he wanted more details about the proposed company's structure before he could support the plan, but Stender said some specifics still have to be worked out and the project could lose out on grants from other sources if it delayed further.

Voting in support of the project, pending renegotiation of the lease and an agreement that OHA would not be liable for the federal loan, were Stender and trustees Linda Dela Cruz, Colette Machado, John Waihe'e IV and OHA chairwoman Haunani Apoliona. Voting in opposition were Akana, Hee, Ota and trustee Donald Cataluna.

The trustees expressed pride and relief when the budget and finance committee approved OHA's operating budget early in the day, but some grew angry after they scrutinized the document and found that some programs had been cut.

Akana said she would oppose the budget unless $30,000 for the 'Aha 'Opio youth leadership program were restored, and Cataluna questioned why $350,000 in scholarships to Kamehameha Schools had also been eliminated.

Namu'o said the budget had been crafted to conform with strategic goals the trustees had previously agreed on, which the youth program did not specifically match. Stender said that he favored the scholarship money but that they were cut because the board deadlocked on the issue several times.

Voting in favor of the budget were Apoliona, Machado and Stender. Voting in opposition were Akana, Cataluna, Hee, Ota and Waihe'e. Dela Cruz abstained.

Meanwhile, Hee, who had quietly considered running for governor as a Democrat this year, said he would definitely run for lieutenant governor instead. He said he was pleased to see banker Walter Dods' statement earlier this week that he was seriously considering running for governor on the Democratic ticket.

Reach Johnny Brannon at jbrannon@honoluluadvertiser.com or 525-8070.