The Office of Hawaiian Affairs has grown to become Hawaii’s 13th-largest landowner — but alarmingly, a new state audit reveals that it is woefully lacking in land-management policy or expertise to optimize its valuable assets.
OHA’s top executives, with their board of trustees, must implement a clear, strategic path forward to avoid squandering a multimillion-dollar trust that holds so much potential to benefit Hawaii’s native people.
OHA’s impressive $224.4 million in real estate holdings comprise 28,206 acres of leased and owned land. But, the state auditor found, its land-management infrastructure is "inadequate, unable to support its growing portfolio nor any future real estate involvements."
That’s a huge red flag: Halt and fix the problem before proceeding.
Seven years ago, OHA started taking big steps toward land acquisition, spending $3.9 million for the 1,800-acre Waimea Valley on Oahu’s North Shore to protect cultural and natural resources. In 2007, it bought 25,800 acres of rainforest land at Hawaii island’s Wao Kele o Puna. It recently paid $3 million for 511 acres of Central Oahu agricultural land, including the royal birthing site Kukaniloko, and, in a controversial buy tinged with ethical questions, acquired the Gentry Pacific Design Center on Nimitz Highway for $21 million. But the agency’s most valuable holdings are 30.7 acres of Kakaako waterfront land, worth $200 million, received in 2012 from the state to settle ceded-lands claims dating back to 1978.
With such a rich land portfolio, then, it’s almost shocking to learn that OHA is, as the audit says, "without the policies, procedures and staff to help guide and support the increased real estate activity. OHA’s board of trustees cannot ensure that its real estate acquisitions are based on a strong financial foundation."
Symptomatic of the deficiencies: OHA staff could not locate key land-related documents and had not produced an annual report about real estate activity and finances. An OHA administrator blamed high turnover and staff shortage in the land program.
In response, OHA board Chairwoman Colette Machado cited OHA’s mission for land and cultural stewardship as foremost: "Therefore the goal of financial return and financial sustainability on these lands must be balanced without compromise to this primary purpose."
This worthy purpose, though, is not mutually exclusive from smart land management. After all, if OHA makes deliberate decisions to acquire acreage, it must make equally deliberate decisions to manage its assets well. Further, trustees have a fiduciary duty to caretake OHA’s trust fund to provide investment returns to sustain beneficiaries in perpetuity.
The auditor also found OHA remiss in its grants programs, saying, "The office continues to lack policies and procedures to adequately monitor compliance and performance and ensure that grants achieve intended benefits for Hawaiians. In addition, grant outcomes are not consistently brought to the attention of trustees."
This area also needs shoring up to improve accountability of funds.
State law requires an audit of OHA at least every four years; this latest was the sixth. Pointedly, the audit noted that in 2007, OHA had adopted a document for land acquisition and policy that articulated its mission, vision, strategic goals, and priorities. But six years and more than $200 million later, OHA has not implemented many of the policies.
OHA did recently hire a commercial property manager and plans to add a property management specialist, so that’s encouraging. As it enters a new era of land ownership and eyes development of its Kakaako Makai acreage, it is imperative that OHA gets its financial house in order. Dealings will only get more complex and sophisticated — so specialized business acumen is needed to prevent incompetence, let alone malfeasance.
The positive news is this: Because it is still relatively early in OHA’s land-acquisition foray, the situation looks fixable. Unlike the decades of lawsuits and entanglements that have mired the state Department of Hawaiian Home Lands, there is reason for optimism that OHA can reset itself on a better path. But its administrators and trustees must start running the agency more briskly and truer to the self-sustaining entity it’s becoming, using best business practices to smartly guide management and growth.
