Category Archives: Business

Sand Island business group seeks to force sale of public land

5 Replies

The motto of the Sand Island Business Association (SIBA) should be something like “If at first you don’t succeed, try, try again.”

In the early 1990s, the group used its political connections to win both a very favorable lease for about 70 acres of state land on Sand Island for an industrial park, and then to obtain a very unusual grant of administrative control over the subleases to individual businesses. For most of the years since, SIBA has been pushing for the transfer of these public lands to SIBA in fee.

Over the past year, SIBA has been advocating on behalf of a special interest bill at the Honolulu City Council that would reduce real property tax payments by businesses with SIBA subleases, while simultaneously challenging its tax bills in state tax court.

This time around they’re at the legislature pushing SB176, which would authorize the Board of Land and Natural Resources to sell parcels of the state-owned land within the Sand Island Industrial Park to lessees. The bill does not provide any public purpose for allowing the sell-off of these publicly-owned industrial lands beyond the general decline in state revenue caused by the current pandemic.

The bill has been scheduled for a public hearing in the senate next Thursday, March 4, before the Senate Ways and Means Committee chaired by Sen. Donovan Del Cruz. The hearing is scheduled for 1:30 p.m. Due to Covid, the capitol is closed to the public, and all hearings are being conducted by Zoom, and written testimony, as well as remote testimony via Zoom, are being accepted.

SIBA has tried this gambit several times over the years. Back in 2009, for example, a similar bill requiring the state to offer the Sand Island parcels to the lessees passed the Senate and one house committee before bogging down in House Finance.

Testimony presented on behalf of then-Attorney General Mark Bennett said the measure would be unconstitutional.

This bill requires the Department of Land and Natural Resources to offer for sale or exchange parcels of Sand Island. Article XI, Section 5 of the Hawaii Constitution states that “The legislative power over the lands owned by or under the control of the State…and its political subdivisions shall be exercised only by general laws….” Given this directive, this bills requirement to sell the parcels at Sland Island would be unconstitutional.

The latest bill appears to also be an unconstitutional special interest bill singling out one organization. I understand why they took this risk. It’s just that there’s no way SIBA could sell the idea that all public land should be offered for sale to lessees.

DLNR’s 2009 testimony said the original lease agreements do not contain any provisions entitling lessees any right to purchase the fee simple interest in the land. Further, the approximately 70 acres of the Sand Island Industrial Park now generate significant revenue that supports DNLR other programs.

“Such sale would not be in the best interest of the beneficiaries of the public land trust, the State, or the Department,” then Land Board Chair, Laura Thielen, testified.

The current measure, SB176, originally had a double referral in the Senate to both the Committee on Water and Land, and Ways and Means. However, on February 4, it was re-referred to WAM, cutting the Water and Land committee, which would generally have jurisdiction over bills regarding land issues, out of the process.

See:

“Monday…Bill sliding through legislature to sell 73 acres of state-owned land on Sand Island,” iLind.net, March 20, 2009.

“Second look: Sand Island Business Association–Money & Politics,” iLind.net, March 18, 2013.

“Hawaii Monitor: Business Group Presses For Sand Island Land Swap/25 years of money, politics, and special interest,” Civil Beat, March 13, 2013.

“Tuesday, Part 2: Sand Island Business Association seeks special interest deal,” iLind.net, March 31, 2009.

“SIBA: Singing the same tune for nearly 30 years,” iLind.net, February 8, 2021.

Stadium redevelopment plan’s legacy of deceit

3 Replies

Two years ago, a bill to transfer control of the Aloha Stadium site to the Hawaii Community Development Authority, and to authorize spending $350 million of public money to fund planning and construction of a new stadium, was approved by legislators.

Several months later, the bill-HB1582 HD1 SD1 CD1–won an award from Common Cause and the League of Women Voters of Hawaii.

Unfortunately, the award was the “Rusty Scalpel Award,” given by the two public interest groups annually to call public attention to the worst example of the legislature’s “gut and replace” sleight of hand that again left the public on the sidelines. “Gut and replace” refers to a maneuver where the contents of an existing bill are deleted, leaving only the bill’s title and number, and the contents then replaced with wholly different content, sometimes (as in this case) concerning a totally different subject.

At the time, veteran newsman and columnist, Dave Shapiro commented in his “Volcanic Ash” column.

With a new Aloha Stadium looming as Hawaii’s first major public works project after the rail fiasco, you’d hope the state would take special care that every move is above board.

But lawmakers couldn’t even get past the first step without major corner-cutting, shaking public confidence from the start.

The groups behind the Rusty Scalpel award described the process that started with a bill that would have created a Department of Environment. This version of the bill was passed by the House and sent to the Senate.

In the Senate, the bill was amended once and scheduled for a public hearing, but before the hearing a “gut and replace” produced a new and very different draft of the bill which morphed from an environmental reform to a bill authorizing a permissive plan giving open-ended authority to HCDA to push ahead with a “public-private partnership” empowered to redevelop the stadium and surrounding area.

As introduced, and as passed by the House, HB 1586 proposed to transfer various state agencies to a new Department of the Environment. The HD 1 amended version of the bill was referred for joint action by the Senate Committee on Energy, Economic Development, and Tourism and the Senate Committee on Government Operations. These two Senate committees deleted thecontents of the bill then held a public hearing on HB 1586, Proposed SD 1 to establish a new State Energy Office within the Department of Business, Economic Development, and Tourism and to modify stateenergy programs and policy. The Proposed SD 1 was adopted as the SD 1 version of the bill, which ultimately was re-referred for joint action by the Senate Committee on Energy, Economic Development,and Tourism, the Senate Committee on Government Operations, and the Senate Committee on Ways and Means. These three Senate Page 2 committees deleted the contents of the bill then held a public hearing on HB 1586, Proposed SD 2 to authorize the HCDA to redevelop Aloha Stadium and the stadium property. With minor changes the Proposed SD 2 was adopted as the SD 2 version of the bill. Because the House disagreed with the SD 2 version, the bill was referred to a House-Senate conference committee. The House and Senate ultimately voted to enact numerous conference committee amendments as HB 1586, CD 1.

Two key players were Senators Donavan Dela Cruz, chair of the Ways and Means Committee, and Glenn Wakai, chair of the Committee On Energy, Economic Development, And Tourism.

Back in September 2020, a post here described how the two were bullying staff in several agencies demanding they support attempts to resurrect the trees-to-energy plant proposed on the Big Island by Hu Honua Energy (“Powerful state senators pressure agencies to back Hu Honua“). It seems likely similar hard-ball tactics have been used to push the stadium plan forward.

Next: If you like the Kakaako version of affordable housing, you’ll probably love the New Aloha Stadium Entertainment District.

Fast-tracked stadium redevelopment = “Boondoggle”

12 Replies

Wikipedia: “A boondoggle is a project that is considered a waste of both time and money, yet is often continued due to extraneous policy or political motivations.”

Governor Ige deserves more credit for trying to put the brakes on the ill-conceived plan to build a new stadium as part of a larger corporate giveway of the site of the current, well-aged Aloha Stadium. He has been circumspect in his objections. But “boondoggle” is the word that comes to my mind.

I admit that I haven’t paid close attention to the years of political and legislative handwringing over what to do about the substantial maintenance needs of the stadium, which has been the University of Hawaii’s home field since the 1975 football season.

I thought the key question was simple: Do we need a new stadium?

And I thought the answer was relatively simple: Yes, we need a new stadium so that University of Hawaii Division I football will have a home.

But then a funny thing happened. The Stadium Authority just cut off UH without discussion. At the end of 2020, the authority simply announced no further events will be held at Aloha Stadium. With that curt announcement, apparently not accompanied by any behind-the-scenes consultations or negotiation with university officials, plans for the next several UH football seasons were upended. And, further, University of Hawaii was informed key decisions about the relationship between the university and the stadium, including financial arrangements and the rights to various income streams created by its football games, will have to be negotiated with the private corporate entity eventually selected to develop the site. In other words, public policy and public opinion may favor the university and a special place for the football program, but corporate interests will control the redevelopment of the site and will determine the terms of any UH-Stadium arrangement.

So, as a result, the university is pursuing an on-campus stadium as an alternative to continued use of Aloha Stadium. And, in the end, even a much smaller stadium on campus may be a better financial deal for the university, since revenues from football games and other events at the stadium, including ticket revenue, advertising, along with concession and parking income, would remain with the university to underwrite the athletic department.

So now that key question has become something like this: Without collegiate football, and given all of the state’s pressing needs, is a new stadium really among the highest priorities?

Remember that the legislature has already pledged $350 million in financial support to build a new stadium, including $50 million in general funds and authorizing another $300 million in general obligation bonds, meaning bonds that get paid back through general state revenue (read “tax dollars”) and not from revenues from the stadium redevelopment project itself. That’s real money taken from other needs, especially in this period of financial uncertainty.

What needs could be met with $350 million in state funding? Where should the stadium (sans UH football) be in a list of priorities?

There are certainly things we NEED. We desperately need affordable housing of all kinds, not only to provide for the homeless and those at the bottom of the income ladder, but also quality rental housing for the broad middle class that has been priced out of the residential market with its million-dollar entry point. We need to adapt to and protect ourselves form the impact of climate change and sea level rise. We need to deal with the huge and growing backlog of deferred repair and maintenance in public buildings, public schools, and the university system. We need to be sure our public pension system is on a sound financial basis. We need to move forward with the replacement of our aging computer infrastructure. We need to face up to the billions in state budget shortfalls projected over the next several years, while our economy slowly recovers from the shock of the pandemic. And on and on.

In my view, any “need” for a shiny new stadium pales in comparison to this laundry list of pressing needs. And meeting those real needs will give the economy more of a boost than a costly development boondoggle.

Coming next: The legacy of “Gut & Replace”

How about we toss in another $50 million for the same folks?

7 Replies

Yes, it’s true.

There’s another pair of bills authorizing $50,000,000 in special purpose revenue bonds (yes, as in $50 million) to a Hawaii company, Keahole Hotel & Suites LLC, for planning, designing, constructing, and equipping facilities for a hotel at the Ellison Onizuka Kona International Airport at Keahole.

According to state business registration records, Keahole Hotel & Suites LLC has a single member, Mason Industries LLC, which in turn also has a single member, Melvin G. Mason, Jr.

That’s the same Melvin G. Mason, Jr. behind the additional request for $100 million in special purpose revenue bonds via the pair of bills described here yesterday which would support Mason’s pipe dream, House of Aloha Enterprises LLC.

The bills are SB256 and a companion, HB688.

Someone appears to have greased the skids in the Senate, where SB256 ended up with a single referral directly to Committee on Ways & Means, which recommended passage of the bill by a 9-0 vote of members present on Wednesday, February 10. A hearing on HB688 is scheduled for this morning at 10 a.m. before the House Committee on Transportation.

There were two testimonies submitted in support of SB256. One was from Melvin G. Mason Jr. on behalf of Keahole Hotel & Suites LLC. The other was from Melvin G. Mason Jr. on behalf of Mason Industries, LLC. This testimony failed to mention that Mason Industries is the sole controlling member of Keahole Hotel & Suites LLC. And neither submission included any details of the proposed project.

There were also two departments that offered testimony.

Budget & Finance offered what it called a “technical comment.”

Federaltaxlawrequires, among other things, that hotels financed with tax-exempt bond proceeds must be governmentally owned and operated by a governmental unit and/or private entity (subject to a qualified management contract), and available for use by the general public for short term stays.

To utilize tax-exempt revenue bonds, a hotel must be government owned, and the bill states calls for tax-exempt bonds. This was pointed out in testimony submitted on behalf of the Department of Transportation.

DOT politely did not testify in opposition to the bills. However, it did put forward considerations that are likely fatal to the hotel proposal.

…the department respectfully offers the following comments for the Committee’s consideration:

1.) The Bill makes reference to the proposed special purpose revenue bonds being exempt from federal income taxation. Such an exemption would require the project to be owned by a governmental entity or a 501(c)3 non-profit corporation; although the project could be operated by a for-profit entity if the terms of such operation comply with IRS requirements.

2.) Airports Division is subject to both Federal Aviation Administration and existing contractual restrictions regarding how it uses airport revenues. Airport revenues would presumably not be available to support special purpose revenue bonds of this nature.

3.) Airports Division is subject to contractual restrictions including restrictions applicable to: (a) the incurrence or guaranty of new indebtedness; (b) the acquisition, disposition and maintenance of property; and (c) a capital budgeting process involving the approval of signatory airlines.

4.) Airports Division is subject to statutory and constitutional restrictions, including, but not limited to, those relating to expenditure of public funds, procurement and leases of governmental land.

And then, just for the record, DOT’s testimony concluded: “Further, if it is determined that a governmental owner is necessary for the tax-exemption of the special purpose revenue bonds, Airports Division believes that it would be a poor fit to serve in such capacity.”

In other words, we don’t want to be involved with this.

It’s important to note that there’s a relatively long history to this project, with lots of warning signs flashing along the way.

I liked the moment captured by Pat Tummons in her excellent review cited below. She described a telling interaction at an August meeting of the Hawaii County Leeward Planning Commission on a related matter involving Mason.

Right before the commissioners were set to vote on the issue, commissioner Max Newberg asked Mason, “Out of curiosity, are you a developer?”

Mason replied, “Yes, I’m going to be developing this.”

Of course, Newberg appeared to be asking whether Mason had any credentials or experience as a developer. And his answer did not answer the question.

It’s the same sort of question about credentials, experience, and resources that need to be asked and answered before any of these bond proposals can be approved.

For additional important background, see:

“Leeward Planning Commission gives OK to airport hotel proposal,” Nancy Cook Lauer, West Hawaii Today, August 23, 2020.

“Panel Green-Lights Zoning Change for Hotel, Other Uses at Kona Airport,” Pat Tummons, Environment Hawaii, September 2020.

“SB652: Will Legislators Give Drunk Rave Promoter $50M?” Andrew Walden, Hawaii Free Press, February 17, 2019.