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HomeMy WebLinkAboutCOM 0092.036 2016-2018 �i d9--.Db- L�� J�-1-/ Cs) /Q, 60 i. •.i L,iG.--6°d 24 Specici 1 Counc; I, • I ND AND POWER .. J .: .. :i . ..IN HAWAII ,:,,. '`ii; ___ „., . .,:,J . , !:. The :Democratic„.. ,,k. ,,,; .• Years t. ,,,, , )„,• ,i,.., j`4. _ GEORGE COOPER GAVAN DAWS .ii: 1 p f .1,. . x. 22. :t VA!', `. •'; f r"1 COMM NOi 1 4;-: . , ...,.. . q2. _ ____. _. __ .. rr,�.. Ref. To: , I .,,, Benchmark Books Date 2Q� ., - '' Honolulu _ Hawaii l� -s 58 LAND AND POWER IN HAWAII • But Mehau and.others steadfastly denied that his involvement went any .urther, a denial bolstered by the fact that vigorous criminal investigations (J rom about 1978 till 1980 by three separate law enforcement agencies,coor- linated by the federal Organized Crime Strike Force and including a hear- ng of evidence by an investigative grand jury,'resulted in no charges being HAWAII: SUBDIVIDING )rought. As with what Mehau told the Los Angeles Times, the criminal investigators LAVA FIELDS mnd prosecutors found that Mehau had underworld associates, but appar- :ntly no underworld activities per se. Honolulu Advertiser reporter James )ooley wrote: "Investigators found Mehau to have created a remarkable ietwork of personal ties with rich and powerful figures of high and low -epute throughout Hawaii and the Pacific Basin." But, as Dooley added, 'personal associations are hardly ground for prosecution. . ." HAWAII'S real estate boom was brought to the Big Island in 1958 by two Far from dispelling the suspicions harbored by some,the investigations, • mainland businessmen from Denver,Colorado. is Dooley wrote, "if anything . . . may have served merely to broaden the Glen I. Payton and David F. O'Keefe organized a Hawaii corporation nystique which has built up around the physically imposing Mehau since he called Tropic Estates Ltd., which included several local-Asians among its )egan to make a name for himself as a tough, no-nonsense cop in the members. In 1958 Tropic Estates bought 12,000 acres of land between Kur- 1950s."58 tistown and Mountain View in Puna from Big Island Democratic politician If questions lingered, however fairly or unfairly, about Larry Mehau as and businessman Robert M. Yamada. The land was cut up into 4,000 lots ome kind of organized crime godfather,this was true of organized crime in which were put on the market for$500-$1,000 with terms as low as $150 ;eneral.The local syndicate was like a guerrilla force of unknown strength. down and $8 a month. The project was named Hawaiian Acres. The lots :t was known to be out there,a factor to be reckoned with in the equation of sold spectacularly well.' nodern Hawaii. But how big it really was, what territories it controlled, The effect of this success was electrifying.A Big Island subdividing boom vhat high ground it might be seeking to occupy—these were things that was on. For the next nine years new large-scale subdivisions were approved .ew or none outside of organized crime knew. And as of early 1985 no one after the other by Hawaii County. iighly placed organized criminal had spoken comprehensively on the pub- There was substantial development of other kinds all over the Big Island is record. then and later that had counterparts elsewhere in the Islands:resort hotels at Hilo,with an international-size airstrip to serve them;heavy hotel and condo- minium building at Kailua-Kona;and an ambitious attempt,spearheaded by Gov Burns, to transform the whole northern stretch of the west coast into a -regional resort complex,making it,in Burns'words,a"Gold Coast."2 But the developments unique to the Big Island were in the mold of the one in Puna that set off the boom:sizable acreage in remote areas,of little or no real economic use value,subdivided into house lots on which practically no one ever actually built homes. • Only on the Big Island was there so much empty space that had no foreseea- ble economic use.Thus nowhere else were there speculative subdivisions. Most of the really big subdivisions of this sort were done in the vast, sparsely populated southeast and southern districts of the island, in Puna, Ka`u,and South Kona. By the time the Big Island boom came to a halt in the mid-1970s, some- thing like 80,000 lots of this kind had been created—on an island whose population at the time was somewhat less than 80,000. * * * '260 LAND AND POWER IN HAWAII • 8 /Hawaii:Subdividing Lava Fields 261 Participation by local people in this subdividing boom was remarkable. The ramifications of speculative subdividing on the Big Island went be- Probably one Big Island family in four put money into a lot in one of these yond the county, affecting attitudes to development statewide. In fact this subdivisions.' sudden rush to subdivide on Hawaii generated part of the momentum for But even with such heavy participation,Big Islanders bought fewer than the statewide Land Use Law of 1961.Big Island subdivisions were springing 12%of the roughly 65,000 lots sold by 1975:4 This meant that the rest of the up wherever developers could acquire large parcels cheaply.Usually this was buyers were outsiders—some 35% from Oahu, and most of the rest from far from established population and employment centers, and the parcels the US mainland. And this in turn meant that a nationwide phenomenon ! were not necessarily near each other. Puna alone was the size of the entire had made its way to the Big Island. ` island of Oahu.The projects were thus dotting remote, huge districts.The The post-World War II middle class of the United States in the national ' Land Use Law's preamble decried "scattered subdivisions with expensive, boom years of the late 1950s and 1960s had money to spend, and they also yet reduced,public services"—exactly what was appearing all over the south had increased leisure time. It was now within the financial reach of a great • and southeast parts of the Big Island. number of people to spend this time in vacation and retirement communities. Once the law was in place,the Land Use Commission it brought into being In the country's sunnier states developers stepped in to make possible a logi- tried to close a crucial loophole allowing the creation of speculative and cal next move:actually investing in vacation and retirement real estate.By the ; urban-type subdivisions on agricultural land. The LUC adopted a rule for- mid-1970s,one American family in 12 owned a piece of this sort of land.5 bidding the subdivision of land in the agricultural district—where most of There were, to be sure, serious developers and serious buyers on the the speculative subdivisions were—into lots smaller than five acres, on the mainland.Over the boom years millions nationwide bought lots in planned argument that even subdivided lots on agricultural land ought to be used for communities that evolved more or less as promised. bona fide farming,and most viable farms demanded at least five acres. But at the same time among both developers and buyers there were also But the state attorney general ruled the LUC out of bounds. He said speculators—meaning that millions bought into subdivisions which 25 and agricultural lot sizes were the jurisdiction of the counties.9 Counties were 30 years later remained largely vacant and without even minimal site im- I thus allowed to continue setting minimum sizes in the agricultural district. provements. And Hawaii County was happy to allow lot sizes well under five acres,in fact Most Big Island subdivisions of the boom years in the Puna, Ka`u and all the way down to about one-sixth of one acre.(Not till 1969 was a uniform South Kona districts fell into the speculative category. statewide minimum set by the Legislature—one acre.)''° The distinction between investment and speculation made no difference Evidence of Hawaii County's real attitude in the early boom years toward to most people on the Big Island, at least in the early years of the boom. controlling or restricting development in general could be seen in a Big Overall the lots appreciated in value,meaning that many Big Island families Island'Planning Commission move in 1962 on the eve of the effective date did well,at least in terms of paper gains.And Hawaii County did well too,at of the Land Use Law, when on a single day 42 new subdivisions involving least on the face of things.Right from the first boom year,the county's reve- 3,500 lots were approved, "in order to beat the [Land Use] law deadline," nues increased because these subdivisions came onto the tax rolls. according to the Honolulu Star-Bulletin.'1 - In the middle of that euphoric first twelve months, the Hilo Tribune- Beyond that,state legislators from the Big Island were active in attempts Herald editorialized: "This newspaper goes along with the optimists, con- to actually get rid of the Land Use Law, which had created a step in the fident that the eager buying of land,much of it sight unseen,means that the construction approval process that many in the business disliked. In 1963, Big Island is finally coming into its own,and that we are on the threshold of only two years after the law was adopted, a Senate bill for repeal was intro- development that has kept Oahu singing with prosperity ... Here on the duced.Four of the nine introducers were Big Islanders.A second attempt at Big Island we don't much care what brings them in as long as they come and ! repeal followed the next year, when the Senate Lands Committee unani- as long as they buy.. ."6 mously reported out a bill that would have done away with the Land Use * Law.The committee report called it a"barrier to economic development."12 * Three of the committee's eight members were from the Big Island,includ- Not everyone on the Big Island liked the new speculative subdivisions.As ing the chairman, Kazuhisa Abe. early as 1960, Hawaii County Planning Director Hiroshi Kasamoto called In short,on the Big Island there was both political muscle and substan- the existing subdivision ordinance"a bad law."He wanted to"control devel- tial public backing in favor of large-scale, virtually unrestricted develop- opment and stop speculation."' County Attorney Yoshito Tanaka in the ment,and this continued to be so for several years. same year described the situation simply as"a mess."' * * * . • 262 LAND AND POWER IN HAWAII 8 /Hawaii:Subdividing Lava Fields 263 I r How were these Big Island subdivisions promoted and sold? Who were would ever have dreamed possible,actually underwater at high tide. the sales campaigns aimed at?What did the buyers think they were getting? The Big Island version of a Florida development was a subdivision laid And what did they actually get? out on volcanic lava. "Along the southern shores of the Big Island, Hawaii,largest of the Ha- Royal Gardens was an example of this. It covered part of the old Hawai- waiian chain," read a brochure for one typical development, "lies the his- ian ahupua`a of Pulama, which made a kind of boundary from the moun- toric and legendary lands of Kalapana. This is the setting for Royal Gar- tains to the sea between the habitable areas of Puna and the uninhabitable dens,.a fertile area directly adjacent to the Hawaii Volcano National Park lava fields of Kilauea Volcano. with its spectacular attractions, yet only walking distance away from lovely i The land of Royal Gardens was about 40% covered with a`a. A`a was beach and shore areas.Royal Gardens lots are all one acre in size,making it defined by the US Soil Conservation Service as loose lava rocks,"rough and possible for the owners to have a small orchard or truck garden,or a magni- broken. . .a mass of clinkery, hard, glassy,sharp pieces[of lava] in tumbled ficent garden,as well as a home and a haven for retirement."13 j heaps." About 20% was pahoehoe, solid thick sheets of lava, hard and Royal Gardens started selling its one-acre lots in the early 1960s for smooth-surfaced, with "no soil covering," usually "bare of vegetation" ex- $995—only$100 down and $15 a month, plus 6% interest on the unpaid cept for mosses at lower elevations, and scrub bushes and trees growing in balance.The development was widely and heavily promoted,locally and on cracks higher up. The remaining 40% was opihikao, "extremely rocky the mainland.For example,in 1961 a Royal Gardens lot was given away as a muck," with pahoehoe underneath. Water was chronically scarce—no prize to ABC-TV's Queen For A Day,plus a trip to visit the place.14 'i streams,just a few widely scattered waterholes.18 This was in the world-famous tropical paradise of Hawaii, now the . When a private property system was introduced in the Hawaiian king- fiftieth state of the Union,only five hours by commercial jet from the West I dom in mid-nineteenth century, the area became the property of the king. Coast.The price seemed amazingly low. It had no great value because it had no real usefulness. In 1864 1,179 acres At Royal Gardens and elsewhere on the Big Island, people by the thou- of what later became Royal Gardens were sold by the government for sands,by the scores of thousands,were ready to buy—and even to buy from • $110.50; and in 1894 the balance of 628 of the future subdivision's 1,807 a distance. A sizable majority, in fact, bought sight unseen: well over half, • acres were sold for $680. Early in the twentieth century a Portuguese perhaps as many as two-thirds.15 i' rancher put some of the land to extremely limited pasture use. But a trust Here there was a loud echo of the classic American story of speculative company officer who later helped administer the rancher's estate said the land development, going back far beyond the Hawaii boom, back to the land had essentially"no value for pasturage. . .I doubt a cow could walk far mainland,back to the original boom in subdivided vacation or retirement enough in a day to get enough to eat."19 In loose a'a Hawaiians used to grow house lots—Florida in the 1920s. '{ sweet potatoes.As well,some kinds of fruit trees,like papaya,and ornamen- The formula as perfected in Florida went like this: acquire cheap raw tals like the Hawaiian Christmas berry,could grow.Overall,though,the Soil land with little or no economic use value,even waste land.Subdivide it with Conservation Service gave da the lowest possible soil productivity rating. little or no site improvement. Promote it heavily nationwide. Advertise in Opihikao contained some organic matter, but the SCS classified it as having terms that make the house lots sound simultaneously like a place to be en- "very severe limitations that make [it] unsuitable to cultivation."20 On pa- joyed on vacation, a haven for old age,a prudent investment, and an excit- hoehoe nothing would grow, except in the cracks, though it was possible to ing bit of speculation offering quick return. And sell sight unseen if possi- use a bulldozer to rip up.pahoehoe and then plant it as if it was a`a.One thing ble,to first-time buyers if possible—in other words to real estate amateurs.ls 1 was certain—there were never "royal gardens" on the land that became Florida was worth millions to developers.And from then on,between the Royal Gardens.There never could have been.And in the twentieth century, 1920s on the mainland and the 1960s on the Big Island, any number of to have a truck garden or a"magnificent"home garden of the kind the bro- similar developments were floated,especially in states with a high number chures talked about,a lot owner would have to catch his own water, possibly of sunny days per year. haul in his own soil,and anyway use.chemical fertilizer. One characteristic common to many of these subdivisions was that they • All this was so because Royal Gardens was on volcano land,recent lava.A were located on land that had virtually no productive value, remote, often brochure described the development as being"directly adjacent to Hawaii essentially waste land,sometimes totally unlivable.''In Florida,so intense was Volcano National Park with its spectacular attractions."2' Another way of the speculation—and so frequent the fraud—that a purchaser who had •j putting this would be to say that Royal Gardens was only 12 miles to the east- bought a lot through the mail,sight unseen,might arrive to take a first look at southeast of an active volcano,Kilauea. his"beachfront"real estate and find that it was even closer to the sea than he Kilauea's east rift zone stretched from the volcano's crater to about 30 . • 264 LAND AND POWER IN HAWAII 8 /Hawaii:Subdividing Lava Fields 265 miles northeastward to Kapoho, passing about a mile-and-a-half from the 1968),there was no discussion of hazard until sale began in late 1972 of Unit rear of the Royal Gardens subdivision. V of the subdivision 26 • The US Geological Survey in 1974 rated all areas of the Big Island for And in none of the Royal Gardens sales brochures on file with the Hawaii vulnerability to volcanic hazard. According to the USGS, Kilauea and its rift County Planning Department and the State Department of.Commerce and zones "must be expected to erupt repeatedly in the future," and "all areas 1 . Consumer Affairs (DCCA) was there any mention of volcanic hazard. In downslope from volcanic vents should be considered vulnerable to eventual - general these were the two government agencies most responsible for regu- burial by lava flows."22 From 1955 the east rift zone had been the source of ri. lating development and sale of Royal Gardens and the two with which the most of the Big Island's volcanic activity.There were several major eruptions buying public would have had the most contact. within the zone,sending lava flows downslope toward the sea. In 1960 a lava There were other omissions as well in the Royal Gardens promotional flow covered much of Kapoho,destroying the village of that name.In 1977 an y material: eruption nearly destroyed the village of Kalapana, about three miles north- Lots in the subdivision were being sold with no water lines,no power,and east along the coast from Royal Gardens, and at one point it seemed as if no sewerage. Some roads were county standard, some were not. When the Royal Gardens itself might be covered with lava. Then, in 1983, 1984, and • Hawaii County Planning Commission in 1960 granted Royal Gardens pre 1985,a total of seven lava flows entered Royal Gardens,destroying altogether liminary subdivision approval, this condition was imposed: "Subdivider 22 homes, or about one in three of all residences so far built in the subdivi- shall notify buyers of land in this subdivision about the use of oil-treated sion.23 - surface for roads [these were sub-standard roads that the County would Associated with volcanic activity was earthquake risk.Royal Gardens lay . . allow to be built but not permit to be turned over to the County for mainte- entirely within the Hilina Fault Zone, an area that the USGS said was espe- nance at public expense] and the present lack of water and sewer systems cially prone to surface ruptures because of land movement within the fault. • and the lack of electrical power. All advertising shall call attention to the Here again there was a repetition of the pattern of large-scale speculative above-mentioned modification of standards and the lack of facilities."27 subdivision on the mainland,where often it was natural hazards that made Although public offering statements in general noted these deficiencies, subdivision areas wastelands from an economic standpoint. When the au- = no advertisement for Royal Gardens on file with the Big Island Planning thors of a multi-volume national study of rural speculative subdivisions like Department or DCCA pointed them out. those on the Big Island selected 10 mainland projects as case studies, they Royal Gardens was not alone in such matters.More than once during the found that seven out of the 10"subdivided and allowed building on highly boom years, Big Island subdivisions which advertised nationwide were hazardous land—near an earthquake fault,within the 100-year floodplain, banned for sale in California,either because they were not registered there and on very steep slopes."29 This was true for the Big Island. Not just Royal as required by California state law or because their sales brochures were Gardens but a majority of the Big Island's speculative subdivision lots—as found to be deceptive, suggesting that the developments had government- many as 60%—lay within USGS"high risk"or"highest risk"zones.25 standard roads and other improvements when in fact they did not.2B Beginning in 1971 the US Department of Housing and Urban Develop- Yet the Big Island subdivisions kept on advertising and kept on selling ment refused to insure residential mortgages in the east rift zone and down- • without county-standard roads, water, or utilities, or even easy access to slope from it,and in most areas at risk from eruptions of Mauna Loa flow- beaches. Though the Royal Gardens brochures talked about being "only ing south and west—meaning that 60% of speculative subdivision lots on walking distance away from lovely beach and shore areas,"29 in fact the aver- the Big Island were excluded from coverage. age Royal Gardens lot was one or two miles from the sea,usually along hot, dusty roads,and a six-mile drive from the nearest sand beach at Kalapana. A Bishop Museum study done in 1959,just as the Big Island subdivision * * * boom was getting under way,described the coast nearest to Royal Gardens as a"shoreline of low,black, lava cliffs, battered continuously by windward Did lot buyers know what they were getting? waves. ..This coast bears witness to the great volcanic forces underlaying it Most of them really did not, at least at Royal Gardens,where at the time through numerous earthquake-opened fissures, and to the violence of tidal of purchase, according to a sample survey done for this book, some 72% waves through huge blocks of lava which have been ripped from the ocean believed their lot had fertile soil, and 69% did not know their lot was in a cliffs and hurled inland."30 zone of serious volcanic hazard. To those with some sophistication in real estate, the overall effect was In the developer's public offering statements(required by state law since strange, almost hallucinatory. As financial columnist Sylvia Porter wrote • 266 LAND AND POWER IN HAWAII • 8 /Hawaii:Subdividing Lava Fields 267 after touring several subdivisions in 1961:"I spent a day destroying a pair of judge and then lieutenant governor, who served as the attorney for Glen- shoes walking over these lava'developments,'taking pictures to remind my- wood Subdivision and for Kalapana Corporation, which bought and sold self that they had no irrigation, no roads, no essential utilities, no beaches, land that later became Kalapana Vacation Lots; and Jack K. Suwa,who for no buildings—nothing except lava. much of the 1970s chaired the powerful House Finance Committee, and If there was some distance between Royal Gardens and the beach, and who was a shareholder in Kalapana Corporation, also a limited partner in some distance between the advertising brochures and reality,there was also Vacationland Associates,the developer of Vacationland Hawaii. some distance between what Royal Gardens was supposed to do under Other Democratic politicians involved were former senator William J. county law and what the developers actually did. • Nobriga as the developer of Aloha Estates; Stanley I. Hara, a Democratic For example,lots were sold in the second increment for three years with- representative and later a senator, who as a corporate officer and partner out county permission. The County Planning Department staff wrote in was involved with Orchid Land Estates and Vacationland Hawaii;and Rob- 1966 that "the subdivider sold lots to individuals within Unit II of Royal ert M. Yamada, Democratic member of the Board of Supervisors, County Gardens Subdivision which was declared null and void by the Commission Councils and Planning Commission,who in 1958 sold the 12,000 acres that in October, 1963, and any sale transaction within this unit is considered became the first such.subdivision, and who as a developer or road building illegal."32 In other ways there were indications that the emphasis was so ;' P contractor took part in the creation of a 413-lot project near Kalapana strictly on mass selling of purely investment or speculative real estate that Beach, of Eden Roc, Hawaiian Ocean View Estates, and of a subdivision rational quality control procedures were not initially adopted: called Hawaiian Parks,Beaches and Shores. After the experience of the first few years of the boom,subdividers were 1Another prominent member of the Big Island Democratic establish- required to post a performance bond on their promise to build site im- ment,though not a politician,who was a partner in Vacationland Associates provements. Usually these improvements were nothing more than roads, ' and a shareholder in Kalapana Corp., was Yoshio Yanagawa. From 1960 • and substandard at that. But even so, in the case of Royal Gardens, the j through 1966 he worked for county and state urban renewal and housing County for years was prepared to accept a letter of credit from an affiliate of agencies,and in 1966 was appointed executive director of the state's Hawaii the subdivider, rather than requiring an actual bond from an unaffiliated Housing Authority. company. One Big Island Republican involved was Sen. William H. Hill's protege, This practice was not halted until 1973, following a memo from the – Richard Henderson, as a director of a company developing Kapoho Beach County Department of Public Works:"Letters of credit should generally not Lots.(Henderson became a senator himself in 1970.) be accepted in lieu of a performance bond because the future worth of the Henderson also was president of The Realty Investment Co. Ltd., which letter of credit is tied directly to the applicant's financial stability. In order to in 1969 petitioned the Land Use Commission for the redistricting to urban avoid such problems,we recommend that performance bonds insured by a of 428 acres of what ultimately was to be a 6,000-acre resort-residential corn- financial institution not connected with the applicant be required. plex in the Kapoho area of Puna.Bishop Estate trustee and former Republi- can senator Richard J.Lyman Jr. was president of the Kapoho Land & De- * * * velopment Co.which owned the land involved in the petition. The LUC staff believed the project to be essentially one more Puna land With all this as background,what was the connection on the Big Island sale scheme,and wrote in recommending denial: "Approval of this petition between speculative subdividing and politics? would contribute to the already scattered residential developments which The public record shows that if a large number of Big Island families • are so evident in the Puna District and would therefore be contrary to the were buying lots, their political leaders were heavily involved in creating intents andur oses of the Land Use Law."34 P P (This LUC application was those lots for sale. surely one of the most extreme ever filed. The petitioners' planning con- Most of the island's most influential legislators of the 1960s and 1970s sultant wrote that the project's "major tourist attractions include . . . the were involved with companies doing speculative subdivisions, as partners, 1960 lava cone and surrounding lava field providing visitors with an oppor- corporate officers,shareholders or attorneys. I tunity to experience the awesome forces of nature."35 Indeed. The project Included were Democrats Kazuhisa Abe, who became Senate presidenti would sit directly on top of an active volcanic rift zone. About half f the • and later an associate supreme court justice, who as a corporate officer total project area had been inundated by eruptions in 1955 and 1960. More helped direct the creation of Orchid Land Estates and Vacationland Ha- eruptions were almost certain to come,making it likely that residents would waii;Nelson K.Doi,also a Senate president who later became a circuit court experience the awesome forces of nature at very close quarters, for instance 268 LAND AND POWER IN HAWAII 8 /Hawaii:Subdividing Lava Fields 269 • in their front yard.The application was supported by the Big Island Plan- MATAYOSHI, MIDORI and ZENKO. Parents of County supervisor and then Hing Commission and the island's two Land Use Commission members. It councilman Herbert T.Matayoshi.Limited partners. was turned down.) MIZUHA,MRS.JACK H.Wife of Supreme Courtjustice.Limited partner. Political figures from Oahu also invested in Big Island speculative subdi- NAKASHIMA,SUMIO.Former Territorial representative,district court magis- visions. Republican US Sen. Hiram L. Fong's Finance Realty Co. was the trate.Limited partner,attorney. developer of Fern Forest Vacation Estates and Royal Hawaiian Estates. USHIJIMA,JOHN T.State senator.Law firm represented company before Ha- Democratic State Rep. Robert C. Oshiro (later a leading campaign coordi- waii County government. nator for Gov.Burns and a confidant of Gov. Ariyoshi)was one Of the attor- • neys for Kalapana Corporation. Republican legislator Ralph K. Ajifu, first Sources: Hawaii County Planning Department files on Royal Gardens; Gwenfread E. Allen,ed.,Men and Women of Hawaii:A Biographical Directory of Noteworthy Men and Women chairman of the Land Use Commission,invested in Milolii Syndicate. of Hawaii(Honolulu, 1966);Betty F.Buker,ed.,Men and Women of Hawaii 1972:A Bio- Kauai Republican politician Clinton Shiraishi also invested in Milolii graphical Directory of Noteworthy Men and Women of Hawaii(Honolulu,1972);Department Syndicate. of Commerce and Consumer Affairs,Business Registration Division;State of Hawaii, Legislative Reference Bureau,Directory of Slate,County and Federal Officials:Supplement to As for the company that developed Royal Gardens, the following table Guide to Government in Hawaii(published occasionally,most recently annually);Cham- (Table 16) shows that investors included several state legislators, among ber of Commerce of Hawaii, Who's Who in Government State of Hawaii(various years); them future Gov. George Ariyoshi, who obtained his partnership share in Hawaii State Archives;miscellaneous references in newspapers and periodicals. trade for drafting the partnership registration statement.Another investor was the wife of an associate justice of the Hawaii Supreme Court. The par- ents of County Supervisor Herbert T. Matayoshi, who later became the is- ously a part-time judge.Engineering consultants included the former chief land's mayor,invested,as did university agricultural extension agent Yukio of the Hawaii County Department of Public Works, and a former deputy Kitagawa,who later became deputy director of the State Department of Ag- director of the State Department of Transportation. riculture and chairman of the Honolulu Planning Commission. The attor- As mentioned, lava flows entered Royal Gardens beginning in 1983 and neys who represented Royal Gardens before county agencies included the destroyed 22 homes.With this in mind,it is ironic to note that among those law firm of State Sen.John T. Ushijima and an attorney who was simultane- who invested in Royal Gardens in the 1960s were several people connected directly or indirectly, then or later, with government response to natural TABLE 16 disasters such as volcanic eruptions. PUBLIC OFFICIALS,PUBLIC EMPLOYEES AND FAMILY MEMBERS Investor Arthur Ishimoto was in 1983 state director of civil defense. En- INVOLVED WITH ROYAL GARDENS AS INVESTORS,ATTORNEYS, gineering consultant Yoshio Inaba had approved Royal Gardens creation as CONSULTANTS county engineer.As county engineer he also had some responsibility for Big Note:Governmental position is as of the time of the work on behalf of Royal Gardens or Island civil defense plans and operations. One of Royal Gardens' lawyers, during the period that the investment was held. George Ariyoshi,was the state's chief executive when.the volcano erupted. The son of two other investors, the Matayoshis, was the Big Island's chief ARIYOSHI, GEORGE R. State senator, lieutenant governor. Attorney who executive in 1983. Thus, in a small way, these people in the early 1960s drafted partnership registration statement in part for share as limited partner. helped to bring into existence a subdivision in a US Geological Survey high- HIROTA,SAM O.Former deputy director State Dept.of Transportation.Engi- risk zone that was repeatedly hit by lava beginning in 1983, requiring ve- neering consultant. peated evacuations and continual civil defense help. This is not to say that INABA,ALBERT Y.Principal Molokai High and Intermediate School.Limited i these people acted cynically in putting their money into or working on partner. Royal Gardens—it was just that back at the start of the Big Island boom INABA,YOSHIO. Former Hawaii County chief engineer.Engineering consult- most of those involved,all the way from individual investors to the govern- ant. ment bodies that approved such subdivisions, had their eye on real estate ISHIMOTO, ARTHUR U. Hawaii National Guard staff supervisor, later state profits rather than natural hazards. adjutant general.Limited partner. KITAGAWA,YUKIO.Assistant extension agent,University of Hawaii Agricul- * * * tural Extension Service.Limited partner. Besides natural hazards, also ignored in at least one Big Island specula- KUSHI,MASANORI.District court magistrate.Attorney. tive subdivision were native.Hawaiians: ' 270 LAND AND POWER IN HAWAII 8 /Hawaii:Subdividing Lava Fields 271 Developer Norman Inaba had a project in'South Kona called Milolii down a steepish mountain side to a lava homesite, there seemed little likeli- Beach Lots Subdivision,for which Sen. George Ariyoshi prepared the part- hood of many people ever living there. nership papers as he had for Royal Gardens.As with Royal Gardens,Ariyo- How could a reasonable balance sheet be drawn up between Inaba's de- shi took as his fee a limited partnership interest worth$1,000. velopment at Milolii and the Hawaiian village? • Abutting the subdivision on the north was a lava flow that in 1926 wiped On the one hand, had Inaba's promises materialized-1,000 house lots out the Hawaiian fishing village of Hoopuloa. The residents of the village occupied by retired military people abutting 60-70 Hawaiians—the subdi- who chose to remain in the immediate area moved into another tiny village, vision could well have obliterated the last Hawaiian village of its kind,mean- on territorial government land a little to the south. • ing that this kind of life would have become extinct. This village was called Milolii.It still existed in the 1980s,home to 60-70 On the other hand, all the subdivision ever amounted to was a set of people, mostly Hawaiian and part-Hawaiian. It was the only such fishing streets laid out in perfect grid patterns on a baking lava field and a sales village left in the Hawaiian Islands. strategy that yielded the developer a gross profit in the millions of dollars. From the 1926 destruction of Hoopuloa until 1982 there were ongoing efforts to give the residents of Milolii some kind of secure land tenure, in * * * recognition of the uniqueness of their community.Finally in 1982 the Legis- lature passed a law which the governor signed, creating a subdivision with i In the rush to subdivide places like Milolii,it was not only the interests of long-term leases available for the residents. native Hawaiians that were ignored but also the spirit of the State Land Use Norman Inaba in 1960 bought from Onomea Ranch Ltd. 423 acres be- Law of 1961. tween Milolii Village and the 1926 lava flow. Remote from existing popula- The law specifically attacked the Milolii kind of subdivision.Yet the attor- tion and employment centers, very hot, with little rainfall, almost totally ney who prepared the subdivision's partnership registration papers,in pay- covered in lava, with virtually no soil, and down about 1,200 feet in eleva- ment for which he received a hui share,was George Ariyoshi,a state senator tion from the government access road, the land was nearly worthless as far who had voted in favor of the law.One of the hui s limited partners,Ralph K. as Onomea was concerned. Inaba thus had to pay only about$137,000. He Ajifu, had before investing served for a year as the first chairman of the then cut it up into about 1,000 lots,provided virtually no site improvements, Land Use Commission. In an interview for this book Ajifu said he believed and sold at prices which research for this book suggests brought a gross then and now that Milolii was a proper place for a residential subdivision return of some$3.5 million. and its existence was not contrary to the Land Use Law, because the land When Inaba started out he announced that Milolii was to be an "exclu- had no agricultural value nor any viable economic use other than to be sive subdivision for retired military officers."36 In the first four months on subdivided. the market some 30% of the lots were sold, most of them presumably to • active duty officers, since a community association formed shortly thereaf- * * * •ter was headed entirely by active duty officers. (The association secretary • - treasurer was Gen.Robert Lee Scott,author of God Is My Co-Pilot.)37 Norman Inaba, who brought Milolii Beach Lots Subdivision and Royal • In his early public statements Inaba also said there would eventually be a Gardens into existence, was among the biggest of Hawaii County's devel- beach club and a 60-acre park.38 opers. In 1964 the Honolulu Star-Bulletin described him as"the Big Island's As with the Royal Gardens sales brochures, which said the subdivision most diversified if not biggest subdivider with nine developments around was"only walking distance away from[a]lovely beach,"there was a problem the island covering some 7,000 acres."40 with the beach at Milolii. Despite the subdivision's name there was no real Just as on other islands where strong family/business/political intercon- beach,only a gradelly shoreline area directly in front of the Hawaiian fishing nections grew up in the Democratic years, so on the Big Island Norman In- village,which also had the only good boat launching place in the area. aba and his immediate family interlocked with the Democratic leadership, Inaba's 1,000-lot subdivision had in the mid-1980s only a 2% buildout and with investors from outside the mainstream Democratic ranks as well. rate-15-20 houses,several of which looked like weekend homes.39 The mil- Inaba, for example,was a limited partner in the Kona Highlands Devel- itary retirement community never materialized. Nor did the beach club. opment Co.,registered with the state in 1968 to undertake a 250-lot project Nor did the park.In an exceedingly hot and dry area,with non-county stan- in Kalaoa,Kona.Unlike most Puna-Ka`u-South Kona subdivisions,this one dard roads, no phone service nor electricity, and with the need during had county standard roads and conventional utilities.Partners with govern- much of the year of having to haul potable water, not to mention oneself, ment positions held at various times during the life of the venture were: 272 - LAND AND POWER IN HAWAII 8 /Hawaii:Subdividing Lava Fields 273 Sen.John T. Ushijima; former Supervisor Richard M.Jitchaku, who was Regulatory Agencies. In 1969 Ariyoshi was the attorney for the construc- also an aide to Ushijima; the chief of the State Department of Taxation for tion of the Waikiki Gateway Hotel, one of whose developers was Rodney the Big Island,Sanford Y.Yanagi; Honolulu Police Commissioner William - Inaba. In 1981 Norman Inaba on behalf of Milolii Syndicate contributed C.H. Chung,whose brother was the chief fundraiser for Honolulu Mayor . $500 to Ariyoshi's re-election campaign. Frank E Fasi;the number two man in the county corporation counsel office, Norman Inaba was thus solidly part of Hawaii's power structure in the George S.Yuda;and District Court Magistrate Roy K.Nakamoto. Democratic years. He was known and trusted, someone to be accommo- Inaba also invested in real estate through his Great.Hawaiian Realty with dated. His dealings with government were normally smooth. For example, Republican Richard Henderson's Realty Investment Co.,to form Leilani Es- when in 1972 he filed a subdivision registration statement for an increment tates Inc. of Royal Gardens,a mid-level official in the State Department of Regulatory Inaba's family was deeply involved in government.One brother,Yoshio, Agencies wrote in an intra-office memo: "Norman Inaba has done a good was chief of the Hawaii County Department of Public Works 1953–1963. job of filing papers and gave us no problem all these years.This new incre- Goro,another brother,was Kona District representative on the State Land ment is like the previous ones. (I haven't seen any documents, but they Use Commission 1963-1973. A third brother, Minoru, an educator for should be in order.)They just filed yesterday. But can you give a fast look. much of his adult life, served in the State House 1969-1972, then again Let's try to accommodate them.Let's give them the approval as of today."41 1975–1980. A fourth brother, Albert, was a public school principal, and a civic and political leader on Molokai for nearly 30 years. * * * At times the brothers worked together.After Yoshio,the engineer,retired from government,he did consultancy work for Norman.Minoru,after retir- Without question there was money for Big Island developers in specula- ing from the Department of Education but while he was in the Legislature, tive subdivisions. worked for one of Norman's development company affiliates.Albert,the pub- Norman Inaba's Royal Gardens was 1,807 acres, bought in 1961 from lic school principal, invested in the Royal Gardens hui. Land Use Commis- Bishop Trust Co. for$200,000, as determined from the tax he paid at the sioner Goro was once sold a lot in Milolii at a low price—$500—when buyers time of conveyance. In a prospectus Inaba gave to potential hui investors in of comparable lots were paying several thousand. 1961, he estimated that total costs to subdivide and sell would be At times the Inabas' public and private activities overlapped. Yoshio $940,000.92 Of the approximately 1,500 lots, 90% were sold by the mid- twice 1959-1960 was found to be in conflict-of-interest situations for draw- 1980s, according to a realtor associated with the project. The realtor also ing up subdivision plans as a private engineer that he then approved as said that prices ranged from$1,000 in the early 1960s to$16,000 in the late county engineer.Goro three times as a land use commissioner,once in 1969 j 1970s and early 1980s. He believed that an average price was probably and twice in 1971, voted to approve redistricting applications in which I $12,000,meaning a gross return of something like$16.2 million.Inaba's net Yoshio was involved as a private engineer. In one case GOro made a disclo- was never made public, though presumably it was substantial, since there sure of interest,in the other two he did not. (In all probability Goro's votes were so few site improvement costs. . did not violate the state ethics law. In general to be in conflict a commis- As mentioned, land for the Milolii Beach Lots Subdivision cost Inaba sioner had to vote on matters directly affecting his or her own financial about$137,000 in:1960. Most of the 1,000 lots, only minimally developed, interests,or those of a spouse or dependent child.) were sold by the end of the 1960s, for a gross return of an estimated $3.5 The Inaba family,from about the time of statehood,had a close working million. relationship with George Ariyoshi,a rising Democratic politician,a legisla- As for buyers.of individual lots, probably the great majority showed a tor 1955-1970,and thereafter lieutenant governor and a three-term gover- paper gain. On the Big Island most first buyers were able to resell if they nor.Ariyoshi in 1960 represented Norman Inaba before the State Board of wanted to, by contrast with some speculative subdivisions on the mainland Agriculture and Forestry on a forest reserve matter in connection with where first buyers got stuck. On the other hand, in later years the rate of Inaba's Hilolani Acres (now Kaumana City). In 1963-1964, as mentioned, appreciation was less(in some cases considerably less)than the rate on prop- Ariyoshi drafted for Norman the partnership registration statements for erties with an immediate and actual use value as well as just an investment or Royal Gardens and Milolii Syndicate.Norman's son Rodney worked for Ari- speculative value—for example a house and lot in Oahu's Manoa Valley. yoshi in the Legislature 1966-1967, first as a committee clerk and then as a But if there was price appreciation, as there was on residential property research assistant.About this time Ariyoshi's law firm handled for Rodney throughout Hawaii,still, in the matter of actual construction on individual the registration of Great Hawaiian Realty Inc.with the State Department of lots,a strange picture emerged: 274 LAND AND POWER IN HAWAII • 8 /Hawaii:Subdividing Lava Fields 275 In 1975,after the subdividing boom had come and gone,97.5%of all lots principally the efforts of then-County Planning Director Suefuji in rewrit- in Puna in subdivisions of 100 or more lots were still vacant. By the end of ing the county subdivision ordinance that choked off the creation of new . 1983,a quarter-century after the start of the boom,no more than about 5% speculative developments. of lots held residences.43 The new ordinance shifted approval of subdivisions away from the So whatever the Big Island boom was about,it really was not about actu- County Planning and Traffic Commission to the Planning Director.Where ally providing homes. it had been a simple matter for the Commission to grant variances from the It was not even about developing subdivisions fully. After all those years, road paving requirements, it was now made mandatory for the director to many subdivisions still did not have adequate roads and functioning utilities. require paving, and it was made very difficult for the commission to over- Perhaps,in an ironic sense, it was best that the subdivisions never did fill ride him.Where water lines had not been required if a subdivision was more up beyond radically low levels, because what would have happened if they than 1,500 feet from a county line, now water lines were mandatory wher- became even so much as 25% full in, say, 30 years? What would the costs ever the subdivision might be. The director enforced this provision, and have been to the county and the state governments to provide normal.public here again variances were made extremely difficult. The new ordinance services to these home owners, living so far from existing population cen- also forced subdivisions to conform to county zoning and the county general ters and not even close to each other? plan.If county land use maps did not show a certain area for residential use, So appalling was this fiscal prospect that consultants to the Land Use then a residential-type subdivision there would be disallowed. Commission wrote in 1963 that "when the provision and maintenance of Suefuji's ordinance was eventually adopted by the County Board of Su- public facilities and services are requested and demanded by property own- pervisors in December 1966.48 ers in these subdivisions . . . both the solvency of the investment and the The era of ever-expanding Big Island speculative subdivisions,with sub- government are threatened."44 standard roads,without water or electricity,below a volcano,in the middle This view was supported by University of Hawaii Land Study Bureau of a lava field,without houses,had come to an end. researchers,who wrote two years later: "The people of the county can only hope that these and subsequent developments in the area do not have suf- * * * ficient construction activity to necessitate the provision of normal urban services,for the costs of their installation and operation would be a fantastic • burden for the county to assume."95 In the mid-1980s,those boom-time subdivisions were a kind of spectacle In the late 1960s Big Island Planning Director Raymond Suefuji said the Big Island possessed, along with active volcanic craters, snowcapped that it would actually be cheaper for the County to buy up all those scores of volcanic peaks, papaya trees growing in lava,and the simple vastness of the thousands of vacant lots to forestall any more house-building than it would island compared to the rest of the state. If they wanted to, tourists on their be to face the financial disaster of having to service a significant percentage way from Hilo to Volcano National Park could wander along rutted roads of them some day.46 laid out in perfect grid patterns regardless of the landscape, looking at di- lapidated street signs in semi-wilderness, aware of the strangeness of being * * * in a lava field,and seeing,every once in a great while,a house. The few tourists who actually did venture into a Puna subdivision,particu- larly those farthest from the county seat of Hilo, might also encounter some- For nine years, 1958-1966, Hawaii County routinely approved specula- thing else: a close,sometimes hostile scrutiny from people living there: tive subdivisions. And development of subdivisions approved during that Beginning in the mid-1970s and continuing into the 1980s, many Big period continued into the 1970s.Reform was a long,hard-fought process.It Island speculative subdivisions came to have as their major economic use took a rising tide of alarm over how to finance services if people should ever something no one could have foreseen at the time of their creation: the come in large numbers to live on their lots; a threat from the County Plan- criminal activity of growing marijuana. ping Commission to void a large subdivision because the developer for I Marijuana being an illegal crop,its total value never turned up in the state's years had refused to meet his road-building schedule; weeds growing in I economic data book. Still,by all sorts of accounts, it had come to be very big many roads because maintenance arrangements did not function; embar- business in Puna and other districts of the Big Island,as in the state at large. rassment over sales injunctions issued in California; and a federal land Most estimates of the early 1980s ranked marijuana as the Islands'third larg- fraud prosecution involving the owners of one Big Island project.97 It was est revenue producer,behind only tourism and military spending—but as big 276 LAND AND POWER IN HAWAII 8 /Hawaii:Subdividing Lava Fields 277 as sugar and pineapple combined.Newsweek in October 1982 wrote that the 1. In 1978 a Big Island realtor placed a general advertisement in a drug cul- Hawaii marijuana business"by most estimates..".now tops half a billion dol- ture magazine called High Times.Noting that two and three-acre lots in Puna lars annually." In 1982 sugar was worth $352 million and pineapple $206 could be had for as low as$1,500,the advertisement said:"Yes,Hawaii's Gold million.In October 1984 the state attorney general estimated that the annual Rush is not only in its smoke,but also in its land.On the Big Island[Hawaii], marijuana crop value was$3 billion,about the highest estimate so far.If accu- which has gained international fame for its sacred herbs, fantastic land val- rate this would probably make marijuana Hawaii's number two industry in ues are still available, but for how long?" "Think," the ad prodded, "what annual revenues.99 land prices will do when legalization occurs." The Big Island,with all those remote places for growers to hide their oper- With the discreet buyer in mind,the ad also said that sellers would finance ations,was the state's marijuana capital. Extrapolating from the amount of "with no questions asked," and there would be"total confidentiality on your marijuana seized by law enforcement officers county by county,in 1982–1983 purchase."52 the Big Island accounted for about two-thirds of the state's crop.Moreover,by Among the consequences of the ad were telephoned death threats to the one reliable estimate, marijuana by the early 1980s had become the Big Is- realtor.In an interview for this book,he said he assumed the calls came from land's single largest industry. Hawaii Business in 1982 estimated the value of marijuana growers who did not want more people in Puna. the Big Island's 1981 crop at$300–$500 million,as against revenues for Big Island tourism in 1981 of$180 million and $160 million for lawful agricul- ture.5° If the Big Island was Hawaii's marijuana headquarters, then the specula- tive subdivisions of Puna were the center of the center. Extrapolating from Big Island police estimates on the percentage of the Big Island crop grown in Puna, and from amounts of marijuana seized county by county, Puna in 1982–1983 accounted for about 40% of the total state crops' According to police most of this was grown by people living in the subdivisions. The creation of speculative Puna subdivisions required dirt-cheap land in large parcels,to attract amateur first-time buyers on a mass scale.This in turn meant the subdivisions were relatively cheap residential areas to move to, a fact of importance to prospective marijuana growers who were often young mainlanders with relatively little capital. In fact, moving in might even be free. So little did the average Puna absentee owner care about his lot, aside from its appreciation value, that there were occasional squatters—people who just appeared on a lot and lived there without benefit of the law. As noted, speculative subdivisions commonly existed only in places far from other people and jobs, on land usually valueless for other purposes; waste land or even hazardous. In other words, places where ordinary people would not really want to live and where indeed few built homes. All this was desirable to marijuana growers.They needed to be as nearly invisible as possible, they liked to have very few other people in the vicinity, and they needed to know by sight everyone else who had business being in a certain place. And they liked to be able to shift around if they had to. Puna had the remote spaces for this.With an area as big as Oahu,Puna in 1980 had • a population only 1.5%of Oahu's. Athough beginning in the late 1970s there was police pressure on mari- juana growers,mostly in the form of crop seizures but with occasional arrests, the main response into the mid-1980s was simply to move the principal culti- vation areas away from growers' dwellings and deeper into Puna's empty spaces;