Wailea KaiMalu Developer agrees to $950,000 ’donation’
By HARRY EAGAR, Staff Writer
reprinted courtesy Maui News 11/11/04
WAILUKU – In October, Robert Armstrong’s Kai Malu housing project in Wailea was deferred by the Maui Planning Commission with the suggestion that he “do more” for the community.
He’d already offered $400,000 toward affordable housing, a request that county housing Director Alice Lee admitted Tuesday was outside the law.
“There’s no enabling legislation,” she told the Maui Planning Commission. “We’re skating on thin ice.”
Nevertheless, Armstrong did come back offering to “do more” – another $100,000 for the county’s affordable housing program, $350,000 above and beyond the legally required park impact exaction and another $100,000 offered to Kihei Elementary School, even though he already had school credits toward a state Department of Education impact fee program.
Although neither the county nor the Department of Education has established legally viable impact fees for affordable housing or schools, Armstrong’s offers appeared barely enough.
Commission Member Bernice Lu offered a motion to defer Kai Malu again. Although that got a second from Nick Casumpang, after discussion even he did not vote for the motion.
Commissioners gave various reasons for voting against Lu’s motion, but none said then – or at any other time – that demanding cash contributions from developers without any administrative rule or county ordinance bothered them.
Lee made her clearest statement yet about the absence of any legal basis for the county’s affordable housing demands, after several commissioners – notably Susan Moikeha and Diane Shepherd – criticized her for not demanding even bigger payments.
SUPPORT FOR THE STRATEGY
During the public hearing, a parade of recipients of housing money came forward to plead with the commission to support Lee’s program.
Since the beginning of this year, Lee said, her housing policy has been raising close to a million dollars a month for nonprofit housing projects from developers.
In the discussion on Kai Malu, which eventually did get its SMA on a unanimous vote, Moikeha said, “I think we should increase the per-unit fee.
“A lot of people are going to think we’re extortionist, or that we’re trying to do things that have no basis,” she said. “That’s their opinion.”
That was Lee’s opinion too, as she spent large portions of a meeting that lasted 11 hours pleading with commissioners not to wreck the scheme by demanding more.
“The reason we’ve been so successful with the fee is that we’ve been flying under the radar,” Lee said.
Charles Ridings, whose West Maui Resource Center is in line to receive nearly $100,000 in voluntary donations from Armstrong, said Wednesday that Lee’s program should be looked at positively. “Are we benefiting the community with this approach? The answer is yes.”
In his testimony Tuesday, he told the commission that these donations are “extremely important” because they address “the social cost of not having (low-income Mauians) in safe and secure housing.”
He and Lee both cited the advantage of having the housing money paid up front – even before the application is submitted in the case of another developer on the commission agenda, Intrawest – to deliver housing for the most needy now, rather than later.
Moikeha noted, more than once, that despite the widely understood need, the amount of housing produced has been inadequate.
In the past, the County Council has imposed affordable or employee housing requirements as high as 60 percent of a project as a condition of zoning.
Today, the exaction is 10 percent, and Moikeha repeatedly asked why the county wouldn’t seek more from developers, particularly since the real estate market is so “hot.”
Lee’s explanation boiled down to two key points:
The higher
exactions didn’t work. Projects couldn’t stand the extra cost and didn’t go
forward.
Since the
first of the year, she has been seeking housing contributions from applicants
requesting special management area permits. No other county attempts to extract
housing through the SMA, she said.
NONPROFITS’ ROLE
Lee said she serves as facilitator; none of the money enters her office. Instead, she identifies housing projects being put together by nonprofits, such as the West Maui Resource Center or Hale Mahaolu.
These agencies cobble together funding from a variety of sources. The West Maui Resource Center, for example, will cost about $10 million.
She said that after the October meeting, she advised Armstrong to confer with Ridings. She had in mind support for a South Maui Resource Center, which is not yet close to breaking ground.
Ridings said Wednesday that he invited Armstrong to visit the West Maui Resource Center, which is already in operation, though not complete.
Ridings said he wanted to show how important these subsidized rental projects are, notably for persons making less than 50 percent of median income. There are 4,166 such households on Maui, and no commercial developers are doing anything toward housing them “because they can’t make any money doing it.”
The Lee system delivers only a fraction of the total amount needed for these projects, which are financed from grants, donations from foundations and corporations that are not seeking land use authorizations, and any other place the nonprofits can find money.
The occasional donations stimulated by Lee are “very efficient from our standpoint. We’re very happy to receive it,” Ridings said.
While showing Armstrong around, Ridings explained that if he could install solar water heating, the savings in electricity would help hold down the rental costs even more.
Already they are $550 a month for a two-bedroom apartment, compared with $963 a month for market rents.
The only way his project can keep prices so low, Ridings said, is to get grants; so that there are no interest charges on a mortgage.
Armstrong agreed to donate $90,000 toward solar water heaters and another $8,000 to air-condition the day-care center.
He was seeking SMA and planned development step approvals for a 153-unit duplex project on 25 acres south of Okolani Drive at Wailea.
Under Lee’s system, 10 percent of 153, rounded up, resulted in an initial demand for Armstrong to provide 16 affordable housing units.
In the past, so-called affordables have taken various forms. Developers have sold some lots or house-lot packages at below market rates, or have built entire apartment houses to be rented at below-market rates.
BUY OR RENT?
Lee, who has been director of housing and human concerns for the past six years, has shifted her focus from delivering “affordable houses” for people to buy to providing long-term affordable rentals.
Part of the justification for that has been that the lowest-income residents have no realistic prospect of being able to buy, not even a subsidized house.
Another has been the problem that, once sold, affordable houses turn into market-price houses after a few years. Those lucky enough to have gotten one sell out and reap the profits of a galloping real estate market.
County buyback requirements are difficult to enforce. Thus, affordable housing for sale turns out to be only temporarily affordable, while affordable rental projects can stay comparatively cheap permanently.
Lee uses a federal Housing and Urban Development formula to determine how much subsidy is needed to get a unit down to affordability. This year, the amount has varied from $20,000 to $25,000 per unit.
Thus, Lee asked Armstrong for $400,000 – $25,000 times the 16 affordable units he would otherwise be required to build.
Although there was no legal justification for the contribution, Armstrong went along, apparently seeking to avoid delays in winning his approvals. He had trouble anyway in October. The commission deferred his application, though not only on affordable housing grounds, asking him if he could not “do more.”
He came back this week offering another $100,000 for West Maui Resource Center; $100,000 to paint Kihei School and air-condition its portable classrooms; and $350,000 to improve the restrooms at Kamaole Beach Park III.
Kihei Principal Alvin Shima told the commission that although Armstrong had no obligation to pay school impact fees, he had “generously offered to assist us.”
Although the state, which runs the schools, does not have an impact fee established that would be triggered by an SMA, in 1997 Wailea Resort Co. contributed $1 million toward Kamalii Elementary School, and that generated more than 1,100 “credits,” to which Armstrong gained access by purchasing land from Wailea.
His donation to Kihei School is above and beyond that.
Similarly, his donation to Kamaole Beach Park III is above and beyond his county park impact assessment.
This could have taken the form either of land or money – about two acres of land or $1.3 million.
Parks Director Glenn Correa had the decision, and he chose land, which will be a passive park. Although Kai Malu will be a gated community, the park gates will be unlocked during daylight, Armstrong agreed.
Moikeha was irritated that Correa chose land. “Why wouldn’t you take $1 million?” she asked him, perhaps to improve Kalama Park.
Correa declined to tell her why, stating only that it was a policy decision that was his to make.
The commission then demanded a meeting with Mayor Alan Arakawa to find out what park policy is. A letter requesting a meeting will be sent.
Nothing about Armstrong’s proposal changed between October, when he couldn’t get a vote; and this week, when he did, except that he agreed to $550,000 more in contributions to county, state and community programs, or $950,000 in all.
Ridings said he considered the $100,000 donation to the resource center to be voluntary, and he said not for a moment in his dealings did he get any sense that Armstrong was resentful or reluctant to pay up.
CONTRIBUTIONS VARY
Other developers pay less. Intrawest, for example, is being asked by Lee to pay about $2.34 million, based on $20,000 per unit for 117 units.
The project, a condominium hotel on 34 acres at North Beach, will have about 700 hotel rooms (sold as condos) and townhouses.
Since it will be a hotel, instead of the 10 percent assessment Lee makes on residential developments, Intrawest’s Honua Kai development is being assessed at one “employee” housing unit per six rental units.
Lee persuaded Intrawest to pay $1.4 million upfront, which proved crucial to completing the West Maui Resource Center, even before Intrawest’s application was heard.
She acknowledged that the development was taking a risk, since it would not get the money back if its application were rejected.
On the other hand, she contended, Intrawest knows exactly how much it is obligated for in employee housing exactions.
Unlike with Kai Malu, the requirements for employee housing on Intrawest are based on an ordinance that applies only to hotels, not to other businesses.
But Intrawest’s Honua Kai is not going to get any authorizations soon. The commission, with Johanna Amorin dissenting, approved interventions by the West Maui Preservation Association and Charles Fox.
Attorney Guy Haywood was chosen as hearings officer for the contested case.
Harry
Eagar can be reached at heagar@mauinews.com.
reprinted courtesy Maui News 11/11/04, original link beta100.mauinews.com/page/content.detail/id/3089.html?nav=10
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