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The Department of Land and Natural Resources for years has allowed fishing charters, a submarine tour operation and other private businesses at a public boat harbor on Hawaii island to use state land without paying rent, a Honolulu Star-Advertiser investigation has found. Read more

Businesses for years have been using state land at a small boat harbor on the Big Island to support their commercial activities without paying rent. The business operators and other boat owners capitalizing on the state’s lax oversight have no written agreements — with one exception — to use the shoreline property.

The state Department of Land and Natural Resources, the landowner, also has a poor track record of leasing idled lands on several islands that it described nearly a decade ago as having the best revenue-generating potential.

And even though staffers as far back as 2012 were recommending that monthly rents for the department’s revocable permits be raised because the rates were substantially below market, the agency didn’t take such action for four to five years.

Those were among the findings of a Honolulu Star-Advertiser investigation of DLNR land management practices that is detailed in a three-day series starting today.

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BREACH OF TRUST

A three-part series by Rob Perez Today: Businesses for years have used state land for free at a Kona harbor. Monday: DLNR plan to lease promising state properties fizzles despite strong real estate market. Tuesday: The agency does not heed 2012, 2013 recommendations to increase deeply discounted rents.

The Department of Land and Natural Resources for years has allowed fishing charters, a submarine tour operation and other private businesses at a public boat harbor on Hawaii island to use state land without paying rent, a Honolulu Star-Advertiser investigation has found.

And only one of the commercial ventures has a written agreement with the agency to use the land.

The business operators, who pay for mooring permits to dock their vessels in Honokohau Small Boat Harbor just north of Kailua-­Kona, have had free use of small patches of state land along the harbor’s shoreline, where they have built pavilions, storage buildings and other small structures to support their enterprises.

Some permit holders have capitalized on the unusual arrangement since the 1980s, while others acquired rights to the slips more recently and are using structures erected by previous permittees.

The mooring permits typically do not provide authorization to use state land to construct buildings. Many of the 30-plus roofed structures the Star-Advertiser counted on a recent visit to Honokohau were linked to commercial enterprises.

DLNR said most of the structures were built before it took over Hawaii’s small boat harbors from another state agency in 1991, and the department kept in place the Honokohau management scheme it inherited at the time. In subsequent years, when the agency attempted to address the issue, the “highest levels of state government” discouraged DLNR staff from taking aggressive action, the agency added.

Today, however, the department is exploring ways to improve the roughly 270-slip harbor, a process that will include determining what, if any, rents should be charged to permit holders who have structures there and what appropriate use agreement to put in place, according to DLNR.

“We’ve been working on this for a while,” said Ed Underwood, administrator of the agency’s Division of Boating and Ocean Recreation, which oversees the small boat harbors. “It’s not like something we just turned our back on and let go.”

WHAT THE LAND AGENCY OVERSEES

Among the Department of Land and Natural Resources’ responsibilities: >> 800 full- and part-time workers

>> $159.2 million fiscal year 2019 budget

>> 1.3 million public land trust acreage

>> 750 miles of coastline

>> 21 small boat harbors

>> 2 million public and private conservation land acreage

>> 678,612 forest reserve acreage

>> 52 state parks

In examining DLNR’s overall land management practices, including at the harbors, the Star-Advertiser found many cases that at best raised questions about its practices and at worst reflected shoddy oversight. Critics say the lax oversight undermines what is in the best interests of the public and the 1.3 million-acre land trust the department oversees.

The cases ranged from DLNR charging monthly rent for years to a for-profit company at a rate about six times less than what it was charging nonprofits, to taking more than a decade to resolve a lease dispute even though the lessee stopped paying rent for the whole period, accumulating hundreds of thousands of dollars in debt.

“It’s negligence,” said Mary Maxine Kahaulelio, 80, one of two Native Hawaiian cultural practitioners who successfully sued the department in 2014 for breaching its trust obligation related to a Big Island lease. “They’re failing to care for our land.”

The newspaper’s findings come at a time of heightened scrutiny for the department. The state auditor is conducting an audit of the Land Division at the request of legislators. And employee complaints filed against the division’s top managers in recent years have questioned whether management actions have been in the best interests of the trust.

LAND UNDER FIRE

A live-fire military training site on the Big Island is at the heart of a lawsuit against the Department of Land and Natural resources. 1964: Army leases 22,971 acres in Pohakuloa for 65 years from DLNR for training exercises; total rent: $1.

1984: DLNR inspects land for first time, concluding “property being used for military training purposes per lease terms”; no other findings included.

1994: DLNR conducts second inspection resulting in single-page report lacking findings and inspector’s signature.

2010: Army Corps of Engineers report documents damage to property, saying “training of military causes displacement of native vegetation and destroying of land that will never be safe for future generations.”

April 2014: Clarence “Ku” Ching and Mary Maxine Kahaulelio, Native Hawaiian cultural practitioners, sue DLNR and its board, alleging breach of trust for failure to care for the Pohakuloa land.

Sep. 2014: Cultural Surveys Hawaii issues report for Army Corps recommending Army begin seeking funding for property cleanup.

Dec. 2014: DLNR inspects property, producing more detailed report on findings.

Sept./Oct. 2015: Trial held before Circuit Judge Gary Chang.

April 2018: Chang rules for plaintiffs, finding DLNR and its board breached trust obligations by failing to care for land.

Sept. 2018: State appeals Chang’s ruling. Source: Court documents

DLNR defended its practices, saying its application of the rules has become fairer and more accurate, and transparency has increased. The trust, it added, is well managed.

But the Star-Advertiser found the agency’s Honokohau oversight to be lax and uneven, costing the state untold sums in uncaptured rent and fostering an environment in which businesses essentially have been subsidized by the public. A lack of building standards also has contributed to a hodgepodge of facade styles, detracting from the harbor’s appearance.

The case of Atlantis Submarines underscores how the public can be shortchanged if DLNR is not on top of things.

The company, which recently generated more than $1.3 million in revenue from a year of commercial activity linked to its two Honokohau berths, obtained a DLNR revocable permit in 2016 for month-to-month use of a small patch of land next to its two adjacent mooring slips, according to department documents. The ground rent for the 3,300-square-foot parcel was set at $3,000 monthly and took effect in 2017.

But Atlantis actually had been using the property since 1999 when the company acquired the rights to the two slips.

By the time the revocable permit was approved in June 2016, Atlantis already had four structures, a shipping container and a concrete driveway on the property — even though it had no land use agreement and was not paying rent, according to DLNR.

That meant Atlantis benefited from free use of state land from 1999 through 2016. DLNR couldn’t even tell the Star-Advertiser when the company built the structures, even though it occurred on the agency’s watch.

“That’s completely unacceptable,” said Marti Townsend, director of Sierra Club of Hawaii. “The department is supposed to be acting in the best interests of the public.”

Ronald Williams, president and chief executive officer of Atlantis Adventures in Hawaii, said the company sought and received DLNR permission to use the shoreline parcel, including erecting two low-profile buildings and installing a short driveway, when Atlantis acquired the mooring rights in 1999 and needed to make essential modifications to accommodate the berthing of a battery-powered sub.

A garden shed and 20-foot storage container were added to the property in recent years.

The company’s understanding was that the payments it made for the mooring slips included use of the adjacent land, according to Williams. “We just assumed that was all part of the rental,” he told the Star-Advertiser.

He said the company had a written agreement with DLNR from the late 1990s, but after two moves of Atlantis’ offices since then, it was unable to locate the documentation to show the Star-Advertiser.

“We requested permission to do everything we did,” Williams said. “It’s very important for us to be a good community business.”

Agency pressured to be lenient

While Atlantis did not start paying rent until 2017, it has been paying for the mooring slips for nearly two decades. In the year ended in August, Atlantis paid nearly $12,000 for the two berths, according to DLNR.

Commercial operators pay a higher rate for their mooring permits than noncommercial entities.

DLNR, which has overseen the small boat harbors for more than a quarter-century, flagged the Atlantis parcel in 2013 when it inventoried all Honokohau improvements, including structures, stairs and retaining walls, that tenants built as far back as the 1980s. The improvements were meant to enhance the harbor, which the state opened with nothing but docks, yet DLNR had little information about them.

“We knew these structures were all through the harbor,” Underwood said. “When we were going through our files and all, we noticed that we were not finding a lot of information on them. We wanted to figure out what would be the best way to address these.”

Atlantis is the only mooring permit holder so far that has a use agreement for the shoreline property, according to DLNR.

Some of the structures throughout the harbor are little more than awnings or small shelters providing refuge from the sun. But others are more elaborate, including one pavilion with a wood deck, portable barbecue, ceiling fan, patio furniture, electrical hookup and large locked storage box or cooler. A “Pickens Patio” sign hung in the pavilion.

Asked whether the public is able to use the Honokohau pavilions, Underwood replied, “That’s been my impression.”

Yet none of the structures the Star-Advertiser saw on its recent visit had signs welcoming public use.

Chuck Wigzell, who acquired the rights to the mooring slip across from the Pickens Patio pavilion about six years ago and captains a luxury charter fishing boat called Ez Pickens, said the shoreline structure already was there. He said he repainted it recently, his customers use it and he occasionally sees others use it as well.

“It’s just for shade, really,” Wigzell said.

DLNR officials told the Star-Advertiser they were not aware of any new Honokohau structures approved for construction over the past decade.

Just last year, however, Heather Howard, who acquired the rights to two slips, said she received verbal permission from a DLNR official to build a storage structure at Howard’s expense across from the slips. Howard said she had to submit three applications because DLNR kept seeking modifications to her plans. She completed construction this year.

Howard, whose company offers scuba and coral conservation trips, said she has no written use agreement with DLNR and is not paying rent, but would be willing to do so as long as the rules apply equally to everyone. She said she was told by DLNR she could credit the cost of building the structure against any rent but that the agency would own the building.

“I have no complaints,” Howard said. “I’m happy as a clam.”

On the question of rent, the department said it believed charging boaters to gain access to their vessels would be unfair. But the majority of structures the Star-Advertiser saw were not needed to access the boats.

In the years following the 1991 management change from the Department of Transportation, DLNR considered addressing the situation regarding the Honokohau structures. But “the highest levels of state government directed staff to not aggressively address this issue,” the department wrote in response to Star-Advertiser questions.

Asked who issued such directives and when, the agency replied, “This occurred over several administrations that expressed concerns regarding changes” at the harbor. “Priorities have changed and the current administration is looking for ways to develop and improve facilities and to increase capacity.”

The matter of dealing with outside political pressure is not new to the department.

“There are times the department is pressured by legislators who are seeking dispositions favorable to constituents,” Sen. Laura Thielen, who served as DLNR director from 2007 to 2010 under Gov. Linda Lingle, said in an email. “While in some cases these are reasonable arguments from the perspective of the local area, they aren’t necessarily favorable to the statewide interests and public trust DLNR is charged with representing.

“In any case, it’s difficult for any department to resist strong, sustained pressure from key legislators year after year. The Legislature sets departments’ budgets, decides how many positions they can have and votes on bills a department proposes or opposes.”

Honokohau is a special case

DLNR officials described Honokohau as a unique situation because most of the structures were built before the agency took control of the harbor and “carried on with whatever the management scheme was at the time.”

To address future plans for the harbor, DLNR recently formed a working group that includes boaters, elected officials and others who will help develop recommendations. The effort will include deciding the appropriate land disposition for the structures.

The 1.3 million-acre trust the department oversees consists mostly of conservation land, marginal parcels and noncommercial properties.

To support the notion the trust is well managed, DLNR officials cited the hundreds of leases that get no public attention because the cases are effectively handled. And the officials underscored the department’s mission to administer the land trust with the best public purpose in mind rather than the highest and best use to maximize revenues — the goal of private landowners.

DLNR forced to pick priorities

Ala Wai Small Boat Harbor in Waikiki is a good example, according to Suzanne Case, who heads the department and its governing board. “If it were a private piece of land, it would be full of high-rises already,” she said.

Case cited two examples to highlight what she considered department successes: managing the 2017 International Union for Conservation of Nature conference under budget, allowing the agency to return $2.9 million to the Legislature; and the June launching of a state landownership database accessible to the public online.

Still, the department is continuously looking for ways to improve, Case said. “We are committed to doing the right things for the right reasons,” she said.

The agency is widely considered to be grossly underfunded, presenting workload challenges. Though many of its employees are lauded for their dedication and hard work, the workload can be overwhelming, some say.

“Overall, what we have to do in our land management is pick our priorities,” Case said. “Yes, you can find examples where people may think we’re not maximizing our opportunity. But we have to prioritize our work because our work is very, very high-volume.”