Maui Land & Pineapple Co. has sued Maui County in federal court to settle a disagreement over how much affordable housing the company must provide for developing part of Kapalua Resort.

The suit, filed Friday, claims that the county is trying to force the company to provide affordable housing representing 40 percent to 50 percent of residential units built on roughly 80 acres of undeveloped land at the West Maui resort, instead of 25 percent as agreed upon by both parties in 2004.

Maui Land said county officials reneged on the 25 percent affordable housing deal negotiated by the administration of former Mayor Alan Arakawa, and are attempting to apply the higher requirement approved by the County Council and Mayor Charmaine Tavares in 2006.

"We're saying the new administration reneged on our agreement," said Ryan Churchill, Maui Land senior vice president of corporate development.

County spokeswoman Mahina Martin said the county hasn't been served with the suit, and therefore reserved comment.

However, the county previously told Maui Land that the 25 percent affordable housing agreement applies only to hotel units developed on the site, and that residential development is governed by the higher requirement.

The county's 2-year-old Residential Workforce Housing Policy has been a source of contention between developers and affordable housing advocates, and was a key issue that helped Tavares, a former County Council member, unseat Arakawa as mayor in a November 2006 election.

Arakawa had vowed to veto the policy on the belief, which he said was supported by economists, that such a high affordable housing requirement would overburden developers, curtail development and cause a net reduction in affordable housing production.

Tavares said the policy would ensure new homes are built for local residents unable to compete in a market largely producing luxury homes for the wealthy, and she enacted the ordinance after winning the election.

The measure establishes a formula for large hotel and residential projects to include for-sale housing that's affordable to people earning 100 percent to 160 percent of the county's median family income, or $72,800 to $116,440. The policy also allows production of rentals for people earning no more than 80 percent of the median income, or $58,220.

Applying the policy to Kapalua Resort would have a significant financial impact on Maui Land, which has struggled with pineapple production and earlier this year laid off 274 employees. It also will affect how much moderate-priced housing is developed in the area.

EXEMPTION CLAIMED

The lawsuit involves a bilateral agreement Maui Land signed with the county, covering about 200 acres of Kapalua Resort makai of Honoapi'ilani Highway.

Other major Maui Land projects, including Kapalua Mauka and Pulelehua, are outside the covered area, as is land around the former Kapalua Bay Hotel site being redeveloped with a mix of high-end time shares and condominiums.

The area at issue is permitted for development of up to 1,050 hotel rooms and 800 residential units, though much of the land suitable for hotel and residential development already has been developed with the 550-room Ritz-Carlton Kapalua hotel and 31 single-family homes.

Maui Land plans to build a 196-unit condo project called Village of Kapalua on 40 acres. It would include a 40,000-square-foot commercial complex for shops, restaurants and other services. Another roughly 30 acres designated for mixed use could still be developed.

For Village of Kapalua, Maui Land would have to produce 49 affordable housing units under its agreement versus up to 98 units under the present affordable housing policy.

Maui Land, after Tavares won the mayoral election but before she took office, sought assurance that projects in the subject area would be exempt from the soon-to-be-enacted Residential Workforce Housing Policy. The company received a letter on Dec. 12, 2006, signed by Arakawa and Alice Lee, then director of the county Department of Housing and Human Concerns, agreeing that area projects were exempt.

But in early 2007, the Housing Department — under new leadership — rejected that view, informing Maui Land that its agreement pertains only to hotel development, and that residential development is subject to present county affordable-housing requirements.

"The units proposed for development in the (project area) are for long-term residential use, which is not covered (by the agreement)," Vanessa Medeiros, Housing Department director, wrote in a May 2007 letter to Maui Land.

Maui Land claims that its project is excluded from the new affordable housing policy by an exemption in the policy pertaining to any development subject to a rezoning condition that requires affordable or residential workforce housing.