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.

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.

Okay, maybe legislators aren’t really standing in the shadows of some downtown alley soliciting anonymous passersby with offers of discount financing courtesy of the State of Hawaii.

But sometimes it certainly feels that way!

Take a gander at SB579 and its companion measure, HB689.

Here’s the primary substance of these bills, which would authorize the issuance of $100 million in special purpose revenue bonds for something called House of Aloha Enterprises LLC.

Pursuant to part IV, chapter 39A, Hawaii Revised Statutes, the department of budget and finance, with the approval of the governor, is authorized to issue special purpose revenue bonds in a total amount not to exceed $100,000,000, in one or more series, for the purpose of assisting House of Aloha Enterprises LLC, a Hawaii limited liability company, with planning, designing, constructing, and equipping facilities for the manufacturing, processing, and distribution of products such as but not limited to the production of value-added agricultural, advanced materials, sustainable, and fine art products. The legislature hereby finds and determines that the planning, designing, constructing, and equipping of facilities for the manufacturing and processing of products such as the production of value-added agricultural products constitute a project as defined in part IV, chapter 39A, Hawaii Revised Statutes, and the financing thereof is assistance to a processing enterprise.

Rather amazingly, both bills have been passed by their subject matter committees, and referred on to the respective money committees, House Finance and Senate Ways and Means.

Even more amazing is the fact that the committee reports accompanying the bills provide absolutely no indication of what House of Aloha Enterprises LLC is going to do with $100 million, what resources it has to put into such an ambitious project, or what business experience its principals have that might suggest the possibility of succeeding in delivering on its wholly vague promises. The poor committee staff didn’t have much to work with, since testimony submitted on the bills was devoid of anything meaningful, and the committee reports reflect that.

So who or what is House of Aloha Enterprises LLC?

The company was registered with the state’s Business Registration Division on October 29, 2020, listing its principal business address as 65-165 Kamehameha Highway in Haleiwa. It is an address at Haleiwa Town Center. Unsigned testimony submitted on behalf of Mason Industries LLC states that House of Aloha plans a “retail outlet” at Haleiwa Town Center which it claims “will generate revenue, taxes, fees, lease and rents….”

“The project will generate jobs in areas such as but not limited to, construction, law, finance, food and beverage, accounting, engineering, landscaping, maintenance, and energy,” as well as “multi millions of dollars in revenue for the State of Hawaii through taxes, fees, and the lease at the Free Trade Zone,” according to the Mason Industries testimony.

Where’s the beef, you might ask? Well, sadly, there was none to be found.

Mason Industries is one of four members that make up House of Aloha Enterprises, according to state records.

The sole member of Mason Industries LLC, according to state business registration records, is Melvin G. Mason Jr. The company’s principal address is a rented residence in Kailua-Kona. It first registered to do business in May 2018.

Mason has another company, Keahole Industries LLC, registered at the same address. It was registered to do business beginning in 2017, but has failed to file required annual business registrations with the state for two years.

According to the state’s Business Registration Division, “This business is not in good standing.”

What appears to be a companion business registered by Mason, Keahole Enterprises LLC, is currently registered. It was first registered by Mason on October 24, 2018. A company by the same name was registered by former state legislator Jon Riki Karamatsu on April 1, 2016. The company went out of business by filing Articles of Termination on May 24, 2018.

The other members of House of Aloha Enterprises are equally unknown entities–Hawaiian Quintessence LLC, International and Pacific Enteprises LLC, and Wahineokai LLC.

Hawaiian Quintessence–It’s sole member, according to business registration records, is Waymond Ngai, a Honolulu attorney. It’s principal business address is a 734 square foot residential apartment on Kapiolani Boulevard.

Ngai is also listed as agent for House of Aloha Enterprises. During 2019-2020, he was registered with the State Ethics Commission as lobbyist for four entities controlled by Mason–Keahole Enterprises LLC, Keahole Industries LLC, KoleaGold LLC, and Mason Industries, LLC.

International and Pacific Enterprises LLC lists a single member, Jason K. Hoopai, and lists is purpose as “to own, operate & manage portfoio business investments & to provide wholesale services and goods.”

Wahineokai LLC was registered with the Business Registration Division on October 16, 2020, by Cameron Wahineokai, and listed a Kaneohe residence as its principal address.

Melvin Mason presented the only testimony in favor of these bills, and his testimony contained absolutely no specifics, no evidence of financial resources, no evidence of relevant experience, and no evidence of capacity to undertake a $100 million project.

The only additional testimony was submitted by the Department of Budget and Finance regarding its requirements for such special purpose revenue bonds.

“The Department would like to inform the Legislature and prospective SPRB parties that should the legislation be approved, approval of the SPRB issuance and conduit loan will require further review of the financing proposal to ensure compliance with all federal, state and credit underwriting requirements,” director Craig Hirai said in his testimony.

Okay. An authorization to issue special purpose revenue bonds isn’t like just getting cash money. It’s like a loan, and requires interest payments and eventual repayment of the principal. And in our current low interest rate environment, revenue bonds aren’t the fantastic financing method they have been in the past, when commercial borrowing costs have been substantially higher. But the state has a limited allocation of such bonds, and there’s still competition for the right to use whatever bond financing is available.

So why did both house and senate committees give what appears to be a pass to this newly formed business with no track record, no visible financial resources, no substantive plans to share, and…and…it makes my head hurt.

Hopefully the tight-fisted members of the money committees will not follow suit.