A faulty decision by a state commission over Hawaii land use looks like it will cost the state as little as $1 instead of a previously agreed-to $1 million.
U.S. District Judge Susan Oki Mollway recently ordered the state to pay $1 to the former developer of a planned $1 billion residential community on Hawaii island called The Villages of Aina Le‘a, which suffered an adverse ruling by the state Land Use Commission in 2011.
Last month a jury sided with the developer, Bridge Aina Le‘a Inc., and said the LUC temporarily took away previously granted urban development rights for 1,060 acres near Waikoloa. The jury wasn’t tasked with determining how much the state should pay Bridge.
Mollway ruled March 30 that Bridge deserved a nominal sum for the temporary “taking” of development rights.
The $1 award replaces a $1 million settlement state attorneys agreed to with Bridge in 2016 to resolve the dispute. But state lawmakers last year refused to fund the settlement, so the case proceeded to trial.
While the $1 award is a win for the state, attorneys representing Bridge won their argument that the LUC unfairly took property rights, and they plan to ask Mollway to bill the state for Bridge’s attorney fees and other litigation costs in the 7-year-old case. The size of that bill hasn’t been calculated yet.
On top of fees, Bridge intends to appeal Mollway’s ruling. If the appellate court disagrees with Mollway’s decision, the issue of compensation could be reopened.
“We respectfully believe it was clear error for the court to preclude Bridge Aina Le‘a from introducing any evidence on just compensation,” Bruce Voss, an attorney representing Bridge, said in a statement.
Bridge had sought
$20 million for the temporary loss of value and ability to earn a return on the land, plus $8 million in property ownership costs and attorneys’ fees incurred fighting a separate legal battle with the state to reverse the LUC decision.
Voss added that despite the Legislature’s refusal to fund the past settlement, Bridge remains interested in discussing a resolution with the state that would
allow Aina Le‘a to move forward.
Fulfilling the development vision, however, is complicated by the bankruptcy of a company that took over the decades-old project.
The Aina Le‘a site was first intended for 2,760 homes, and a California developer obtained LUC approval in 1989 to reclassify the land from an agricultural district to urban.
After a subsequent plan for six golf courses and 1,550 homes fizzled, Bridge bought the property in 1999 for $5.2 million, and in 2005 announced a plan centered around 2,300 homes and two golf courses.
However, Bridge said it needed the state to relax an affordable-housing requirement fixed to the site in 1989 that required 60 percent of homes be affordable to moderate-income buyers. The LUC agreed to
20 percent on condition that 385 affordable homes, or 17 percent, be finished in five years.
Bridge, an affiliate of a Saipan-based real estate lending firm, had trouble meeting the 2010 deadline in part because of a lawsuit over water rights and a surprise requirement in 2007 to produce an environmental impact statement triggered by a legal ruling on the Hawaii Superferry.
In 2009 Bridge sold land under the affordable-housing site to Nevada-based DW Aina Lea Development LLC.
DW built a lot of infrastructure and substantially finished 60 homes but missed the deadline, so the LUC in 2011 revoked its 1989 permission for urban development on the land.
Bridge and DW cried foul, pointing out in an appeal that the LUC reduced 60 percent affordable-housing requirements for at least six other projects — including part of Mililani — without imposing construction deadlines.
A state judge sided with the developers in 2012. The Hawaii Supreme Court agreed in 2014, ending an LUC appeal. Meanwhile, Bridge pursued separate litigation for damages.
DW, now known as Aina Le‘a Inc., bought the rest of the property in 2015 for
$24 million, partially with a loan from Bridge, but has had financial difficulties. Last year, after claiming to have spent $112 million on the project, Aina Le‘a Inc. filed for bankruptcy to reorganize $42 million of debt under pressure from Bridge trying repossess the property through foreclosure.
