A planned community with 2,330 homes initiated by the state to produce work-force housing on the Big Island is generating concerns and opposition that threaten to derail the project.

The estimated $734 million master-planned community called Kamakana Villages at Keahuolu has been in the works for several years, and faces a key hearing today in Kona where the state Land Use Commission is expected to either stop or advance the project.

Developer Forest City Hawaii LLC petitioned the LUC in September to reclassify the 272-acre site near Kailua-Kona from agricultural to urban use.

But the former owner of the land has raised objections over the use of the site and whether impacts from increased traffic will sufficiently be mitigated.

The Queen Liliuokalani Trust, which sold the project site and adjacent land to the state in 1992 under threat of condemnation, has raised its objections with Hawaii County officials, in arguments before the LUC and in a lawsuit filed recently to halt LUC proceedings.

"Please do not misunderstand our intentions," LeeAnn Crabbe, trust vice president, told the Hawaii County Council in written testimony last week. "We support affordable housing and job creation in this community. What we cannot support is the promise of affordable housing and jobs at the expense to others in this community that will ultimately bear the costs."

The trust fears that Forest City won’t contribute its fair share toward traffic improvements. The developer insists it will, and said it’s negotiating such agreements with the county and the state Department of Transportation.

Another trust argument is that the state originally sought to condemn the Kamakana site and another nearly 200 acres for a broader range of public uses, including a University of Hawaii campus and a sports complex. Housing also was part of the original plan with 60 percent of units at affordable prices.

Benjamin Kudo, a local attorney representing the trust, said the trust historically has tried not to sell land because it relies on income from its property to support its charitable mission benefiting children.

Kudo said the trust reluctantly agreed to sell the 450 acres in Kona and avoid a legal fight at the time because of the specific public benefits proposed for the property.

Kamakana, with 50 percent affordable housing and 200,000 square feet of commercial space, doesn’t provide the same public benefit, Kudo said.

Kudo made his argument before initial LUC hearings last month, and Wednesday at an informational briefing held by the Senate Ways and Means Committee.

However, Kudo admitted that the land sale wasn’t contingent on the state proceeding with what were conceptual plans for the site in 1992.

The 450 acres were part of a major affordable housing development initiative by the state in the 1980s that led to the development of Kapolei on Oahu. But the Kona project and one on Maui were stalled by a legal challenge over ceded lands in 1994.

About 150 acres of the Kona site got transferred to the Department of Hawaiian Home Lands.

A state agency charged with facilitating affordable housing development, the Hawaii Housing Finance and Development Corp., did some planning work for the balance of the site in 2007, and signed a development agreement last year with Forest City Hawaii following a request for proposals process.

Race Randle, development manger for the affiliate of Ohio-based Forest City Enterprises Inc., said the company spent more than a year collecting community input for the project but hadn’t heard objections from the trust until August or September despite several previous meetings with the nonprofit group that owns a lot of adjacent land.

"We were surprised (by the trust’s objections)," he said. "We’ll try to do everything we can to make our neighbors as happy as we can."

The HHFDC said Kamakana will help meet an acute need for affordable housing in West Hawaii and reduce regional highway traffic that’s bad in part because many workers at nearby hotels commute to the area from far away.

Under the development agreement, at least half the homes must have rental or sale prices affordable to residents earning no more than 140 percent of the Big Island’s median income, or $65,370 for a single person or $93,380 for a family of four.

Forest City proposes making 58 of the 1,169 affordable homes affordable to residents earning up to that limit. Another 286 homes would be affordable to those earning 100 percent to 120 percent of the median income, and 825 homes would be affordable to those earning between 80 percent and 100 percent of the median income.

This breakdown and many other details are still being negotiated, including traffic mitigation and how the project will comply with county design and impact fee requirements.

The LUC decision today governs whether the land should be approved for urban use, and will determine whether Kamakana moves forward.