Mayor Mufi Hannemann yesterday signed a deal that gives the city ownership of 34 acres of prime land in downtown Kapolei in exchange for completing a one-mile stretch of Kapolei Parkway.

The deal represents a major shift in the development of the "Second City" because the city overnight becomes a major player in the area. The six properties are in the vicinity of Kapolei Hale and the new Kapolei Judiciary complex, and include a musubi-shaped parcel that's designated as a site for a major transit center for buses and the proposed $5.3 billion rail transit project.

"I believe future city councils, future mayors, will be very pleased with this transaction," Hannemann said.

Kapolei Property Development, the landowner and major developer for the region, has run into financial hardships during the poor economy and told the city its construction of the parkway would be delayed.

Handing over the responsibility for construction of the road means it can be finished by 2014. The city also agreed to repave Kamokila Boulevard, another key Kapolei thoroughfare.

City officials believe the city will come away with a net benefit of about $24.6 million as a result of the deal.

Hannemann said transit-oriented development is high on the list of possible uses for the area. He said it's too early to tell if it will make more sense for the city to sell the land outright or develop the area itself and lease out property.

"But the city now has all these options at its disposal," the mayor said.

The city won't sell or develop the properties right away, and can afford to wait for the economy and the real estate market to improve. "There's not going to be any fire sale," Hannemann said.

Of the 34 acres, 21 had already been designated for transfer to the city but were originally required to be used only for government purposes. That restriction has been lifted. The remaining 13 acres come to the city without restrictions except that any proceeds derived from those lands must go to the city's transit fund.

The City Council on March 17 passed Resolution 10-49 authorizing Hannemann to sign the memorandum of agreement with Kapolei Property Development.

Kapolei Property Development President Brad Myers called the deal a "win-win" for the city, the company and the community.