Tackling the Tough Issues
That old line, “What do you want first, the good news or the bad news?” came to mind as we researched this Maui report.
One of our first visits was with Maui County Mayor Charmaine Tavares. The mayor’s concern about the impact of the current economic situation and its effect on the progress of much-needed facilities and services, is obvious. This was the basis for her initiation, last year at this time, of interactive consulting groups such as the developers’ task force, which she hoped would help to improve such existing problem areas as the lengthy permitting process. We ask the mayor about the status of the task force with its many industry leader members. “Their work is completed,” she replies. “It has not yet visibly shortened the permitting process as we had hoped it might, but the task force members came up with excellent suggestions for making the permitting process easier to get through as well as more efficient. Some of the suggestions already have been implemented. It all goes back to what I have felt is so important from the beginning — what needs to take place in each department — planning, public works, water, all of the county departments. Look at what you’re doing and see how you can do things more efficiently.” The mayor says the developers’ task force also came up with various legislative suggestions, “and I’m taking them very seriously.”
We ask what she feels is the biggest challenge currently facing Maui County. “It’s still water,” she says. “Nothing happens without water.” We tell her that in our discussions with industry members, the “show me the water bill,” which, with certain exemptions, requires developers to identify a “long-term, reliable source of water before receiving zoning or subdivision approval,” is a very contentious issue. “I know it is,” she replies, “but if there’s no water, there’s no water. Then what? How can you take a chance developing with no source of water?”
Several industry members disagree with the bill, calling it “a de facto moratorium on development” and an area that needs addressing. They contend that Maui has an abundant source of water but that source development, transmission and distribution need to be strategically planned and implemented. Where does it all go from here? “Agreements need to be addressed and finalized,” says Mayor Tavares. “Who is doing what with water?”
The mayor also continues to be determined to “push” CIP (Capital Improvement Projects) work. “A lot of the county projects we are trying to get out the door are infrastructure projects,” she says. (Editor’s note: We detail this area later in discussions with the director of Public Works.) “For example, there is an aggressive program for transmission line replacement, which at the same time, is looking at the most energy efficient methods.”
On the Bright Side
“I am very excited about the progress we are making in energy efficiency and sustainability,” says Mayor Tavares. “The private and public sectors — everyone is getting together to increase and promote energy efficiency and sustainability.” She emphasizes that this has been a priority with her administration “from day one.” Actually, even earlier — before she became mayor of Maui County, before green building and sustainability became buzzwords and “the right thing to do,” she was a driving force in this area. “I was one of the early proponents for energy efficiency and sustainability when I was on the county council,” she acknowledges.
The mayor and Maui County’s efforts in this area have not gone unnoticed, even at a national level. The findings of a recently issued National Research Council report on policy and technology options for alternative energy development in the United States validates efforts by Maui County and the Maui Economic Development Board to reduce Hawaii’s dependence on oil.
Five working groups were formed under the umbrella of the Maui County Energy Alliance (MCEA), which the mayor created in 2008 to focus on matters of energy conservation, technological options and needs. Members of the MCEA include representatives from the County of Maui, the Maui Economic Development Board, Maui Community College, the U.S. Department of Energy and volunteers from public, private and government sectors. The MCEA was tasked with developing a Maui County energy plan with goals, objectives and a timeline for implementation. “It was unveiled to the public at the energy expo (the Maui County Energy Expo) in September,” says Mayor Tavares. Priority recommendations include the development of an Energy Infrastructure Master Plan; a standardized report for county energy and resource consumption; a “green permit” program to encourage green and LEED-certified building in both private and public projects; and legislation “that strengthens the commitment of Maui and Hawaii to achieve energy goals by ensuring that stated targets are legal mandates and not merely recommendations.”
The MCEA plan also recommends that Maui County fund a Maui renewable energy trust; expand the bus system to encourage public transportation; provide energy audits to businesses to promote energy efficiency; reduce fees for eco-friendly projects; and lead by example by implementing energy efficiency in its own facilities. This last recommendation seems to be moving forward, as the mayor tells us stimulus funds have been applied for to cover energy audits for such facilities as fire stations and some community centers. “We’re looking at photovoltaics and other energy saving technologies,” she says, and also mentions the need for and the intention of creating a “green directory” of businesses, suppliers and products. For more information on the MCEA plan or to view a copy of the “Strategies for Implementation: Recommendations from the Working Groups,” visit www.mauicounty.gov/energyexpo
Facing up to the
Facts and Figures
“Building permit value is continuing a downward trend from last year,” says Milton Arakawa, director, Maui County Department of Public Works.
“In calendar year 2008, the total building permit valuation was $467 million. From January to June 2009, the total building permit valuation is $140 million.” Arakawa provides more statistics from past years: “In calendar year 2004, the total valuation of building permits in the County of Maui was $467 million. In calendar year 2005, total building permit valuation rose to $871 million. In 2006, it rose again to a little over $1 billion. In 2007, the total building permit valuation declined to $755 million, declining again to $467 million in 2008.” And then we have the current six-month figure for January through June 2009 of $140 million.
Never one to shirk harsh reality, Arakawa also tells us, “Average building permit processing times generally have increased over the past five years.” The figures underscore his words, progressing from 83 days in 2004 to 124 days in 2005, 148 days in 2006, 160 days in 2007 and 188 days in 2008 to the most recent 213 days for January – June 2009. “For the first six months of 2009, average building permit processing times have increased slightly,” he acknowledges. “While the increase in time is not positive, one noticeable issue has been the significant numbers of permits that have been approved but have not been picked up. There currently are 321 of these permits.”
It’s not a far stretch to analyze why this is happening. “They are not as confident in the business climate as when they first filed.” Also, simply put, they have not gotten the expected financing.
“Instituted earlier this year to ease the permitting process,” Arakawa explains, “is electronic approvals for Certificates of Occupancy. Formerly, Certificates of Occupancy needed to be hand-carried to various review agencies for signatures. Now, the electronic process provides added convenience and is time saving. We also are looking to expand the electronic process to building permit applications as well.
“Everyone realizes,” says Arakawa, “that the economy is in a terrible slump and the construction industry is hurting. We are working on initiatives to try to streamline the development process as well as try to get our capital improvement projects going. For example, we currently are working on legislation to try to streamline the subdivision process. We have been working with the Department of Planning on this matter. Subdivision applications currently undergo review by the Department of Public Works (DPW). One of the points reviewed by the DPW is whether state land use, community plan and zoning designations match for conformance. However, since the Department of Planning currently utilizes a consistency standard for Special Management Area (SMA) permits, the proposed legislation seeks to establish this same standard for subdivisions. This means the state land use, community plan and zoning may not necessarily match, but they would still need to be consistent with each other within each respective category. The proposed bill calls for the Department of Planning to make this determination. If this legislation passes, it could eliminate a number of unnecessary state land use district boundary amendments, community plan amendments and/or changes in zoning applications. This could shorten the overall development permit process time.”
What’s the Plan?
“The Maui County Planning Department is continuing its pursuit of a streamlined permitting system,” says Planning Director Jeff Hunt. “The draft Maui Island Plan has been transmitted to the County Council for adoption. The plan’s urban and rural growth boundaries will expedite project approval by providing assurance to developers of county support for projects within the growth areas. Furthermore, the Planning Department will be seeking comprehensive amendments to state land use district boundaries, community plan designations and zoning maps to provide entitlements to lands within the growth areas. The department also is drafting a set of four bills that would delegate approvals and renewals for projects involving a project district, planned development, conditional permit or off-site parking.” The Maui Island Plan also envisions a more diverse economy with greater growth of emerging industries including renewable energy, high technology, health care, entertainment and education, while still providing for growth in tourism.
Under the Long Range Division, Hunt says the Maui Island Plan proposes a directed growth strategy that is the first of its kind for the county. “The strategy includes the development and adoption of both urban and rural growth boundaries,” he points out. “These boundaries define where future urban and rural expansion will be supported. The growth boundaries will provide for more effective planning and delivery of infrastructure, greater protection of critical environmental and cultural resources and stronger support of smart growth principles. The plan also identifies and maps Maui’s resort destination areas so that resort expansion can be directed to these areas. Additional Maui Island Plan highlights,” Hunt says, “include recommendations to protect prime agricultural land and promote food self-sufficiency. A cornerstone of the plan’s housing element includes a requirement that affordable housing be deed restricted and appreciation-capped so that it remains affordable in perpetuity. Finally, the plan seeks to better protect near-shore water quality and the island’s coral reef ecosystems by integrating watershed and coastal resource management planning.”
Of the permitting process, Hunt says, “Building permit review has been reduced with residential and commercial applications being reviewed within five to seven days upon receipt by our staff. We have no backlog in our review of new subdivision applications and requests for SMA exempted permits. Our zoning and flood zone determinations are being confirmed within one to two days of receipt. We have a 20-day backlog on agricultural building permits. Additional processing time is required for review of farm plans and agricultural use agreements, which are recorded at the State Bureau of Conveyances. In addition, inspection of the implementation of farm lands may be required prior to building permit approval.
“Of course, the downturn in the economy has affected developmental planning, but a lot has to do with the extra hours that the staff still is putting in to get the work assignments done in a timely manner.”
As to the Current Planning Division’s activities, Hunt again emphasizes, “The department continues to look at ways of implementing code and rule changes to implement streamlining. While the number of permit applications being processed presently is down from last year, the Current Division looks at ways of reviewing the bed and breakfast permit applications resulting from the new B&B legislation enacted in January 2009. This division also is processing the land use permits for the planned $250 million upgrade at the Grand Wailea Hotel and Spa with its 310 room addition. Other major public projects going through the land use entitlement process are the $40 million Kihei Police Station, the $200 million new Maui Correctional Center and the Haiku Fire Station.”
An Industry
in Transition
In addition to interviews with the mayor and other county officials, we visited jobsites and businesses and spoke with many industry members who are based on or currently working on Maui. Their comments are insightful and in some cases, passionate.
“I see 2009 as a transitional year,” says Doyle Betsill, CEO of Maui-based Betsill Brothers Construction. “Where we are at the end of this transition period depends primarily on our local government. Many construction companies had projects in the pipeline that enabled them to maintain volume in 2008 and even 2009. However, we are not really in competition with other builders and developers right now; we are in competition with the hundreds of foreclosures which have flooded the market this year. Very few projects can compete with the price points on foreclosed units and maintain adequate margins. So builders are finding it necessary to reduce their margins and increase efficiencies to stay competitive in the marketplace. In addition, high unemployment reduces the number of buyers, fewer projects are coming online and the short term is a brutal business environment. I think that normally, we would be calling a bottom for this recession and be preparing bids and projects for the upside. Unfortunately, the cumulative cost of impact fees such as park fees and affordable housing fees are higher on Maui than the total cost of homes in most of the (mainland) U.S. And the new water ordinance effectively prevents any new projects from even getting reviewed. Unless our Maui County Council takes action to remove the obstacles they have placed on new construction immediately, the construction industry on Maui will not share in the economic recovery which now is developing.”
Last year at this time, David Goode, president of KSD Hawaii told us his projects were moving forward and his company was not being heavily impacted by the economic situation — “at least not yet,” he said. However, “This year we have been affected,” he now tells us. “Sales have slowed on some projects.” The good news for potential homeowners is, “Now is a buying opportunity for those who have been priced out of the market in the last five years or so. Many of our sales have been to first-time homebuyers and the federal tax rebate is a positive influence for these sales.” Commenting on the overall Maui picture, Goode says, “High unemployment continues to be a drag on the local Maui economy and job uncertainty is keeping a lot of potential buyers on the sidelines. Federal stimulus funds had not appeared as of the end of September, so construction jobs continue to decline. Newer projects are having a difficult time getting off the ground,” he points out, “not just because of the economy, but because of the ‘show me the water’ and ‘workforce housing’ ordinances. These ordinances are making new water meters almost impossible to obtain and the high workforce housing requirement (40 to 50 percent) makes project financing financially unfeasible. There appear to be possible changes to the water ordinance but changes in the workforce housing ordinance proposed earlier this year, fell on deaf ears.”
Call to Action
“Maui has slowed down a lot over the past year,” says Ray Skelton, Maui regional manager for Goodfellow Bros., Inc. “There is definitely less work in 2009.” In specific issues, Skelton points to the permitting process as a major concern. “Although the problems have been identified, the process has not improved,” he says. “We are in one of the lowest economic downturns we have ever faced, with public projects that need appropriate approval so our infrastructure does not fail — roads, bridges, schools, community facilities. Taxpayers are going to seriously start asking what they are getting for the taxes they pay. This issue has alarming proportions.” On the more positive side, Skelton mentions that the county now has a CIP coordinator. Speaking of this move forward and of the mayor’s efforts with the developers’ task force, Skelton says, “We need to keep up the good
work and build on it. What is the stumbling block in getting the projects out? For one, there seems to be entitlement issues. The ‘show me the water bill’ has not improved things. People who want to build low cost and workforce housing are being hindered by the workforce housing bill.” Looking to hope for the future, Skelton says, “Some local government people seem to want to open discussions on the issues.” As to the identification of urban growth areas and its implications, Skelton says he can understand the concept behind the Planning Department’s strategy, but questions whether should it be quite so absolute. “If handled properly, it can be a positive thing, but the issues involved need to be carefully addressed,” he feels.
What lies ahead? “I see the first half of 2010 as more difficult than 2009. If we don’t all come together as a community, it only will get worse. By beginning to address the larger issues such as the workforce housing and water bills, we can start to pull ourselves up. Inactivity will kill us.”
As to Goodfellow’s role, Skelton says, “We’re trying to do our job in the community, take a leadership position, help lead the community to a positive place. This has always been an important part of our basic philosophy.”
We speak every year when we do this Maui report, with Charlie Jenks, a longtime Maui developer who attempted to move his Honuaula (Wailea 670) project forward for many years. This time around, Charlie tells us zoning for the project (a 1,400 home subdivision, of which 50 percent — 700 homes — will be affordable units) finally was awarded in 2008. This development will not rely upon County of Maui water so it will not be involved in current water issues. However, 250 affordable units to be built on a parcel of land owned by Jenks in North Kihei will be impacted by the water availability bill. Jenks is not alone in his concerns. He, along with other developers and builders who are affected by the bill and at this point are unable to move forward with their projects, including much-needed workforce/affordable housing, plan to obtain a hearing before the Maui County Council to address necessary changes and exemptions to the bill — some of which, they say, were in earlier versions of the bill but later removed.
Consider This
There was no shortage of those willing — even eager — to voice their concerns and opinions on issues facing Maui. Suggestions also were offered on possible ways to alleviate what are viewed as stumbling blocks to a more positive economic outlook. We already have discussed in this report much of the input we received while on Maui. But there is more:
In another take on the current situation, Stephen Leis, president and CEO of Dorvin D. Leis Co., Inc., based on Maui for more than 42 years, says, “After the sudden downturn in projects at the end of last year, we have been working off of our existing backlog in 2009. Unfortunately, this has resulted in a contraction of our workforce that is unprecedented in the history of our company. 2010 looks as though it (also) will be very lean and we don’t see a lot of opportunities. Hopefully, Maui will see some recovery opportunities by the end of 2010. However, we feel that any recovery may be impeded by the recent passing of the county’s ‘show me the water’ and ‘affordable housing’ bills which will, in our opinion, stifle the approval process. This will negatively affect the feasibility of future projects and will present a formidable challenge to any recovery. Well-planned and worthy projects,” says Leis, “such as West Maui Hospital, should be given an expedited review, approval and permit process to bring them on line as fast as possible. In addition, capital improvement projects that are pending should be put out to bid as soon as possible. Projects such as the long overdue Kihei High School and the prison expansion should be placed on the fast track. This is an opportune time for the county, state and federal governments to receive the benefit of substantially reduced construction costs and also will result in much-needed construction jobs.”
Regarding the Planning Department’s directed growth strategy with its identification of urban growth areas, Daryl Arita of Arita-Poulson General Contracting, LLC agrees with many who spoke about this move. “If handled correctly with proper research and attention to the details and issues involved, and with a goal of making Maui a more beautiful place to live, it could be a success story. Otherwise, it will be just another bill that probably will not accomplish much.” The details he refers to include, “paying attention not only to how a project is developing, but also the time it takes for a development to get from point A to point B; how long the development process takes.”
Looking Back,
Thinking Forward
“D.R. Horton, Schuler Homes has had a presence on Maui since 1974 when Jim Schuler built his first homes, Papakea Condominiums, on the Valley Isle,” reports Mary Flood, vice president of sales and marketing for D.R. Horton - Hawaii. “Since that time, we have built over 2,000 homes on Maui, most of which have been workforce housing.” Flood, who is immediate past president of BIA (Building Industry Association) Hawaii, says, “D.R. Horton, Schuler Homes intends to continue that tradition with Na Hoku at Maui Lani in Kahului, the Cottages at Kulamalu, and Opukea and Hoonanea in Lahaina. Plus, we always are looking at new projects on Maui as they arise.”
Stanford Carr of Stanford Carr Development, LLC (SCD), a longtime developer on Maui, fills us in on his projects and plans. “Hoolea Terrace (formerly known as Module 17) at Kehalani is going full speed with sitework infrastructure (Goodfellow Bros. with Hawaiian Dredging Construction Co., Inc. as general contractor). The Cottages at Kehalani (Inter Island Home Builders, LLC, general contractor/Diversified Machinery, Inc. sitework) are nearing completion, and we are moving slowly but surely forward on The Villas at Kehalani (Inter Island Home Builders, general contractor/Goodfellow Bros. sitework.) We are going to start on some design/build homes in Waiola (Module 2) at Kehalani in order to stimulate lot sales. We also can work with families in a design/build service to create their dream home.
“We finally are proceeding with Kehalani Village Center, our neighborhood center at Kehalani, after a few false starts with some mainland joint venture partners that fell apart because of the capital markets. But fortunately the anchor tenants believe in our location and our community, so we are proceeding.” The most recent site plan for Kehalani Village Center includes locations for retail, restaurant, office and other community amenities and services. Total planned space is 151,000 square feet with parking facilities for 181 cars.
“We are committed to Maui and put a lot of emphasis into developing affordable homes on Maui early in this administration,” says Kaulana Park, newly appointed director of the Department of Hawaiian Home Lands (DHHL). “As a result, we developed our Waiehu Kou subdivisions in Wailuku and Leialii subdivision in Lahaina. Our affordable housing project in Kokea-Waiohuli in Upcountry Maui currently is out for bid and we expect to select a developer later this month for the first 25 homes.
“Dowling Company, with its team of sitework and building contractors, professional consultants, realtors and financial partners, has been a good partner and has built many quality, affordable homes for our beneficiaries.
“Maui has great potential and promise and we are now moving ahead with Leialii lB in Lahaina. Thanks to the efforts of the state legislature, our first step is the development of a water source to service this subdivision. While there are challenges to any project, we are upbeat about everyone — from the county to the state and private industry — that we work with. Overall, DHHL has been responsible for hundreds of millions of dollars of work on Maui and we believe this is a role we need to play and will continue to play in helping to ride out these difficult economic times. I am hopeful the economy will begin to see an upswing and we want to be a part of the increase in economic activity.”
In addition to those projects mentioned by Park, DHHL’s Paukukalo Pump Station was set to be completed in October (Goodfellow Bros.) and vacant lots at Waiohuli Hikina (Royal Contracting site contractor) are being awarded to owner-builders.
Despite the challenging times for Maui’s economy and the industry, there were pockets of progress. For example, in addition to the projects already mentioned:
