Office of Hawaiian Affairs rejects $100M Kakaako Makai deal
April 7, 2023

by: Andrew Gomes

The Office of Hawaiian Affairs has dismissed a buyout proposal from a legislative leader to make permanent an existing residential development ban on land the agency owns in Kakaako Makai.

OHA’s nine-member board of trustees voted unanimously Thursday during a special meeting to reject the offer made Monday by House Speaker Scott Saiki after a discussion in executive session with legal counsel.

Saiki proposed for the state to pay OHA $100 million and provide $65 million to fix damage to a wharf area on part of the agency’s property in return for a perpetual easement prohibiting residential development and limiting building height and density on 31 acres OHA owns makai of Ala Moana Boulevard between Kewalo Harbor and Honolulu Harbor.

OHA trustees in a statement said Saiki’s offer represents a “small fraction” of what it characterized as a “total make-whole value owed to OHA.”

The Kakaako Makai land was conveyed to OHA in 2012 to settle previous unpaid ceded-land revenue in lieu of $200 million. At the time, OHA and state negotiators were advised by their own appraisers and agreed that the value of the land, which included a ban on residential use imposed by the Legislature in 2006, was roughly $200 million.

Later, however, OHA contended that it expected lawmakers to reverse the ban. Yet three times before this year, the Legislature declined to pare back its 2006 residential-use ban.

Earlier this year OHA claimed that its Kakaako Makai land is worth only $43.6 million based on a new appraisal that accounts for deferred maintenance and hazardous-materials conditions — things OHA said it couldn’t assess in 2012 because of time pressure to accept the state’s settlement offer.

“Clearly, Native Hawaiians were seriously shortchanged,” OHA board Chair Carmen Hulu Lindsey said in March.

A bill introduced in January to reverse the ban on OHA’s Kakaako Makai land stalled in March in large part due to opposition from Saiki, who was instrumental in establishing the prohibition to block a development plan initiated by another state agency.

The bill’s demise led to a meeting between Saiki (D, Ala Moana-Kakaako- Downtown) and OHA representatives March 31, and Saiki sent the agency a written proposal Monday.

OHA’s board said Thursday that it hopes the latest activity reflects a much-needed thawing of entrenched positions and a meaningful start to open discussions and negotiations, but it could not accept Saiki’s proposal, which was subject to legislative approval.

“While OHA appreciates that Speaker Saiki clearly recognizes the overarching need to make OHA whole, and acknowledges the historic nature of his latest proposal, the Trustees nonetheless found that both the terms and funds offered remain far off the mark,” the board stated.

The board also took issue with Saiki including in his proposal an annual increase in interim future ceded-land revenue payments to OHA. The agency claims it must be paid 20% of such revenue, but the state and OHA have never agreed on calculating that, and so it has been left to the Legislature to decide how much in interim annual payments to make.

In 2022 the Legislature approved giving OHA $64 million in past-due revenue from the state’s public land trust, and increased the annual distribution to $21.5 million from $15.1 million.

Saiki proposed that the annual distribution become $25 million on July 1, 2024, and then rise each year thereafter by a factor representing a three-year average local urban-core inflation rate.

OHA’s board said that it isn’t acceptable to use future public land trust obligations to pay off a past public land trust obligation.

Part of OHA’s argument has been that if it had received real estate worth $200 million in 2012, then it should be worth a lot more with appreciation 11 years later, and thus it has been shortchanged by an amount well beyond the difference between $200 million and $43.6 million.

If OHA had received $200 million in cash, the agency has contended, it would be worth about $400 million today if it were invested since 2012 and produced a 7% annual return.

Saiki has emphasized that OHA accepted the land in 2012 as full payment for a $200 million debt, and on Thursday said he wants to help the agency resolve its dilemma.

“I hope to continue discussions with OHA over the summer,” he said. “This is an important issue that needs to be resolved once and for all.”

OHA on Thursday said relinquishing the possibility of adding value to its Kakaako Makai lands, perhaps by persuading the Legislature to allow residential use along with height and density increases, would be too much of an adverse impact on the future value and income stream for the property it has dubbed Hakuone, which translates to “a small land division cultivated for a chief.”

OHA has produced a conceptual plan for Hakuone that includes residential towers on three of its nine parcels, 10 acres of open space including a public waterfront promenade, a Hawaiian cultural center, a 3,600-stall parking garage and 250,000 square feet of retail, restaurant and other commercial space.

Lindsey said in Thursday’s board statement that OHA, which serves Hawaiian beneficiaries through programs, grants and other ways, wants the same development rules that exist in Kakaako mauka of Ala Moana Boulevard to apply to the agency’s land.

“We are asking to be accorded the same privileges as the developers from the mainland whose towers continue to go up, unimpeded, just across from Hakuone,” she said. “I am tired of seeing kanaka maoli (Native people) dominate the statistics for (houselessness), incarceration, and serious diseases. It breaks my heart to see children living with their parents in encampments and on sidewalks.”

Lindsey continued, “Our lahui (nation or race) and future generations of our beneficiaries would reap the benefits that would flow from OHA’s development of Hakuone. We see it as an economic engine, a place close to the urban core, where we can showcase our culture, allow families to thrive, and encourage business growth. We believe it would be a positive step towards fulfilling our sacred mission to foster the well- being of Native Hawaiians.”