LAST OF THREE PARTS

The internal warnings came long before the unflattering newspaper coverage.

Staff at the Department of Land and Natural Resources in 2012 and 2013 warned top managers within the Land Division that its month-to-month property rental program needed major fixes.

Several workers told their bosses the rents for so-called revocable permits were substantially below market and set without any established criteria. If the information became public, they said, it would embarrass the department and create the perception of favoritism toward lessees, according to internal documents and interviews.

The workers recommended the rents — in some cases as much as 4,000 percent below market — be raised on an interim basis while appraisals were pursued to bring the amounts more in line with prevailing market rates, the documents show.

But DLNR’s board didn’t approve what became nearly across-the-board increases until four to five years later — and only after the Honolulu Star-Advertiser published a front-page story in February 2016 exposing serious problems with the program.

Among the revelations: hugely discounted rents that in many cases had not been changed since the 1990s.

The newspaper’s coverage came three years after it published a series exposing similar problems with the revocable permit program at the Department of Hawaiian Home Lands. When that series ran in May 2013, Land Division workers at DLNR posted the newspaper stories on office cubicle walls as a none-too-subtle reminder to management about their earlier warnings.

They also voiced an additional concern: William Aila, then-DLNR director, had just been appointed by Gov. Neil Abercrombie to a task force to address problems revealed in the Star-Advertiser series on DHHL, even though the permit program in his own department suffered from similar problems.

According to the documents and interviews, the workers recommended their concerns about the program be shared with Aila, but their warnings were dismissed, with one supervisor telling them DHHL permits had no bearing on DLNR’s, and their concerns were not relevant.

“Our intention was to prevent DLNR receiving similar negative attention on the front pages of the newspaper,” one worker’s memo said of the 2013 complaints issued to management just after the DHHL series was published.

The 2016 memo was a supplement to an internal complaint seven workers filed that year against top management within the Land Division.

Coverage spurs changes

The failure to heed the internal warnings speaks to DLNR’s tendency to take action not in the best interests of the public and the 1.3 million-acre land trust it oversees or to take an inordinate amount of time to act, according to those who have raised concerns about DLNR practices and management.

“They’re simply not doing their job,” said attorney David Kimo Frankel, who represented two Native Hawaiian cultural practitioners who successfully sued the department in 2014 for breaching its trust obligation over a Big Island lease. The court ruled in favor of the plaintiffs this year.

The Office of Hawaiian Affairs has been among those questioning some of DLNR’s revocable permit practices and the handling of specific cases.

“They’re outrageous, the individual cases we’ve looked at,” said Jocelyn Leialoha M. Doane, OHA’s public policy manager.

At the same time, Doane applauded improvements DLNR made in the wake of the Star- Advertiser coverage.

Several days after the initial stories appeared in February 2016, DLNR Director Suzanne Case announced the formation of a task force to recommend changes to the program, mirroring how DHHL responded to the Star-Advertiser coverage three years earlier.

By the end of June 2016, the DLNR board adopted the task force recommendations.

The sweeping changes were designed to improve transparency and accountability, including providing the public with clearer justifications on why revocable permits, rather than long-term leases, were being issued and whether the monthly rents were fair for the state.

Permits

As part of the reforms, the board approved rent increases ranging from 1.5 percent to 27 percent for most Land Division permits, accounting for the failure to adjust prices in prior years. Those increases, approved in the latter half of 2016, took effect at the beginning of 2017.

For about 130 permits in which the rents had not changed since at least 1999, the increases could have been higher, but the board decided to cap them at 27 percent.

As of September, DLNR’s Land Division had 332 revocable permits that generate about $2.4 million annually in rents.

The permits are intended to get or keep tenants on department land — often remote or not highly desired — on a temporary, month-to-month basis, generating revenue while saving the agency the cost of maintaining the property.

But the Star-Advertiser found that dozens of permits essentially had become long-term agreements, lasting years or even dec­ades. And the substantially discounted rents — sometimes only pennies per acre — often remained unchanged for all or much of that time, even though the permits were renewed annually by the board.

When the Land Division workers first broached the subject of raising rents, DLNR hired an appraiser in 2013 to help evaluate rates. But the contract was allowed to lapse without the work being completed.

Swifter action on reforms

Asked why DLNR waited four to five years after the internal warnings to broadly raise rates, department officials responded by referring to a passage in the task force report: “Appraising parcels and issuing leases are resource-intensive activities for divisions. These activities require funds and staff time. They are sometimes delayed if funds are not available or staff have other issues that take precedent. Costs for appraisals must be able to be recovered in a reasonable time through revocable permit fees for the appraisal to be justified.”

Yet within about a year-and-a-half of the Star-Advertiser’s 2016 stories, the agency had managed to hire an appraiser to review rents, obtain board approval to hike rates for nearly 300 permits and receive additional approval to implement widespread reforms to the program.

The department also said the work done under the 2013 appraisal consulting contract, even if completed, would have been too limited and inappropriate for evaluating the 300-plus permits since only a single appraiser was involved. Thus, the administration said it let the contract lapse so the process could start anew, and “it took time to re-task the revocable permit appraisal project to other staff and develop an appropriate scope of work.”

What’s more, revocable permits represent only a small portion of the land management and acquisition work the department does, and rent adjustments were considered secondary to higher-priority matters, according to DLNR.

As for the rates, the department said the law gives the board discretion to set them at levels that serve the state’s interests but does not require that they reflect fair market value. That’s why DLNR is able to issue permits to other government agencies and nonprofits for no or nominal rent.

To increase transparency in the approval process, the board adopted a task force recommendation to review permits at four separate meetings each year, grouped by counties, rather than evaluating 300-plus statewide permits at a single meeting, as was done previously.

Critics said approving so many permits at one sitting did not provide the board and the public with enough information to properly scrutinize the requests.

Not all concerns addressed

The board also reviews water permits at a separate meeting, and land permits with significant public interest are handled as individual agenda items rather than grouped together by county.

In addition, the documentation that is made public before the board approves or renews permits contains more information compared with the pre-2016 system.

“That’s some of our efforts to make sure that the revocable permit process is fully transparent,” Case told the Star-Advertiser.

OHA’s Doane agreed the process is more transparent and that DLNR makes more information public prior to the board voting on permits.

“But clearly there continues to be areas of concern,” she said, noting the department sometimes doesn’t even comply with all the recommendations adopted from the task force.

When permits are up for annual renewals, OHA typically submits testimony, and it frequently cites gaps in the information staff presents to the board or proposed actions that would undermine transparency and accountability.

OHA tracks the permits as part of its obligation to assess state policies and to advocate for its Native Hawaiian beneficiaries.

“Our concerns have been more than about maximizing revenue,” making sure DLNR is being a good steward of the land, said Wayne Tanaka, OHA’s policy advocate.

Concerns about that stewardship prompted Keith Chun, DLNR’s then-land planning and development manager, and two co-workers to recommend to their Land Division bosses in 2012 and 2013 that the revocable permit rents be raised to prevailing market rates, according to DLNR documents.

Over the years, Chun recommended changing other policies and practices he believed weren’t in the best interests of the state and land trust, but most were not embraced by management, the documents show.

In 2016, as DLNR was grappling with how to reform its permit program, Chun was informed his annual contract would not be renewed because his position “was of a temporary nature,” according to the documents. Yet his contract had been renewed in each of the prior 14 years, and he was the only noncivil-service worker of a dozen in the Land Division to be let go, according to the records.

Chun declined to comment.

DLNR said it couldn’t comment on a personnel matter. However, the department said that when staff members offer proposals, it considers whether such recommendations are in the best interests of the trust and state.

AIMING FOR MORE TRANSPARENCY

In a bid to enhance transparency and accountability, the board of the Department of Land and Natural Resources in June 2016 approved significant changes to the revocable permit program within the Land Division.

Among the changes:

>> Present permits to board for annual review at four separate meetings, grouped by county, rather than all 300-plus at single meeting, as previously done.

>> Convene separate meeting for water permits.

>> Devote more staff to manage permits.

>> Standardize documentation presented to board, including checklist and supporting details.

>> Review permits on regular basis to determine which ones should be recommended for alternative land disposition, such as seeking leases via public auction.

>> Post list of permits on department website when up for annual review.

>> Provide board with appraisal to determine fair market rent.

>> Work with water permit holders to convert agreements to long-term leases.

>> Inform board about noncompliance issues, litigation involving permits up for annual renewal.

Source: DLNR

SOUNDING THE WARNINGS

>> Late 2012: Several staff members recommend to top managers within the Land Division of the Department of Land and Natural Resources that rents for its revocable permits — a month-to-month property rental program — be raised on an interim basis while an appraisal is pursued. They note that rates are as much as 4,000 percent below market. They also warn about the program’s lack of established criteria and the perception of favoritism that could result if such information became public.

>> May 2013: The Honolulu Star-Advertiser publishes a front-page series exposing similar problems with the Department of Hawaiian Home Lands’ revocable permit program. Gov. Neil Abercrombie appoints a task force, including DLNR Director William Aila, to recommend fixes to the DHHL program.

>> May 2013: Alarmed by the Star-Advertiser series, DLNR staffers remind Land Division management about their concerns and recommend Aila be informed. They warn of potential embarrassment if the newspaper turns its attention to DLNR’s revocable permits. They are told by managers that DHHL’s permits have nothing to do with DLNR’s and that their recommendations are not relevant.

>> August 2014: DHHL task force recommends sweeping changes to the agency’s revocable permit program.

>> December 2014: The Hawaiian Homes Commission approves changes to basic framework of DHHL program, intending to make the process more fair and transparent.

>> Feb. 14, 2016: Star-Advertiser publishes front-page story revealing a DLNR program with major flaws, including permits in place for decades, rents unchanged since the 1990s and lack of clear criteria.

>> Feb. 18, 2016: DLNR Director Suzanne Case announces formation of task force to recommend changes to program.

>> June 23, 2016: Seven DLNR workers file internal written complaint against Land Division management. Among the many issues raised is what they characterized as management’s failure to pursue raising revocable permit rents.

>> June 24, 2016: Board approves substantial changes in the permit program, aiming to improve transparency and accountability.

>> January 2017: Rent hikes for nearly 300 revocable permits take effect, ranging from 1.5 to 27 percent.

Source: DLNR documents, Star-Advertiser research