Settlement hearing raises more questions


BY ERIN MILLER | WEST HAWAII TODAY

Just who would be responsible for building the Mamalahoa Highway bypass remained unclear Monday, following a court hearing on a motion to enforce a recently reached settlement.

Deputy Corporation Counsel Joseph Kamelamela filed the motion to enforce the settlement agreement, in which the company that bonded 1250 Oceanside's Hokulia development agreed to pay the county $12.5 million and the Lloyd's of London, the bank that now owns Hokulia, agreed to give the county a $20 million first mortgage on portions of the land.

"Why $12.5 million?" 3rd Circuit Court Judge Ronald Ibarra asked Kamelamela during the hearing. "The entire bypass was bonded."

And, Ibarra asked, why Oceanside would agree to the $20 million promissory note.

"Is there a reason they want to have that two-year period (to complete the bypass)?" Kamelamela responded. "So they don't lose the value of the property? They might want to sell it. I don't know."

But is that $12.5 million enough to build the road, Ibarra asked Kamelamela. The county's answer: There isn't a shortfall in funds to build the road, because there's the $12.5 million and that $20 million promissory note.

It wasn't clear, however, who would build the road in the two-year window to which Hawaii County agreed.

"I thought you still wanted Oceanside to be on the hook (to build the road)," Ibarra said to Kamelamela.

No, the county attorney responded.

Oceanside's attorney, William Meheula, told Ibarra the county brought the issue back to court to ensure Oceanside monitored the building of the road.

"We're not obligated to do this administering (of the funds to build the road), but we're talking about it," Meheula said.

Ibarra took the motion under advisement, and noted that a federal magistrate extended the deadline for the parties to reach a settlement until Feb. 29. If no agreement is reached by that date, the federal judge will dismiss the federal lawsuit. Ibarra said he would follow suit, dismissing the state lawsuits the next day.

One new detail about the proposed settlement that emerged Monday was that the agreement doesn't just release American Motorists Insurance Co. from the road improvement bonds, worth about $60 million, but also all the bonds Oceanside had taken out for the first two project phases.

Charles Flaherty, a plaintiff in a lawsuit against Oceanside that resulted in a 2006 settlement agreement, the terms of which allowed construction at Hokulia to resume, said that was a cause for concern. That's tens of millions, perhaps even $100 million, in bonds no longer being held to ensure the development continues, he said.

"Because the county code requires bonds, the question is, is the county entering into a settlement agreement that violates its own code," Flaherty said after attending the hearing. He said the settlement agreement's terms allow him to voice concerns about the agreement and whether it is being fulfilled.

The provision giving the county a promissory note for $20 million also worried him.

"If the road is not built after two years, the county will receive property within phase two, which has no infrastructure and no bond for completion," he said.

He noted Ibarra's line of questioning on who would build the remainder of the bypass.

"Ibarra brought up a point that even at this moment, it's not clear who is going to complete the bypass and how," Flaherty said. "It's a bad deal for taxpayers. It raises a lot of questions."

emiller@westhawaiitoday.com