HomeMy WebLinkAboutCOM 0896.095 2022-2024.IV OF --
REBECCA VILLEGAS PHONE (808) 323-4267
(808) 323-4786 FAX.
Council Xlember
E N1 A I L: Re be cca. villegas gc
District 7, Central Kona ,hawaucoway.gov
HA API COUNTY COUNCIL
[Vest Hmipai'i Civic Center, Bldg. A
74- 5044 Ai i e Ac ohokalole Hi ty. y.
Kailita-Kona, llawal'i 90740
DATE- July 10, 2024
TO Heather L. Kimball, Council Chair, .and
Men-ibers of the I lawal'i Council
X!:
FROM: Rebecca Villegas
Council Member, District 7
SUBJECT: Supporting Material related to R111 No. 169
Attached for Council mciiibers review Is t-elevcint to today's discussion on Bill. 169.
Please distribute the rattacli-ments to the Council members.
Thar ik you for your attention to this n-tatter.
RV/ca
Att
Hawai'i Cowq is an Equal Opporawily Provider and Employer.
qsComm. No.
Ref. To:
Ref. Date 141JL 1 0 20'4
Environment
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Intic\ In Y,.;11 1'1)1 A1Om".
Hawai i
Affordable Housing Requirements Still Unmet by ,� ��,,,,
Kona Vistas Developer
posted iit- 1,1L"d Use, Novcm be 21123 1 0
When the Land Use Coniniission approved the redistrictincy of the properl}, to he developed by Kona Vistas, the very first
condition concernied affordable housing.
Condition A required 10 percent of the hou ill" built oil the properly he "ofkred to residents of'tile State cat;low and
moderate incorne."
Tlie I JaN ai`i (.'okijity Council. then included Condition J in its rezoning ordinance, requi.ri.ng conipliance with the affordable
housing condition In the LUG_, order, as deterinjuecl by the county I lousing, Agency.
For the last 40 VMS, finding a path forward on affordable Mortising has proven to be difficult. Multiple agreements betWeell
the developer and the county have been signed, only to dissolve for one reason or another.
The most recent was signed in January 2022. But jest 11 nionths later, (lie county ( iitce of I- ousing and Conlilitillity
Development 014DQ asked that new conditions for affordable housing be imposed in any rezoning ani ndinent..
The first agreeinew lasted intich longer, although it required nuinerous extensions. That agr enicnt, signed in December
1992, called for (lie developer to purchase about 12 acres niakai of the redistricted land, nia a drainage iniprovennents and
donate it to the: county for developinent of affordable Dousing by a third. party,
Not until 2015 slid the county receive title. Drainage improvetuenis, however, still had not been made, prompting the
cou11t f's thexl-11ou � Ii1g adiiiinistrator, Susan Akiyama, to demand performance in July ofthat year. At the saute tinic, slic
infor-fined the then-c viler, Kona. Vistas, that on the advice of the county coyoradon counsel, it would not be able to "use
exccss affordable housing credits to satisfy their obligation" under the L C's redistricting order. Should the developer
havc any questions, Akiyania advised it to call Alan Buda of lter office.
Barely two months later, Akiyania completely reversed her }position. The conveyance of title to the 12 acres to the county
"or our designated non-profit Neill full' satisfy Condition A" of the LUC order and Cite coutity's affordable -housing
011dition as NvelI, Akiyania Nvrote oil October i. Again, questions were to be directed to Rtido.
'Mlle drainage iniprovetnents had still not been clone a year later, when the county planning director advised the new
landowner, Kona Three, LLC, that it was still on the hock for th rn.
In This Issue
ful), 2024 1'DF .
in West Maui. flie. Fight
Over Waler Reveals
711oSc
New- & fi` ote�Nrtjj
Mosquito Coll( ol_
Lahajii�i Pe r i i i I t Acid A (16rdalile
l ial
L
High C oint Finds W',L1cr
Rr
C oininission Flailed To
Justify ``Mattis (duo' Streatii Flow
Standards
Sul'. 9, 21,24
Richard Wheelock, otie of the members of Kona Three, replied, noting that developing the drainage improvements was
difficult. An environmental impact statemem had been done in I996, since county property would be afli cted by thelll.
"Then it was discovered that the drainage design to link into the county ditch at Kuptina Street would need to be routed
through some land owned 1)y tX%ro separate ltonicomiers... [I]t took another six years to negotiate a deal between the
comity, the Im property owners, and Kona Vistas LL .",
But what seetfils to have killed (lie plall was it hydrological analysis that found the increased fl o\ifs in the Holualoa Ditch
brought about by the plaimed clime es would r sult ill Ille c11,111lic:l over€oppkig, both Queen Ka`ahumaim and Kttakini
highways ill heavy raids, "Therefore." }tc; \%,rate, "Ole platys for drainage improvements ... will need to be altered,"
Also, W lzeelo& WOW, the 2015 transfer cif title to the coil nty was an error. It was only to be recorded after the coulity
completed an environmental assessment for (lie transfer, Wheelock said, but, "far unkno%%m reasons, escrow recorded this
deed before the EA was comj)lcte."
A meeting was held in the Planning Department on September 22, 2016, involving Wheelock, Daryn Arai, then a county
plamier, Alan Rudo of Housing, and Ron Kim of (lie Corporation ounsel's office. They agreed that l ona 'l hree would
Avork with the Corporation Counsel to reverse the conveyance of (lie property and work with Planning to update the SMA
for [lie drainage improvements. In addition, Kona Three -would work with 1 lousing to arrange to convey (])Crproperty to a
third -party developer.
In 2019, [lie OHC D again addressed the affordable housing issue. On October 3 1, then -administrator Neil Gyotokth
informed Robert %- illiams ofKona Three that "no allorclaNe limisinc; agreement exists' between (lie comity and oji,�i.
Three. "A new acir�eenzent must he cic.��cic pcd alld sighed 1))' tl1e omi�rs taml 111C c;c�t ily befiore the olla Vistas project ill
mhm-Koim may move fonvard.
The prc::VIOUs a0l,eefllelzt, inw1ving the laud transfer, signed In 1992 and amendc(l seven times, "ultimately e\p1rc d almost
13 years a(lo on December 31, 06," 'ryotoku '%vote.
While the counly was willing to negotiate a ne", agreement, lie continued, it "no longer believes acquiring [tile 12 acres]
are in the Best interest cif the taxpayers ... as it Nvould free Kona Three LLC to piusrte the development of hundreds of
marketipricc homes, willtolit any guarantee the third patty will be able to develop the affordable potties,"
"Kotia `Tltree LLC, should reve,, l how- it will satisfy requirements of 10 percent affordable for the development of the
completed increment" of2.10 siii le-llmiily bottles, Gyotaku %NTrote, observing that the previous developer had not built any
Monies in satisfaction of the Affordability rcquirenicnt. In addition, "the coutity also bel ieves that since there is no
affordable Housing agreement in place, any agreement with Kola Three LI,C must comply with the current requirement of
20 percent affordable to meet the requircments of Chapter 11 of the Cumi(y Code, Should Kona Three LLC build 465 new
homes ... 93 of the units must. be offered as affordable." The total number of affordable 11OLISiclg credits required Stood
therefore at 114.
"In the spirit of'mo ing fonvard, ... the COHCD Neill agree to allow constnic:tion of 114 affordable units" on the 12 acres,
Gyotoku Nwole_ Altemately, lie added, (lie developer could satisfy the agreement by purchasing e ccss ailordable housing
credits.
With the election of Mayor ditch loth in 2020,.Susan Hinz (formerly Susan Akiyania) returned to head the OHCD. She
proceeded to work with Kona Three on devising a complicated plan to satisf' the affordable llousbig requirement by
haN Ing the developer purchase about 10 acres mauka of the Dona Lowe's store. Kona Three would then convey the land to
a third party developer that would build 100 affordable rental units on the site. Kona Three would obtain 67 credits in this
deal that it would then surrender to the 011CD, thus sati t�,ing K.unz's detenuination that. Kona. Three deeded that number —
and not the 114 Gyotoku had proposed — to comply Avith the county affordable housing lay%�
Kunz signed off on the agreement in January 2022.
Later that year, the scandal involving former housing employee A km 1 udo's abuse of the affordable housing credit system
broke, with ludo and three of his partners in the scam facing federal charges of ttaud. County Council members expressed
dismay on leaming how (lie market in credits allowed devclopers to avold having to build any affordable housing at all.
Wheelock reported tlae fallout in his A►tgust 2023 report to the state Land Use Commission, noting that "10,1ne of tile Kona
coLi tic it inembers expressed dissalisfact ion with the fuIfiIlinem of the Kona Vistas/Roy a] Vistas affordable housing
requiremctats by the use of affordablc housing credits."
'riiat wasn't the oiily problem. "I'lae Planning Department and (lie OR -ice of the Corporation Counsel approached Kona
Three with 4a legal position that the agreement couldn't be used to fulfill the affordable housing obligation," Wheclock
wro le, miming (hat they maytatain that (lie LUC condition requires the affordable lots or houses "(o be developed on the
subject properly.
Omitted from Wh clock's report was any mention of'ta letter that housing administrator Kunz setit to the Planning
Department on November 30, 2022, in response to a request for comments on the rezoning amendments.
"The OHCD entered into an affordable housing agreement with the applicant on Januan, 1.0, 2022," Kunz'wrole. "The
applicant desired to satisfy this requirement through (lie purchase of 67 excess housing credits... `1"o date, the applicant has
not salisfied the agreement.
"Since the applicant intends to amend Ordinance 02-131 ... the OHCD kindly requests ... that (lie condition be updated to
reflect the current housing conditions — requiring the applicant to earn housing credits equal to 20 percent of the number
ofunks or lots."
Patricia Tuninions
For Fin-ther Reading
Some of the principals of Kona Three --- Roland, Jan, and Laurie l ligasltt and Robert Williaraas — havre developed other
properties su ject to affordable housing agreements. For details, see the articles in the March 2023 edition of Env r'oTrtwW
Hawa 'r, especiall), "Affordable Housing Gets Short Shrifl as Developers Devise Work- rounds,"
Our June 2023 edi(ion includes an article on a development in Kea`au by a comp ny led b Ruland Hiflash4 and [mane
Higashi. See "KeWau Subdivision Gets Final Approval with t o Affordable Housino Agrecment."
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I II I dI \ blv Yc;11
Affordable Housing Gets Short Shrift As
Developers Devise Work-Arounds
Hawat i
posicd in_ Land Usc..Nfarwh 2023
The Hawai `i County Office of l Jousing, and Community Developincilt sailed for }Furs without any meaningful oversight of
its handling of affordable housing credits. Intemal controls were also sorely lacking.
That came to an end last summer, following criminal charges against Alan Rudo, w1lo had been employed by Of I D until
late 2018 and who had conspired with others to award to themselves housing credits that the), then used to purchase land.
The land was then resold or leased, with Rudo and his associates enriching themselves with the proceeds of those sales.
Two of (lie schemes ludo carried out involved the sale of affordable housing credits. A third involved the diver iall of
property donated to fulfill an tall"ordable housing obligation to a company Brat then resold the property. with Redo and his
co-conspirators shal-1112 ifl (lie proceeds from that sale.
But the patterns of those schemes don't begin to exhaust the ways in which the complexities of"Chapter 1 I caii lcad to
abuse.
The fell eaten( of the use and abuse of affordable housing credits may never be known. As the 11mal-i Comity auditor
points om in a recent report oil the office, "In October 2018, two ofOHCD's five server drivers failed sinmilancously,
restilting in data loss." Perhaps coincidentally, this was around the time that Alan Rudo had come 1111der suspicion for his
involvement ill arranging a scheme to salisfy housing obligations for a proposed development outside ofWaikoloa Village.
In any event, the auditor continue , "While s0111e infornlatiotl %Vas recovered through backups OFI D has spent four Mears
working to recover last data. Some scanned data will never he reCo,%rred because (lie original doctiments werc shredded,"
Environment llcrii a `i reviewed the labulation of housing credits prepared by the auditor and has atte ipted to trace the
transfer of credits as well as the ways in which affordabic housing obligations have becti satisfied by reviewing records
maintained b)F the state 13tireall of Conveyances, Not every agreement mcuted b)F the Housing Office was found there,
and many of the credit transfers can only be inferred since not every transfer was recorded.
Despite it all, INxe XNrcre able to track a few. And they paint a discouraging picture 0fµjISt 11 tNr developers and their agents
have gamed the system for the last two decades.
Milo 011C, llilO'1WO
The county auditor reports that Hilo One, hies , porcimsed six credits that it then redeemed. We i11%,estigatedl 11cre's what
we found-
In This Issue
.rule IL024 PDl.
Jah- 10, 2024
Ov i- Water Reveak
Deep ak�WI- I-'-col]omic R I
h1h 1). 21�23
Editorial. Those
Launiupoko ` anns'
hrl% '.*. 2412.1
MA -MUM AL. Nct l Ic�te trc i k17r�.
N[osgtiito Comrol.
[.ahaiim Permit iknd Afti)rcl,-I1)1C
l-- ousino Trial
$ut% )_ 2021
r;)j
�Iigh Cc�41rt Finls''aler
r r Co1i inlission Failed To
Justify- `StatlIS 01TO' Stream FIMV
Standards
his 9_ _'r124
In 1993, the state Land Use Commission approved a petition to move into the state Urban Land Use District About 24 acres
of land north of Hilo, in the Pauka`a community. One of (lie conditions was that the developer, Hilo One, hic., satisfy,
affordable housing conditions set by Hawaii County. President of I Iilo One is Roland J. 1-1iga hi, a prominent Hilo
businessman and forlller member of;tile state Board of Land and Natural Resources.
Eventually, the land was developed with 21 luxury housing lots ranging in size from 15,000 square feet to more than all
acre.
Not until 2016 did the developer Nvork out an affordable housing agreement with the Housing Office.
BN, thcii. I Iilo One had sold the Pauka'a property to RJL, LLC (members are Roland, 3anice, all Laurie IIigashi, as well as
Hilo rc fl estate agent Robert G. Williams). To satisfy the of ordable housing conditions, the cotulty alld RJL agreed that
RJL w-ould need to earls six credits. This, RJL proposed, would be achieved by selling 12 lots created ill a different
ubdivisimi, Waiakea Fair%\rays, in the area of Hilo kiioN171 as Waiakea Uka, at I)rices aft` Fdable to households earning no
more tIiiiii 100 percent of the area median inconi , or AM1.
11ao1' 1j4rs in 111Waillc �'d1�5'i'tjl)kjirisioaj lick tip against the ] Iilo irinicip'l Golf Co►ir5.
In November 2017, however, RJL wanted to clxange the to nns. In -sly amended agreement, RJL, the county, and a third
party -� Hilo Two, LL C —agreed that the affordable housing condition could he met simply by selling cuff all 4 lots ill the
kNaiakea Fairways subdivision, bounded oil two sides by Hilo's municipal ipal golf coarse, at set prices per lot, ranging from
135,000 for the smallest to $195,000 for the largest, with those next to fairways priced loward the tipper end. (Hilo Two
had two managing partners- I JL, LL , and i- Williams, L.LC. It submitted articles oft rniiililtion to the state Department
OrCorrtmerce and (1011;UMer of airs in July of last year.)
The amended agreement had no calculations to suggest that all), of []lose lots were within the range of affordability to
houscho Ids earning 100 percent of [lie Aids. The tact that the lots were substantia]ly larger than other lots in the
neighborhood — around 20,000 square feet versus 15,000 for the neighborhood — and that ninny of them backed onto the
golf course would seeds to put thesis ill a range affordable only to a higher income bracket.
"[I]n the interest of providing affordable lots to Hawaii residents, JOINING PARTY [Hilo Two] is prepared to offer and
sell the lots in the Waiakea I;ainvays Subdivision for not more than tile, prices shown on (lie schedule attached hereto," [lie
amended agreement states-
All 49 lots have since been sold at prices at or below those specified in the attachment.
The original agreenient listed I eligibili "i 11), requ j renients for the purchasers and restrictions oil resales for 10 years.
"APplicants shall intend to ulili7C the affordable housing lot as their pennatient and primary residence and be owner -
occupants during the affordable housing period," ffiat agreement stated, III addition, buyus -must not own more than fifty-
one Percent or more interest ill real property suitable for dwelling purposes within one year prior to the date of
application."
All that vas jettisoned in the aniendment,
In early 2018, the first lots ill the Waiakea subdivision began to scll. One of the earliest buyers snatched up not one but two
of thein for $132,683. The schedule appended to the agreement set maximum prices for each of those lots at $135,000. flee
buyer %vas none other than RJL, LLC. Over the next year, RJL built a three -bedroom, two -bath house an oile of the lots and
promptly resold it for the market -rate price of $459,000, RJL built a siniflar-sized house on the second lot, which it sold ill
2019 for S420,000.
Another lot %vas purchased by RS Williams, LLC, one of the members of I-lilo'l\Nro. That lot, obtained for $98,733,. Was
resold a year later, Nvith no rurther improvements, for $240,000.
On January 3, 2018, two lots were sold to one buyer, real estate agent Terrs? Schoneberg, at the scheduled prices, for a total
payment of $3 10,000. Two days later, Sclionebetg sold off one ofthe lots, whose scheduled price was $150,000, for
175.000, reaping $25,000 in 48 hours. In August, that second lot, whose scheduled price was listed at $160,000, was sold
for S 186,000. For all initial investment of $3 10,000. Sclioneberg saw a retuni ot'S5 1,000 in less than eight months.
Several ofthe still wideveloped lots now- have market values ofupw(ards <A'S300,000, according to the county tax
assessments. One vacant lot that sold for S 175,000 in 2017 is now ofTered for sale at S3 19,000. Tliose lots with hollses that
are near the golf" cotirse have assessed market values approaching or even exceeding $1 million and recent sales have
surpassed that.
Toda)F the median household income. ill Hilo is around $70,000 a year.
Yet another affordable housing agreement involving Higashi and Williams is mentioned in the audit report: that betliVell
the comily and a company kno%%m as Kona Three, LLC. `llie members of the company are OIP, LLC (Robert Williams,
nianager), RJL, LI-C. and Richard Wheclock, a rcal estate agent in Hilo.
Kona Tilrce owns around 69 acres of land in Kona, just mauka of Queen Ka'ahunianu Highway and north of Lako Street,
where it says it intends to develop 450 residential tinits. The land was part of a much larger development proposed in the
early 1980s by the Ganilon Corp. for around 172 acres. The Land Use Commission approved (lie projcct in 1983, Ivill.1 tile
condition that 10 percent of the units built be affordable. Gamlon and a successor company, Ganirex, developed 103 acres
with 215 single -Family houses, but never fulfilled the of housiogmquirenicnt.
In 2015, Kona Three ptirchased the undeveloped laid intended for multi -family housing. Ill all environnicntal. assessment
published in 2020, It stated that it proposed building "tip to 450 multi -family residential units in clusters of two- and Oirce-
qm-v bul)(11,11(Ts. ... U111(s Nvould target local renters and buyers in the 'market" price points." None of(he housing, in other
C� I'D
words, would be priced so as to be affordable.
Early last year, the I lousing, Office and Kona Three signed an affordable housing agreement ma is it clear that Kona
Three did not jiflend to develop any affordable housing on the site —car anywhere else, for that matter.
Koiia'l-hree, the ac,reement s('11CS, ILI)roljoSeS to satisfy the ... affordable housing requirements ... through the acquisition
l
of',.tfibrdable housim) credits,"
-
The total number of credits that would be needed to satisfy those, affordable housing obligations was put at 67, or 10
percent of the total jitinibcr of units developed over all 172 lacres- ThQ audit report states (hat Kona Three leas a
commitment to purchase those credits, al(hough the seller is not identified,
The affordable housim-, aor-centent contains lan6 ( ouage (Iial, tip to this point, had never been inserted into such agreements:
0 Z:-,
"The developer shall pFoNide proof and 0I [C'D steal I N.-cri f., excess credits are valid."
I.,a,%,a Kuakini 1: Knha'ollino Partners
According to the auditor. Kaha'ohno Partners, LLC, purchased seven afibi-dable housing credits to satisfy the affordable
housing obligations associated with its development. Here's what we %%,crc able to learn about that-,
In lute 2004, Kaha"olino Partners, whose principal XNrls Kona real estate agent Phillip Tinguely ' purchased about 21 acres of
land in Kona north of Kainiinani Drive, The seller was another LLC, C L & 1) Eight, an entity managed by yet another
LI-C. Nani Kona Aina, whose sole inember Avas Dan Bolton of Kona.
The land had been rezoned by, the Count)F C0111ICil a couple of ),cars earlier and at that time, an affordable housing
condition had been placed on the proposed 35 -lot dcvclopnient.
One means of satisfying of housino oblioations ir-,, for developers ot'niarket-rate. i1OUSing tO PartlICT I-Vith those
0 L_
developing more aIT6r(I3bIcC0111J1ICNcs. And so Kaha'olino Partners entered into an agreement on September 21, 2005,
With tile 11 oil S I lig 0 ffil Ce a I I d a newly formed LLC called Liwa Kuak in -1. One o f several members of that entity was Edward
J. Rapoza, who, I I ke TI n gue I y, s o I (I reel estate in the Kona area.
Lava Kuakini had no development experience and had acquired. (lie land it proposed to develop with 'In affordable housing
complex just two days earlier, September 19. That day, it inked an agreement Nvith Stanley T Toniono for a tract of land
along Kuakini I lighway, just south of Kona Village.
Despite this lack of experience, the coun(y Housing Office agreed to allow Kaha Lolillo Partners to push its affordable
housing obligation onto the young back of Lava Kwakini.
Kaha'olino Partners, (lie tripatlite agreenient. stated, had agreed "to purchase a niiii1mum ofsevcif allordable housing
excess crcdits to satisfy (lie requirements ofthis aurcemen( wi(h I,wa Kwikini, LLC, the developer of approxiinatcly 14
Z�
acres of real property — which is proposed for development of' approN Huately 2 1.) multiple -fancily residential units, 50
percent of which are to be developed as afford iMe houSIT)II U1111q.,
Not mill December ol'that year did Lma Kuakhu finally execute its ONVII MUCC111CIlt With UIC I 10LISilIg Oflicc lior dim
,911-ordable dc,elopment. In the intenyellillo year, it iiad shepherded through the County Council an ordinance that changed
(lie zoning, for tile propeiLy firom Agricultural 5 acres to Multiple -Family Residential, subject to a condition that the
I lotislng? () Ifice demands are met. 'flie agreenient, with the Housing Office clearly anticipated fli.eit I Kuakini would be
0
selling, off sonic of (lie credits it received for developing 1()I%r_CoSt llotlSillg: "the developer intends to entur 11110 aurecillents
Nvith de%.,ciopers of other projects for the sale of affordable liotising excess credits generated on -site'" at the Kmaklin
PropertN7.
But no longer was I ava Kuakini going to build 212 units. This agreement called for just 50 single-family residential lots or
multiple -family units, with at least half of them developed in each phase to be affordable.
For 12 years, (here is nothing further in records filed with the Bureau of Conveyances concerning [lie Kaha'olino Partners'
progress toward niee(ing its affordable housing requiremen(s.
Then, on August 6 of 2018, an "affordable housing release aorcenient" was lodged with the Bureau of Conveyances,
freeing Kaha'olino Partners from any and all obligations to develop affordable housing. No affordable units had been built
by Kaha'olino Partners itself. for had any credits been purchased fton) third parties that the company was able to
surrender to the county to fulfill its Chapter I I obligations.
Instead, there was only Ilic Inonlise that "flie affordable housing requirenient has been secured and will be, satisfied at the
affordable housing site" owned by Lava Knakiiii. The agreement was signed J))F'l'iJJgJJelY, MaMiClU (,) F the Kalia'nl i no
L_
PF0J)Cr_tN7 Owners Association, and by Steven S.C. Lim, identified now as manager of Lava Kii-AMI.
By that linic, however, Lava Kuakini was six feet under. "Iwo years earlier,, oil April 19, 2016, Rapoza had submitted
articles oft rniination to the state Department of Commerce and ConsumerAffairs. In fact, Lava Kijakini had conveyed its
interest in the Kuakini property as far back as May 2013, selling the land that it 11 ad acquired for $1.4 million to Kuakini
Highway 75-6099 Corp., a Califomia company, for $2,065,000.
The audit report states that Lava Kuakini obtained 10 credits and sold seven of them — presumably the credits that
r,
Kalia'olino P(Irtners Nvas said to have purchased. If so, tile sale of those credits is not recorded at the Burem of
Conveyances. And, in any event, Lava Kiiakini should have had no credits to sell. There is still no housing on the Kuakini
property,
Lava Ktinkini 114- C L& D Nine
lit the auditor's " coi n pFeliensiveaccounting of credits" — a (able presenting his conclusions as to the total number of credits
obtained, sold, purchased, redeemed, and yet milstanding — there's an entry for one developer, C L & D Nine (another LLC
that traces back to Dan Bokon), that shows it purchased two credits and surrendered (hem to satisfy its housing obligalimm
From records at the Bureati of Conveyances, %vc learned this:
On January 12, 2006, the Housing Office signed on to a tripartite agreement with C L & D Nine and Lava Kitakini- Per its
temis, C L & D Nine, the developer of a Itimit),1, gated, 16-lot subdivision about lialf a mile upslope of Queen Ka' altciii1alill
I I ighway in Kona, Nvould satisfy its affordable housing obligations by purchasing "a minimum of three affordable housing
excess credits" from Lava Ktiakini's affordable development.
AS with C\'C[)! affordable housing agreement E-m,iromnent llaimi'i,,vas able to review, this one had deadlines for
subillitting to the Housing Office designs and plans flm- marketing, periodic progress reports, deadlines for fulfilling (lie
at -fordable housing;, requirements (in this case five years), and, "to secure the completion of constniction of the alYordablc
11011SIng 11111ts", the county may require [lie developer to post a bond for the full costs of construction. "The agreement shall
pi-ovide a mcchanism for the comil),3 in the event of a breach ofthe agreement by the developer, to complete the
Construction of the affordable housing units,", it said.
Also, the agreement "shall fun Nvith (lie land ... and be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns."
Then something add happened. Barely 10 niontlis after the initial agreement Nvas signed, the county agreed to release 1.3 of
the 16 lots in the C L & T) Nine subdivision (no,*%, known as Meilani View Estates) from [lie initial agreement. In addition,
the county released Lava Kuakini from any obligation to provide credits to C 1, & 1) Nine.
"In consideration of the premises herein, the county, Lava Ktiakini and [lie developer [C L & D Nine] do hereby cancel,
release and discharge Lava Ktiakini as a party to the January 12, 2006 agreement," this "partial release and anmidnient"
stated. The county also agreed to "release, discharge, and forever qmitclaini unto" C L & D and Lava Kuakini all "right,
title and interest \%-hick the county, Lava Kuakini, and the Developer may have acquircd up to the date of this partial release
and amendmert ofaureement im and to the real property identified herein above."
Just three of the subdivided lots in the Meilani subdivision - 5, 9, and 13 - were kept by the comity as hostage to ensure
the all'ordabIc housing obligations were fulfilled.
The county's leverage was lurthcr reduced in 2014, with [lie execution of a "partial release" that removed the cloud From
I.o(5.Tliistittle- the agreciiictitivf,.istrot be[xN,eelithe coLtiiivaiidCL&DNiiic,brit rather %vitliCLNVHC aii investments,
signed by Clarence L. Werner, its manager. (CL"', original owner of the property, had entered into a development
agreement with C L & D Nine... No one involved at the lime seemed to notice that the agreement was made with a party
who wasn't signatory to the original agreemeW.)
N-Vhy did the county give tip its hold on Lot 5?
Just days before the C01111ty release ms signed, a document was lodged with the Bureau of Conveyances recording the
assignment of one affordable housing credit by GBH -Kai Maluna, LLC, to MV Hawaii Investincii(s. And it was this that
bought the freedom for Lot 5.
The final release Nvas executed in the spring of2015, this time Nvith C L & D Nine signing oil belialrof the developer. That
document states only that the county "hereby confinits that the developer has obtained tliree affordable housing credits and
leas fully satisfied any and all of its affordable housing obligations and duties."
o Car ,as I3ureaca of Conveyance records go, there 1.vas just the one credit, the one obtained by CLW in 2014, that Nvas
applied against the three -credit obligation of L & D Nine.
Where did the second and third credits collie from? The auditor's (abulation saes (wo %vere obtained, though no source, is
provided. The rcquireiiient. that three credits Nvere needed ender the affiordable housing agreement isn't accounted for in the
tabulation.
INIC s tp ro
s complicated as these other transactions may be, the group ofagreements involving, AAA Development and a host of
related LLC,s is hands -down the Gordian knot of affordable housing credits.
AAA Development, LLC, still holds on tea no fewer than 522 credits, according to the auditar's tabulation — although, to be
sure, lie saes it should have received just 488. 1n either case, AAA's credits amount to between 36 and 38 percent ofthe
total number of credits still outstanding, far more than any other credit Bolder.
But AAA is just one of a vast number oflimited liability companies that are, or were, so closely related, it is di fficult to
determine who continues to hold possession of w at. Complicating matters further is (lie fact that folloNving the 2008
downturn in real eslatc, many of those {affiliated 1_ I -Cs lost to foreclostire Imids that Nv re subject to affordable housing
agreemea)(s_
Wcstpro Hodlinus appcars to hanve becra tile: hrs( Inember° cal;(1ais frin7aly of to receive credits, lack ill 2003. A
document filed with the Bureau of t~'OM ev;HICes in 2012 makes reference to the courity awarding six credits to Westpro in
aji tags —cement ol'April 2003. According to that 2012 record, (lie agreement called for affordable housing to bc built o» five
parcels (flour ofthein ja.as( slab,; of 15 "ic.res) ill Iona, I�Iing between I ualcini and Queen Ka`aliumanu. highways, ii akai of the
slarawliaify Piu-Ilani subdivision. The land remaiais aandeveloped.
Exactly what Westl)ro was to (Jo iii return for those credits w{as not specified iii (lie 2012 doc timent.
But tliose same lairds, burdened apparently by the nine- Fear -old affordable lionising agrccincnt, Avere sold by Westpro to
Suffolk Itiminmit, I'LC, in 2004. And although the deed makes no mention of credits, nor is any affordable housing
kagrcc riieiit called out M the descriptions of the parcels sold, Suffolk clainied ownership of those six credits when it
conveyed their iaa 2012 to Kona Countr Club for $43,000 apiece.
That claim of ownership doesn't seem to have been made by any of the other successors to laird once owied by Westpro or
related companies. (The Housing Office zmd (lie audi(or sax that Suffolk purchased N es(pro acid in this fashion came into
possession ofWestpro's credits. t f. tlati( h appedied, (here is no public record of the sale ofthe business, ,vl1ich, according to
the Department of Commerce mid Consumer Affairs was administratively teriiiinated in 2014. At the time of its last annual
filing. John Stevens, its orgaaiizer. was still listed as manager. Suffolk itsclfwas administratively ten ina(ed in 2021, affer
havimy fled no annual reports for three years.)
hi 2004, N estpro again entered Hito an affordable lionising agreement with the county. Under this agreement, NXIcstpro
would make five Houses availableavallable for sale: at prices affordable to households earning tip to 140 percent of (lie area median
income in (lie 48-unit second phaSC of i(s 1'aI' taltOttria subdivisivil, which WCS(pro "as building on land south of l aiminani
Drive_ The set price calculated at tla{at ti'IS S262,700 for a three -bedroom, two -loath liouse of 1,104 squarc feet with a
carl)ort on a I0,000-square-foot lot. 'Ihc oaf ord ahic houses would simply be used to cam tlae five credits that NV stpro
needed as a condition of its subdivision approval; there Nvere no "excess credits" earned.
The only Wes(pro credits to which reference may be found in Bureatt of Conveyance records are these two, sets: the sip
credits a ardcd in a 2003 atgreenient, and the five Credits earned and used up ill the developmeiit solids of K,aiaa1iaa4irii
Drive.
The audit. report, however, states that Wcs(pro received a total of50 credits, all of ��-hich have been sold
Seascape
Another NVestpro-rellated LLC called Seascape Devc1opment was formed in 2005. In January 2006, it took title — from
Westpro — to laird in Kona whcrc, eventually, (",oapartment complexes would arise: the low-income complex known as
Lokahi Ka'u, wlicre a total of 306 tinits would be buil.t. aiid, ininiedia(ely iijakai of that, the 104-unit complex knoviiinow
as Kona Seascape.
F
The Lok-ahl Ka'u coniplex near (lie Kona airport earned AAA Development, LLC, 522 housing credits. CREDIT:
1,0 K A H I A PA RT M I -N]"S. M M
The Lokahi parcel would tie sold in early 2008 to AAA. The makai parcel, however, was retained by Seascape
Development. In March 2006, Seascape and the county Housing Office signed ail affordable housing agreement, calling
for Seascape to build 108 affordable units, all of which were to be sold to households earning between 120 and 140 percent
of AMI, For each unit, the CoUilty injIllediately awarded Seascape half a credit, for a total ol'54 credits, "The developer
may transfer said credits" with the approval of the Housing Office, the agreement said- But I fany such credits were to be
transferred, Seascape promised to build and sell, within three years of the time the first credits were sold, units sufficicill to
account for the transferred credits. In other words, if Seascape sold three cFcdits, it would need to build six of tillits
within the next three years.
Seascape built most of [lie units but by December 2007, it %vas apparently not selling them as quickly as it anticipated acid,
what's more, it was under increasing financial pressure from lenders. On December 12, the county ailiended its agreeiliew
with Seascape, releasing it from all further obligations. The condition was that Seascape would sell all those units yet
unsold at a price ot'not more fluan $293,403 per 1111it to miyone who could pay it, regardless of their incoine levels.
For most of the previous year, Seascape and related entities had been falling behind in payments to lenders. As sooji Zis one
Nvould threaten to foreclose, another was found — but inevitably at eNFer higher rates.
Around 2010, as Seascape and related Westpro companies Nvcre litigating M federal coot over ternis of a $7 tilillion note
issued in late 2007 that had one into default. it received a ball -out ol'sorls 1rom one Richard L. Fischer, who did acquire
an equity interest in at least one of the Stevens -related LLCs.
And what of Seascape credits?
In hily 2006, lang before its financial troubles began, Seascape conveyed 24 credits to GM I -Kai )Maluna- In 2014, as noted
earlier, 01314 assigned one credit to CUM. 'flie remaining 23 credits that Seascape transferred to 01111 were assigned in
2017 to I lualatai Health, LLC, "to be used in coil nect ion" with Hkialalai Health's devc1opment cal njne acres it owns in
Kona, between I itialalai Road and Qticen Ka'ahtinianu Highway.
Oil the same date I Imikilm Hcnith recorded its receipt offliose credits', it turned around and used 17 of (hem as security for
a Joign it ims reccived from a comp.my cAled I Jualiflai ()tic More `fire. The security ty agreement states that Hualalai One
More Time may transfer (lie credits, so loqras it "slml I appl.), the procceds (if any sale to principal and interest" on Hualalai
Health's out -standing loan. Wimi the loan is fully paid off' I Im-dalai One Ntorc'hme is to return the unsold credits to
Hualalai Health.
Signing fol. I Imidalai I Icaith, a Washiliciton-Mate Ll'C' Nwas Mice 1). Beard. Beard, it may be recalled, is one offlic people
111voived In I lomia'iila, [lie developer float leased land in Kealilkehe from one of the Altaic -Redo -affiliated companies, West
Vinv De�'Clopmcllt.
As for the remaining 34 Seascape credits (the original 54 less the 24 conveyed to GBH), accordinfT to the auditor: 12 Nvere
L-
sold (o Pinn Brothers Consinictioll, 10 to SCD Kona 108, and eight to WB KD Acquisitions,
And as for Seascape? For a short time, its annual business registration filillgS IiStCd RiCIMRI I - F I SC-11C r XS its manager. Tlie
Company was tenninated in 2013.
AAA
Then there is the AAA affordable housing agreellieiiL On February 28, 2008, AAA Development, J,1,C - through Wcs(pro,
i(s matingiag LLC - signed an with the comity to develop 306 units of low-income housing to be rented to households
canting less 1han 60 percent of the AMI. For this, (lie comity agreed to award two credits each for (lie 108 one -bedroom
and 108 two -bedroom unit and one credit for each of the 90 studio, units, for a total of 522 credits.
Within days of the agreement being signed, AAA sold the land on which these units were to be built to Ho'olelma I lousing,
LLC, a company that traces back ultimately to a firm that specializes in affordable housimIr development. The ullijS were.
0
built and the development, kjioN%rii tim as the Lokahi Ka'u apartments, Continues to serve low-iiiconle households.
It may be useful at this time to look into (lie origins of AAA. It eras formed in November 2006 as Ali'i Antia. Apartments,
LLC, with its sale stated purpose "affordable housing credits, county of Hawa VU' 'I'll e organizer and sole manager -
member listed was Westpro Holdings, LLC, Alan Dickler, manager. The signature of Dickler or (hat of John R. Stevens
would always appear on (lie documents entered into by Westpro or its many affiliated LLCs. Barely six weeks after its
formation, Ah'i Anna Apartments changed its name to AAA Development.
The first atTordable housing agreenien(AAA signed with the comity - and the only one - was for the Lokahi apartments. If
it has assigned any ofthe credits it received, there is im evidence of it at the Bureau of Conveyances. And according to [lie
audiloCs report, (lie comity has no record of any transfer, efflier.
Unlike (lie oilier Westpro-affiliated LI.Cs, AAA is still nominally active, with its business agent filing timely annual reports
with [lie Department of Commerce and Consumer Affairs. Richard L. Fischer remains its sole trained maliagcr.
— Patricia Tummons
Articles in the Junc 2022 and August 2022 editioiis ofEnvironmens H(mwi'i report more fully on the fraudulent SCIICMCSr
devised by Alan Rudo and his associates. Available free online at �%-%viv,enviroiiiiietil-iiii\N,aii.org
Palli'm
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11r1-,!h aiMyd
` In east N i +ri, (lie Fight
Over Water Reveals
Deep Social, 1-conomic Rills
!itl% 10. 1,124
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1� A
D e l o e County Push to Revive Entitlements NOV 102;
for Kotia Vistas Project
i pos icd in, Land U5c. No i b, i " (12 3 ti
-J
"Stale clititlements," That's the terni that the Hawaii. County Planning Depar(nient apses to describe approvals given
decades ago for a I iolualoa developnieint. The brie for performance rail out and, with no requests made for tulle
extensions, one inight think Ilia( (lie enti(letiients are iiotjust stale, bw dead and btiried.
Yet for (lie last eight years, landowner oiia 'l liree, LLC, has been pushing the county to refresh a rezoning ordinance for
the 70-acre area, firs( rezone(] in 1984 and niost recently reauthorized in 2003. Now Kona Three is asking for ten more
Fears to finish the Kona Vistas proicct, at an estimated cost of 170 million in 2022 dollars,
Not only has (lie tinge frame changed, but also the project itself. What had initially been proposed as a 2 -unit
d vclopnient has now inorplied into 450 multi -fancily units, some to be rented, callers to be sold.
In 1983, this area was part of a 170-acre development that included around 215 single-family lots to the south of the
current project. The development in Holualoa, around three iiiiles south of Kona village and niauka of Queen Ka`aliiiinanu
Highway, was about halfdone wheli Kona Three acquired (lie land in 2015 .
By that tinge, inost of the siiigle-fainily lots had been developed and sold. What reniained undone Nvas any iinprovcnicnt oil
the area proposed for multi-faniily units.
List year, after Mears ofworking with Kona Three, the Planning Department asked the Leeward Planning °ominission to
forward a recommendation to the County Council that it aniend the 2003 ordiiiance by extendinu the deadl ine fi r
eonip)etion — which had expired in 2012 — and removing some requirenients ld1Nr,1y iiiipr venleilts.
The Leeward Planning Commission ixeld a hearing on the proposal on D ceinber t 5.
It did not go well. About two dozcii people testified in opposition. Twice the then -chair, Michael Vitousek, called recesses
"for the purpose ofniairtt(aining, decoruin."
After a raricous lour hours, (lice commission deferred Mating on (lie proposal and instead asked the county"s Cultural
Resources Conimission for its recommendation.
Over the past year, (lie CRC held three niee(in s -s litre the project was on the agenda. At (lie first, it authorized a
pennitted interaction group to visit the Site. At the second, it heard the P 1.G,'s report. At the third, in Junc, it adopted a
niotion to ask the developer to include more open space in its plaits and to "more sensitively integrate the natural,
historical, and cultural features of the landscape, including trails and archaeological sites." In addition, the CRC asked
Komi Three for flur[lier documentation "of lineal descendants and kaina`aiiia knowledge of the cultural resources of tile
project,,' including trails.
The Leeward Planning Conimission Nvas toconsider bona Three's proposals at its October meeting, but the company
requested a deferral because tiie C'i►]talNil Resources Commission had not yet made any reconiniendation.
The coniniission has been tentatively scheduled to niec:t next on December 21.
A Lang History
The project now kite voi as Kona Vistas Mfirted out niore than 40 years Vigo, when a Japanese -owned company, Galiflon
Corp., petitioned (lie state Land Use Commission to place around 175 acres of land ilien in the state Agricultural District
into (lie Urban District. The LUC appro'%Fed a two-phase redistricting process, jNritli the second please, of ararand 50 acres, to
be redistricted only after a shoNving that infrastructure improvem nts had b eri i iadc for the first increment, That first
increnient was to include about half of the single-family lots and all of the area where niiilti-fame ly till ids N%rej_e proposed.
ire 1992, Ganilon ---- which by then had changed its naive to Ganirex — asked the WC to approve redistricting of that second
incr inert. No infrastructure had been extended to (lie multi-faniily portion of (lie first increment. Howcvcr, Ganitex said it
was prevented from doing so wilil (lie second increnient was developed. The LUC approved, noting in its order, "The
water system master plate for the area rc gtiires [Ganirex I to develop the water system and other iniprovenieit(s within
Increment 11 prior to the development ofinfrastnicture inipro\,cnients in the multi-faniily residential areas within Increnient
1."
In 2006, Gianirex conveyed roughly lialfaf its interest in the entire property to Kona Vistas, LLC, a Delaware entity wliose
three members were Chase Berkeley, based in Austin, Texas, a conipatiy called BI MAC, and Gainrex itself. To [lie LUC,
tilis was not described as change in ownership — which, under (lie redistricting order, would have required prior approval
of (lie WC — but rather as a name cliange. Court records indicate that Ganirex's share was 49 percent.
hi a 2014 report (o the LUC, covering the previous eight years, planning consultant Sidney Fuke referred to cliallelilge-S
brought about by changes in ownership, Although he said the report was to "cover all activities" to date, lic omitted -mN.
mention of a lawsuit that Gamrex brought against its partners involving the unauthorized transfer ofabout 50 slTl,(YlC-fi1l11l1\:
lots to a Texas business, The outcome was a mediated settlement, with Kona Vistas regaining title to the properties.
By the time the WC received the next nominally minual report in 2016, [lie property Imd cha[igcd hands once more —
again, with no advance notice to the commission. KonaThree now held title.
Sigiifiiu off on the report wcas 1iclmrd Wheelock, a real estate agent -mid one of three membus of Kona Three. The others
are (..)] R [, 1,(', and 10 L, 11(-', (-.)1 P is managed by Orchid Isle Properties Profit Sharing Plan, whose sole member is Robert
Williams, a ) I i10 I -Cal elate 'i'lle three members of RJL are Hilo businessman Roland I ligashi, his wife, Janice, and
Ills C1,911aliter, l'alme, a real cstate auent.
C11 ZD
Since then, the company has been workiiig with the Planning Department to develop a new, denser desigil for the area.
Folloxving the publication of a 2021 environmental assessment, the Planning Department appears to have been satisfied
with Kona Three's proposal.
But, 40 years and comi(ijig from (lie ol-Wyinal approvals for the project, whether other authorities go along Nvith the plan
remains an open question. The surrounding community has already weighed in, voicing its strong disapproval in comillents
on the environmental assessment and at numerous public meetings.
— Patricia Tum m ons
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