Local developer Jeff Stone is willing to give up $3.45 million in state tax credits he claimed last month — and more he still could claim — if state lawmakers redirect the credits to affordable housing on the Leeward Coast.

The Ko Olina Resort & Marina master developer said low-income rental housing for the area is a community need that he would like to see benefit from a $75 million tax credit program approved five years ago for developing an aquarium and other commercial facilities at the West O'ahu resort.

Stone made the offer in response to an Advertiser story on Tuesday that disclosed his recent application to take $3.45 million in credits after agreeing in January 2007 to allow the credits to be shifted to other projects to support Leeward Coast residents. At the time, Stone said he was OK with the shift because so much investment had flowed into Ko Olina without the aquarium, and because state leaders wanted to use the credits for more pressing needs such as affordable housing.

Stone said he elected to claim the credits last month because his earlier pledge to not use them appeared wasted, given that no bills to redirect the credits passed last year.

Now the developer has proposed returning any state tax credits that he's entitled to for past spending — mostly on aquarium plans — if lawmakers pass legislation this year or next year to redirect the credits for low-income rental housing on the Leeward Coast.

"I'll give the money back," he said. "We need to get affordable housing up in that community."

Stone said relinquishing Ko Olina tax credit proceeds, including any he earns in the future, is contingent on a law being passed by 2009 that would provide the credit to developers of Leeward Coast rental housing that's affordable to people earning no more than 80 percent of Honolulu's median income under state guidelines.

In 2006, 80 percent of the median income was $39,950 for a single person or $57,050 for a family of four, according to most recent figures from the Hawai'i Public Housing Authority. Maximum affordable monthly rents by unit size range from $998 for a studio to $1,655 for a four-bedroom residence at the 80 percent income level.

Stone estimated that by building small units, $75 million in tax credits could yield about 1,000 rentals. The developer also said his partner in Ko Olina, the Harry and Jeanette Weinberg Foundation, is committed to donating Makaha Valley land on which to construct the rentals.

UP TO LEGISLATORS

Senate President Colleen Hanabusa, D-21st (Nanakuli, Makaha), an initial sponsor of the controversial tax credit, said she now favors repealing the bill, but that it's up to legislators collectively to act on Stone's offer.

Wide disagreement among lawmakers in the past over how to reuse the credits suggests it may be difficult to redirect them as Stone has urged.

The Legislature two years ago attempted to reallocate the aquarium tax credit for affordable housing and other uses within the economically disadvantaged Leeward Coast, but ultimately couldn't agree on what alternative uses would qualify.

The administration of Gov. Linda Lingle favored broad reuse of credits covering any commercial investment in Leeward O'ahu that could have included existing plans to build a Starbucks in Wai'anae, condominiums at Ko Olina and a shopping center in East Kapolei.

Other lawmakers including Hanabusa favored more narrow use limited to development of affordable housing and training facilities associated with the University of Hawai'i for tourism, media, film and music education on the Wai'anae Coast.

All attempts to reallocate the credits failed last year. Also failing were bills that would have repealed the aquarium tax credits.

This year, more attempts were made at redirecting the credits, but they made even less progress than last year.

As of Friday, there were three bills still alive to repeal the aquarium tax credits.

Also, a bill that would reallocate the credits for Leeward Coast affordable rentals and education and training facilities still could be approved in a conference committee. That measure, House Bill 1277, stalled in conference last year but recently had new conferees appointed in a sign lawmakers may act on the bill.

PURPOSE OF CREDITS

The original purpose of the tax credit was to build a "world-class" aquarium and other facilities to stimulate growth in real estate development, jobs, visitors and the tax base for Ko Olina.

Under the law, items that qualify for credits also include an international sports training complex, travel industry management intern campus, seawater air-conditioning system and marine science and mammal research facilities.

According to filings with the state by Stone's aquarium development entity, West Honolulu Attractions LLC, Stone applied to take $3.45 million in tax credits related to qualified spending from 2003 to 2005.

Filings show that Stone spent about $2.5 million on aquarium planning and design work that has included efforts to attract an aquarium developer to Ko Olina and supplying the project with seawater through a well.

About $700,000 was spent on marine science that included relocating the nonprofit Dolphin Institute from Kewalo Basin to Ko Olina. About $200,000 was spent on sports training, or primarily work on a field at Ko Olina for NFL Pro Bowl activities.

The Department of Business, Economic Development & Tourism has certified that the $3.45 million in claims are allowed under the law. However, the $3.45 million claim has not been paid yet because it's still subject to state Tax Department approval.

Stone also filed a report stating that spending last year totaled $322,952 mostly on aquarium-related planning that he intends to recoup under the tax credit authorization if approved by DBEDT and the Tax Department.

There was no claim to recoup expenditures made in 2006 because West Honolulu Attractions filed its 2006 spending report after a March 31, 2007, deadline. The developer in the late filing reported spending $1.34 million.

There is no language in the tax credit law that requires Stone to deliver an aquarium or other completed projects to collect credits for qualified spending.

Under the law, Stone has until May 31, 2009, to spend up to $75 million on the aquarium and other facilities to qualify for the tax savings. Rules prohibited Stone from claiming any credits until last year and limit credit redemptions to $7.5 million a year against tax liabilities.

Though no aquarium will be built using the tax credits, Stone said Walt Disney Parks & Resorts plans to build an aquarium as part of a $800 million hotel and time-share project at Ko Olina.

Stone said Disney, which announced its project in October, has indicated it won't claim any credits.