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The Honolulu Advertiser
Posted on: Wednesday, September 10, 2003

Ruling suspends luxury project on Big Island

By Kevin Dayton
Advertiser Big Island Bureau

HILO, Hawai'i — Big Island Circuit Judge Ronald Ibarra ordered a halt to almost all construction at the sprawling 1,550-acre Hokuli'a luxury development in Kealakekua yesterday, ruling the developer doesn't have the government approvals it needs to proceed.

Ibarra's ruling appears to be a huge setback for developer 1250 Oceanside Partners, which according to court testimony has spent more than $190 million on construction and development of the project since 1998.

Under the ruling, Oceanside must petition the state Land Use Commission for a reclassification of the agricultural land where most of the project is being built before it can continue construction, or must obtain a declaratory ruling from the Land Use Commission approving of the project.

"It's a big decision," said Robert D.S. Kim, a lawyer who sued over the project on behalf of a farmer and some environmentalists and small business people who opposed it. Also joining in the suit was the Protect Keopuka Ohana, a group of Hawaiian cultural practitioners and descendants of Hawaiians who were buried on the project site.

"We don't believe that this is the end of it. It's the beginning, but it's a step in the right direction, and I think what it tells all developers is no man is above the law," Kim said.

John De Fries, chief executive officer of Hokuli'a, said last night the company needed more time to study the 31-page decision and expected to issue a statement today.

"The implications are immense both internally and externally," and company officials needed more time to be sure they fully understand the impact of the ruling, he said.

De Fries said Hokuli'a has about 180 people on its payroll, and indirectly employs about 240 more through the contractors and subcontractors working on the project.

The developer won approvals from the Big Island County Council in 1994 and 1996 to rezone the property to allow for one-acre agriculturally zoned lots.

By presenting the project as an agricultural development instead of an urban project, Oceanside argued it did not need to apply to the state Land Use Commission to have the land under the project reclassified by the state for urban uses.

Developers sometimes try to avoid applying to the Land Use Commission because commission proceedings may require many months of preparation, hearings and testimony, especially when projects face community opposition.

The commission also has the power to impose new conditions, such as demanding that developers contribute money or land to help mitigate the impacts of their projects may have on state highways or the public school system.

Ibarra ruled the county and Oceanside "deliberately collaborated to avoid LUC involvement" in the project, with the county failing to properly enforce the state law that governs the way agricultural lands can be used and developed.

Ibarra found the county agreed to do this because it had reached a development agreement with Oceanside that provided the county with a 140-acre shoreline park as well as construction of a bypass highway from Keauhou to Napo'opo'o to relieve traffic congestion in the area.

Ibarra found the project is not a true agricultural development, and instead is "a private luxury resort residential subdivision" that needed an Land Use Commission reclassification under state law.

The development includes a golf course, a members lodge, club house, pavilion and tennis courts.

The company plans to sell about 750 residential lots for prices ranging from $650,000 to $2.5 million. It has sold more than 190 of the lots, according to court testimony.

As proof of the nonagricultural nature of the project, Ibarra cited a 1999 public offering statement by the company that warned that "buyers should not expect material financial benefits from agricultural activities."

He also ruled the developer had declined to apply for a Land Use Commission reclassification despite repeated warnings from lawyers, experts and state officials that a reclassification might be legally required.

Moses Haia, staff attorney for the Native Hawaiian Legal Corp., said he expects the developer will appeal, but said the ruling appears to stop the project unless Oceanside can get another court to stay the judge's order. Native Hawaiian Legal Corp. represented the plaintiffs Protect Keopuka Ohana in the case.

Haia also wondered if a new delay in the project could trigger lawsuits from people who bought lots in the subdivision.

Court testimony showed there were a number of cases on the Big Island where urban developments slipped through without the required scrutiny by the Land Use Commission, but the practice was not challenged until the lawsuit over Hokuli'a, he said.

"Given what Oceanside and the county did in attempting to just avoid the LUC, I believe that would be their just desserts if they didn't get this development done," Haia said. "Someone has to be made an example of, and Oceanside may be that developer."

Hokuli'a has faced one legal challenge after another since 2000.

Last year Ibarra ordered 1250 Oceanside to restore a portion of an ancient Hawaiian trail called Alaloa that was destroyed during construction.

In another ruling last year, Ibarra found the state and county failed in their duty to protect the ocean when two massive runoffs fouled the near-shore waters off the project two years earlier.

In a third ruling last year, Ibarra ordered the developer to take greater steps to protect ancient burials and Native Hawaiian cultural sites.

Reach Kevin Dayton at kdayton@honoluluadvertiser.com or (808) 935-3916.