A plan by two nonprofits to buy a long-vacant residential estate in East Honolulu and preserve a rare freshwater spring is still in jeopardy.

Neighboring homeowners unsuccessfully lobbied City Council members to kill a vital piece of financing for the project last month. Now one of the homeowners, Richard MacDonald, is suing the nonprofits and the state on the grounds that an environmental assessment is necessary because the preservation plan includes converting the property from a single-family residence into a community resource with a classroom, a caretaker’s residence and an office for one of the nonprofits.

Maunalua Fishpond Heritage Center and The Trust for Public Land arranged to buy the property in Kuliouou from a company in Japan for $2.65 million, with primary financial backing from state and city land preservation funds.

The property, which borders part of Kanewai Fishpond, contains a freshwater spring believed to be the last in Honolulu with a surface connection to the ocean. The spring’s water passes into the fishpond, which connects with the state-owned Paiko Lagoon Wildlife Sanctuary, which leads to Maunalua Bay.

Maunalua Heritage has been hosting community and school groups on the site one day a week for the past five years in an effort to restore the neglected spring and teach children and others about how the fresh water nurtures numerous species of native fish, the Hawaiian stilt and black-crowned night heron, as well as native limpets, shrimp and plants.

However, after reading about the planned acquisition in an April Honolulu Star-Advertiser story, seven homeowners living along the 3-acre lagoon raised concerns about their privacy and asked some City Council members to cut $1 million from the city budget set aside by the city’s Clean Waters and Natural Lands Commission to help with the purchase.

Neighbors’ opposition

The neighbors include Punahou School; Linda and James Yeomans; Kirsten, Michael and Richard Melcher; Paula Ogi and Stacey and Stephen Shimamoto; the TranJMT Family Trust; and a Tokyo-based beauty, spa and diet company called Miss Paris Group.

The move to kill the financing failed.

MacDonald filed a lawsuit in state Circuit Court last month contending that approval of a $1.3 million contribution from the state Legacy Land Conservation Commission is invalid because it violates state environmental law.

MacDonald, who owns his property through a Nevada company called Kalanianaole Highway LLC, named the two nonprofits as defendants along with the state Department of Land and Natural Resources and its board.

The lawsuit says that when the board approved the state grant, it improperly exempted the project from producing an environmental assessment. The exemption was made under a portion of state law pertaining to activities funded by grants that don’t cause material change to land use or resources.

“The applicant proposes to change the use of the subject property from single-family residential use to educational, community and public use,” the suit states. “To accomplish this change in use the applicant intends to demolish the existing residential house and build an educational center consisting of a classroom, community center, caretaker’s residence and administrative office.”

MacDonald’s lawsuit, filed by lawyers from the Honolulu law firm Morihara Lau and Fong LLP, said the board didn’t consider appropriate factors to exempt the project from an environmental assessment.

“The applicant’s proposed project cannot be considered a minor project qualifying for an exemption of an EA as the applicant intends to change the use of the property and construct new facilities to effectuate this change in use,” the suit said.

The complaint has been assigned to senior Judge Jeannette Castagnetti of the state Environmental Court. The nonprofits and the state have yet to file any response to the complaint in court.

Deborah Ward, spokeswoman for DLNR, said the agency and its board prefer not to comment on pending litigation.

Representatives of the two nonprofits could not be reached for comment Thursday.

The two entities, which are raising $350,000 to buy the property once owned by convicted Hawaii Ponzi schemer Ronald Rewald, are under pressure to complete a purchase from the seller, an affiliate of Japanese taxi firm Rikuo Kotsu Co. Ltd., by Aug. 31.

If the purchase deadline isn’t met or extended, Rikuo can pass up the deal and sell to some other interested buyer. The nonprofits fear if their purchase is scuttled, a real estate developer could buy the property and destroy the spring.

Community support

While neighbors have tried to derail the purchase, the broader community has expressed considerable support for the effort to buy the property and its spring, which the Historic Hawai‘i Foundation added to its list of the state’s most endangered places last year.

About 15 individuals or organizations wrote letters of support for the proposed purchase, and the Kuliouou-Kalani Iki Neighborhood Board adopted a resolution to support the plan in a 10-1 vote.

“Kanewai Spring is a priceless cultural heritage site for East Oahu that needs and must be protected for future generations,” Kukona Lopes, executive director of the Kailua-based nonprofit Ke Kahua o Kualii, said in a letter. “Kanewai Spring in Kuliouou is a unique and exquisite educational and research opportunity. Fishpond restoration and protection cannot happen without the protection of the springs that feed them, the life source of the ponds.”

Wes Pei, a volunteer teen program leader for the Kaimuki YMCA, said in a letter that the Y has brought high school students to the spring for four years.

“Over the years, our teens have had the opportunity to see how Kanewai Spring transformed from an overgrown weeded area to a beautiful area where native plants and animals have come to flourish,” Pei said.

Hawaiian sailing canoe navigator Nainoa Thompson endorsed the preservation plan on behalf of his family and the Lucas and Blankenfeld families, who have lived in the Niu and Kuliouou area for up to eight generations.

“We have watched the change in our environment and community and are now looking at an amazing movement to honor, protect and restore our valuable places,” he wrote. “Please accept the wishes of our collective families to protect Kanewai Spring. It is part of our ancestral home.”

More support was provided by The Nature Conservancy, Waikalua Loko Fishpond Preservation Society and a fishpond association on Maui called ‘Ao‘ao o na Loko I‘a o Maui.

The lawsuit seeks to have a judge enjoin the state from executing a grant agreement with the Trust for Public Land and Maunalua Heritage, prevent DLNR from releasing the grant money, invalidate the board’s approval and require the two nonprofits produce an environmental assessment before any new consideration of the grant approval.