The city has canceled a nonprofit organization's license to sell surfing lessons and rent beach equipment at one of three main beach service concessions in Waikiki.

The Department of Enterprise Services notified Palekaiko Beachboys Club Inc. yesterday that its Kuhio Beach concession contract has been terminated for failure to provide proper financial records of the largely cash business.

"We have to be off the beach as of close of business Monday," said Thomas Copp, founder of Palekaiko. "We will probably be filing a lawsuit," said Copp, who would not comment further.

Department director Sidney Quintal said, "There's been a history of problems" relating to the company's failure to file necessary monthly and annual financial statements.

"We're trying to just enforce our contract and our specifications," Quintal said.

"This is not the first request to Palekaiko for financial records. I just happen to be the guy who's trying to clean things up. We intend to re-advertise the contract for other qualified nonprofits to come in and take over the concession."

The nonprofit concession is awarded via lottery to operators who meet pre-established qualifications, he said.

Deputy Corporation Counsel Chris Diebling said the city could have worked with the organization if it had come forward earlier.

"But to come in on the last day to get serious about it is perplexing," he said.

The nonprofit operator is required to pay $4,000 in monthly rent to the city and is allowed to charge lower prices for beach services and equipment rentals than the for-profit operators of the other two Kuhio Beach concessions.

Palekaiko isn't the only beach concessionaire to run into financial problems, according to public records. One former operator, Gilbert Hisatake, owes $285,000 in back rent and interest to the city and last year pleaded no contest to a misdemeanor charge of failing to pay state excise taxes on $455,000 in beach concession revenue, according to city and court records.

Hisatake said he paid his back taxes last year and is in talks with the city about settlement of the outstanding rent issue. He said business suffered badly after the post-9/11 economic downturn. Hisatake also said the city failed to provide promised equipment and services, and should have discounted his rent because of Waikiki reconstruction projects.

Another former for-profit concessionaire, C&K Beach Services Inc., recently was blocked by the city from bidding on a new concession contract because it owed $102,999 in back rent to the city. The C&K debt was paid July 22 after the city "collected the money from their insurance company," said Ron Nakano of the Enterprise Services Department.

"C&K doesn't owe anything now," Nakano said.

The most recent concession contract winner is Star-Beachboys Inc., which is accused in federal court of skimming cash from the beach business back in the 1990s, according to city and court records.

Reach Jim Dooley at jdooley@honoluluadvertiser.com.