Is 2005 Ko Olina's big year?

By Andrew Gomes
Advertiser Staff Writer

Nearly two years after Gov. Linda Lingle approved a controversial $75 million tax credit for an aquarium at Ko Olina Resort & Marina, few results have come from the economic development tool aimed at generating tax revenue, jobs and resort expansion in West O'ahu.

That is expected to change this year in a big way, according to Ko Olina master developer Jeff Stone, who earlier this month unveiled conceptual plans for a luxury hotel and time-share complex with 1,000 rooms and a commercial village surrounding the long-planned aquarium.

Stone has described the Grand Ko Olina Resort Hotel & Spa design as "the Grand Wailea times 10," referring to the Maui hotel, and says he expects construction will start by the end of the year.

The Grand Ko Olina addition would go a long way toward delivering on the economic development promise hung on the tax credit, creating what Stone projects will be 1,000 new jobs and $1 billion in spending.

If built as expected, the Grand Ko Olina and the attached aquarium would be the second major wave of revival projects at the largely undeveloped resort.

Ko Olina was envisioned in the mid-1970s, and ground was broken in the late '80s. The project stalled in the early '90s after just one hotel, four lagoons, a golf course and 280 townhomes were completed.

Prime ocean-front sites for nine more hotels sat empty, as did space for what was envisioned to be 3,000 homes.

Ko Olina has been troubled over the past decade because it lacks a critical mass of hotels, homes and visitor attractions. Since Stone acquired the stunted resort with partners in 1998, he has been able to facilitate development of more homes, a marina and a time-share complex — but not the hotels that are the major visitor magnet and job provider at a resort.

To date, the tax-credit package has resulted in more than $800,000 in scholarship awards, primarily to Leeward O'ahu residents. A training fund paid for by Stone's Ko Olina Co. is to distribute $2.5 million in awards over six years under terms of Lingle's approval of the tax credit.

Some observers, however, question whether the tax credit, which was authorized in May 2003, is producing its larger intended benefit. Others say it is understandable how much time has passed without any binding commitments from companies willing to risk millions of dollars to establish hotels at an idyllic yet remote location 25 miles from Waikiki.

State Sen. Willie Espero, D-20th ('Ewa Beach, Waipahu) said people are anxious to see the fruits of the tax credit.

"More jobs in West O'ahu will make life better for many area residents who are currently unemployed, underemployed or are commuting to town each day," he said. "The quicker it can be developed properly, the better for us all."

Espero also said he realizes the pace of progress isn't always quick. "There is much competition throughout the world for new hotels and resorts, so investors and companies do have options or alternatives before them. They, too, want to make sure their capital investment is sound and profitable," he said.

Some people — including former Gov. Ben Cayetano, who vetoed a 2002 version of the tax-credit legislation — don't see the necessity of the credit, and argue that hotel, condo and time-share developers would build Ko Olina without the promise of a taxpayer-financed aquarium.

Gary Char, a retired business owner and avid fisherman from Ma'ili, says he doesn't think taxpayers should contribute to building the aquarium, though he believes it would attract more tourists and businesses to a community that has struggled economically.

John Michael White, president of real-estate development firm Hawai'i Land Co., argues that Ko Olina needs state help to become a self-sustained resort.

"The state was right to step forward and support Stone's effort with tax credits to encourage development of facilities such as the aquarium that will become an asset, not just to Ko Olina but to (the) community as well," he said.

To date though, Stone has yet to announce any development agreements with major hotel or resort companies. It also appears that the tax credit has yet to attract commitments from investors who are not already stakeholders in Ko Olina.

In January 2003, as the tax-credit bill started on its repeat journey through the Legislature, Lingle announced that the Ritz-Carlton Hotel Co. signed a letter of intent to have a "major presence" at Ko Olina. Stone later described the planned presence as a combination 250-room hotel and 150-unit condominium.

Ritz-Carlton is owned by Marriott, which started building 750 time-share units at Ko Olina in 2001 and manages the resort's only hotel, the JW Marriott Ihilani Resort & Spa.

Stone had expected Ritz-Carlton to break ground promptly if the tax credit became law. But Ritz-Carlton has yet to publicly commit to a timetable for the expected project.

Ritz-Carlton spokeswoman Vivian Deuschl said the company does not have a signed contract and therefore cannot comment on the status of the plan.

The Grand Ko Olina plan was put forth by Stone, who enlisted the help of Takeshi Sekiguchi, a developer from Japan who developed or invested in several Hawai'i resorts, including the Grand Wailea, and was an original partner in Ko Olina with local developer Herbert Horita.

Sekiguchi, through an interpreter, deferred comment on his role to Stone. Efforts to reach Stone, who is traveling, were unsuccessful over the past two weeks.

According to property records, a company connected to Sekiguchi owns 15 acres of the 25-acre site for the Grand Ko Olina.

The tentative plans of Ritz-Carlton and the Grand Ko Olina, which needs financing, compare with signed development agreements Stone had with Hilton Hotels Corp. and Intrawest Corp. in 2002 after the tax-credit bill was first proposed and passed.

Per the agreements, Hilton committed to co-develop a 340-room hotel, and Intrawest committed to co-develop a vacation club condo with more than 200 rooms, a commercial village and an expanded marina.

Stone estimated the Hilton/Intrawest "marine village" would create more than 10,000 construction jobs, 2,000 permanent jobs and $186 million in state tax revenue over 10 years. But plans unraveled after Cayetano's veto.

Since then, Hawai'i's tourism industry and economy have prospered, but Stone has said he ran into delays from unexpected permitting issues with the aquarium and city indecision over whether to close or expand the nearby Waimanalo Gulch landfill.

In 2002, then-Mayor Jeremy Harris sought approval to keep using Waimanalo Gulch for 15 more years. Last month, the City Council rejected alternate dump sites and decided to use Waimanalo Gulch until 2008.

Stone and Ko Olina have until 2009 to spend up to $75 million on the aquarium to qualify for the tax credits, which must be redeemed over 10 years at $7.5 million a year.

Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.