Kauai police arrested two people at a beach-side residence in Kapaa and confiscated crystal meth, marijuana and drug paraphernalia.

After police notified the state that the property, managed under the Department of Land and Natural Resources revocable permit program, could be seized for forfeiture, land division staff recommended immediately pulling the permit. Although the tenant was not a suspect in the 2012 drug bust, the situation represented a serious violation of the month-to-month rental agreement.

But the agency’s board did not act on the recommendation. It instead relied on an unsigned letter purportedly from one of the suspects — his name was typed at the end of the document — to withdraw the revocation recommendation in early 2013, according to DLNR. The letter said the permit holder was unaware of the drugs.

The permit remains in place today.

The action was the latest involving the Kapaa property that underscores what critics say is poor oversight of the department’s temporary land-occupation program. Previously, the family was allowed to construct a home on the property under the month-to-month permit, and they were allowed to live on the property with no permit for seven years after the relative who held the initial permit died.

That case and several others the Honolulu Star-Advertiser examined raise more questions about how the agency operates the program without administrative rules.

Partly as a result of the Star-Advertiser’s inquiries and coverage, DLNR Chairwoman Suzanne Case on Thursday announced the formation of a task force to recommend ways to improve the program. One aspect that the group will explore: possible rules.

“I know we can do better,” Case told the Star-Advertiser. Case, who has headed the department for less than a year, said she wants to make the program more transparent and allow opportunities for competition when a parcel is available.

People familiar with the system lauded Case for recognizing the need for reforms. But those who contend the program is mismanaged said they will await the changes — Case wants them in place by the end of June — to see whether the agency is serious about reforms.

Gov. David Ige, who appointed Case to the job, weighed in on the controversy at the request of the Star-Advertiser.

“I’m pleased that the department is moving forward with specific action items to make the revocable permitting process more effective,” Ige said in a written statement. “We want to get transparent, more consistent and fair procedures in place as quickly as possible. If the task force determines that administrative rules are necessary, we will begin that process. This could take years, so it’s important to identify steps that can be taken now.”

Developing administrative rules is a drawn-out process that includes holding public hearings before anything can be finalized.

Trouble on borrowed land

The land agency manages more than 300 revocable permits that cover uses ranging from farming and grazing to residences and commercial operations. The agreements, which generate about $2 million a year in rent, involve nearly 100,000 acres, some of it remote or landlocked and some prime spots along the beach or with ocean views.

In the absence of rules, DLNR has wide discretion to apply a relatively vague state law authorizing the issuing of month-to-month permits for up to a year. The statute also gives the board the power to extend the permits for additional one-year periods.

Though the law specifically states the permits are for “temporary occupation,” an earlier Star-Advertiser investigation found that dozens of permits effectively have become long-term agreements, providing the permit holders with discounted rates for decades while escaping the oversight linked to long-term leases. In some cases, rents have remained unchanged since the 1990s.

The department has used revocable permits in a handful of cases to allow families to live on state land for generations.

In the Kapaa case, DLNR granted Eloise Oclit a month-to-month permit in 1973 and gave the family permission to build a home at the site in the late 1980s. When Oclit died in 2003, her husband was unable to obtain a permit for the property because of tax issues, according to the documents. Although a new permit was never issued to him, the family continued to live there until sometime after his death in October 2010. They paid rent and maintained insurance for the small parcel, records show.

After he died, a permit could not be transferred to any of their children, according to DLNR, requiring the tenants to vacate the site. While the property sat vacant, the agency received complaints about homeless people trespassing.

In September 2011, one of the Oclits’ children, Donna Nunes-Hoopii, obtained a new revocable permit for the property, with DLNR setting the rent at $311 monthly. About a year later, the drug bust happened. Nunes-Hoopii was not a suspect. The Star-Advertiser talked to a woman Thursday who described herself as Nunes-Hoopii’s cousin, but no one responded to a request for comment.

DLNR officials Friday said then-Director William Aila Jr. had the revocation recommendation withdrawn at the January 2013 board meeting after seeing the unsigned letter purportedly from the suspect. The minutes of that meeting do not mention any discussion of the letter.

Occupied for generations

When the Star-Advertiser previously asked officials why residences are allowed on revocable permit property, they said the agency uses such permits as a temporary measure to keep a residence occupied until a long-term disposition can be made.

Yet most of the eight residential parcels under revocable permits have been used by the same families for decades. Among them:

>> Joseph J. Hines and Elaine Nickie Hines held a revocable permit for a Waimanalo parcel from 1977 to 2014, when Elaine Hines died. Their grandson, Jacob Kaleo Hines, then requested a revocable permit for the property. DLNR Land Division staff recommended that the board deny the request.

“It was never intended for a revocable permit to be passed on to other family members,” the staff wrote. Hines told the board the property “has been in the family over 30 years.” The new permit was unanimously approved.

>> After the death of his grandmother in 2004, Antone Carrillo wanted a permit for the Maili property where she lived. DLNR records indicate the land, across the street from the beach, had been held by the family under a revocable permit since at least 1969. After determining that the structures on the property (built by Carrillo’s grandfather) were privately owned, rent was set at $600 a month, and a new permit was issued in 2008. At that time, the recommendation was that “staff will bring back to the board when any long-term plan, e.g., public auction, is available.” Carrillo still holds the permit.

>> The Hashimoto family has lived on a Kauai parcel for more than 100 years, at one point holding a 999-year homestead lease. The leaseholder tried to buy the property, but died before the sale was completed. With both the lease and the sale terminated, the family had no rights to the property, so it went to a revocable permit in 1983. The 1.73-acre parcel is across the street from the beach in an exclusive area of Kauai, where neighboring properties are used as vacation rentals. Appraisers felt the $500 rent being paid was far below market value, and when the rent was raised to $3,556 a month, permit holder Junedale Hashimoto struggled to pay it. Other members of the family stepped up to support her, but at one point the permit was in default. In 2012, board members added Jodi Hashimoto-Omo, Junedale Hashimoto’s sister, to the permit and agreed to set the rent at $454 a month for the life of Junedale Hashimoto. On Friday, DLNR officials explained the agreement was approved because of the unique nature of the case. They also said the monthly rent is “comparable to similar state-issued residential revocable permits and leases statewide that were located on or near the ocean.”

In its review, the Star-Advertiser also found at least two examples of current revocable permits held in the names of individuals who records indicate died two to three years ago.

“People don’t always tell us” when someone dies, Case said.

In 1992, prominent Big Island rancher Richard Smart, whose family founded Parker Ranch, died of cancer. But DLNR didn’t cancel a revocable permit Smart held until 2002 — a decade later, according to agency records.

Some tenants resist change

Case told the Star-Advertiser she’s keeping an open mind about what problems need addressing and will await the task force recommendations. She said the agency has to strike the right balance, improving the program but not making the changes so onerous that it completely bogs down the process.

The state benefits from having tenants on land that otherwise might be unoccupied because it reduces liability and shifts maintenance responsibility to them, according to Case.

Big Island resident Chris Yuen, a DLNR board member who was appointed to the task force, said board members in December raised concerns about the annual bulk-approval process and the duration and rents for some permits. While some properties are valuable, others are parcels that nobody but the permit holder likely would want, Yuen said.

Nancy Jones, who owns Circle J Horse Sanctuary on Hawaii island and pays DLNR about $1 per acre monthly for the 14 acres of pastureland, said the revocable permit greatly benefits her horse-rescue operation, allowing her to take in more animals.

The beauty of the permit program, she said, is its simplicity, especially for farmers and ranchers. Tenants are responsible for property taxes and maintenance, and that helps preserve open space, according to Jones.

“This is one program I would hate to see being meddled with because it’s running so well,” she said.

But Marti Townsend, director of Sierra Club of Hawai‘i, said having good rules to implement the law is important, especially for a complex program. “That gives us the certainty we need to make sure our resources are well managed,” she said. “Otherwise, it’s just people following their gut instincts.”