The Department of Hawaiian Home Lands and the city are turning to the federal government to help resolve a years-long stalemate over how to value land in a property exchange involving the rail project.

The two sides have agreed to use the U.S. Department of Interior’s appraisal process to ensure a land exchange that has been in the works for more than a decade is fair.

The Hawaiian Homes Commission, which oversees DHHL, in 2006 authorized its director to pursue a land swap with the city involving two West Oahu parcels. In 2009 and 2010 the two sides approved memorandums for an exchange or sale of the properties, and several years later they each issued 75-year licenses permitting the other access to the respective sites while an exchange was pursued.

But the planned deal was held up because of a difference over how the parcels were to be valued.

DHHL’s nearly 56-acre Waipahu parcel, called the Ewa Drum site and zoned residential, has an assessed value of more than $21 million. The city already has constructed a rail maintenance and storage facility on the DHHL land.

The city’s Kapolei parcel, zoned agricultural and called the Varona Village site, covers more than 50 acres and has an assessed value of nearly $5 million.

DHHL wanted that parcel for future development. The property is adjacent to the agency’s East Kapolei master-planned community, including the Ka Makana Alii mall.

William Aila, DHHL director and chairman, told the Honolulu Star-Advertiser’s editorial board recently that the city’s position was that the properties should be valued at $21 million and $5 million, respectively.

But Aila said the parcel it received should be valued at its highest and best use, not as agricultural land, which would have a lower value.

“We are not willing to get an appraiser to just stick to our land as being agricultural,” he told the Star- Advertiser. He said prior administrations “were not able to break that logjam.”

DHHL is not bound by county zoning designations and has the authority to change such classifications for its lands.

The city was concerned about the highest-and-best-use approach because that likely would result in a value greater than the $21 million for the DHHL- owned parcel that the city is getting, Aila said.

If that were the case, the city presumably would have to kick in more land or money to DHHL to make the deal equitable.

The Interior Department must approve any land exchange involving DHHL lands.

Interior has oversight responsibility for the 200,000-acre land trust that DHHL manages because it was created nearly 100 years ago by the federal government. Trust beneficiaries — those at least 50% Native Hawaiian — can apply for 99-year homestead leases for residential, farming or ranching purposes.

The planned land swap had been criticized by some trust beneficiaries who said DHHL was getting the short end of the deal, citing the big difference in assessed values.

But Aila said Interior will not approve the exchange unless it is in the best interests of the trust.

DHHL and the city last month reached an agreement in principle for the proposed land exchange and are working on a memorandum with Interior on how to proceed, according to Aila.

“As with any land exchange involving DHHL lands, the U.S. Department of the Interior will have final say on the appraisal of the land and whether the exchange may proceed,” he said in a statement. “We are pleased to move forward in the best interest of DHHL’s beneficiaries.”

The city’s managing director, Roy Amemiya Jr., struck a similar tone.

“The Department of Hawaiian Home Lands and the city are proceeding mutually with an appraisal process in conjunction with the Department of the Interior in which an independent appraiser will value the parcels at zoning and land use classifications that are more in line with the highest and best use for each property,” Amemiya said in a statement. “We believe this will result in appraisals that are fair, accurate and consistent with the original agreement between the parties.”