Editor’s note: County information in this article should be attributed to the mayor’s office, not County Attorney Al Castillo. LIHU‘E — Kealia landowner Canpartners says Kaua‘i County is turning its back on an offer of $3 million and 16 acres
Editor’s note: County information in this article should be attributed to the mayor’s office, not County Attorney Al Castillo.
LIHU‘E — Kealia landowner Canpartners says Kaua‘i County is turning its back on an offer of $3 million and 16 acres of land.
Officials in the mayor’s office countered Friday that the developer admitted it is in default where subdivision obligations to the county are concerned. With utmost caution the county said it has no intention of granting Canpartners’ request to “draw down” on letters of credit the developer says is a necessary move by Tuesday or else the 2,000-acre project can’t proceed.
“Our due diligence process has left us with grave concerns about the legality of taking the action requested by Canpartners,” County Attorney Al Castillo said in a statement.
“Their proposed package left us with questions as to whether the full $18.4 million would be reinvested back into our community. We ultimately concluded that the legal risks and obligations placed upon the county and its citizens, if we drew on the letters of credit, clearly outweighed the value of the benefit package proposed by the developer,” he said, adding that “approving this proposal would leave the developer with an inequitable benefit at the risk of taxpayers.”
Canpartners responded in a press release, saying the request is a “win-win” situation. The landowner said drawing down on the letters of credit represents no adverse exposure potential to the county.
“There is no plausible explanation for this inaction by the county,” said Jonathan Roth, Canpartners’ principal. “Our primary concern is timing — if no action is taken by (Aug. 31), the deal cannot proceed.”
At risk is the proposed Kealia Kealanani subdivision, a 2,000-acre project Canpartners has worked on for the past 18 months.
Canpartners said they reached a deal with the administration but “ever-increasing demands of county officials could end up nullifying the agreement.”
In addition to the land and cash, Canpartners offered to indemnify the county from potential legal action to ensure that this deal was completed successfully based upon the terms agreed to in July, the Canpartners release states.
County officials said during the entirety of the 18-month negotiations the county never agreed to draw on the letters of credit.
Central to the dispute is $18.4 million in letters of credit (LOCs) pledged by the original developer, Maurice Kanbar, who posted these to secure infrastructure improvements he failed to construct in connection with the project, the Canpartners release states.
Kanbar took a $41 million loan from Canpartners and subsequently defaulted on it in late 2008, forcing Canpartners to foreclose on the Kealia Kealanani property. Without county action by Tuesday, the LOCs expire, according to Canpartners.
County action isn’t going to happen by that deadline, county officials said.
Canpartners said in its release that they were led to believe that the proposed transaction was accepted by the county, and the developer was also led to believe that the “draw down” on the LOCs would be made by the county by the Tuesday expiration to ensure that the funds would not be lost.
“Let us be clear: The county has at no time ever come to any agreement or accord with the developer to draw on the letters of credit, and we still maintain this position,” Castillo said in the county statement.
David Callies, an expert in land use and entitlements and a professor of law at the University of Hawai‘i at Manoa, said the action by the county requested by Canpartners is legal.
“Extensive legal analysis has shown that the county has the right to call these letters of credit and the action of doing so poses no legal risk to the county and does not cost the county anything,” Callies said in the Canpartners release.
County officials said their own third-party advisers “confirmed that our concerns are valid. Therefore, we disagree that drawing ‘poses no legal risk’ to the county.
“We are disappointed that Canpartners and their associates have chosen to publicly misconstrue the actions of the county with respect to the Kealanani subdivision letters of credit,” Castillo said.
“With regard to this matter, the county’s first priority was, and has always been, taking actions in the best interests of its citizens,” the county attorney said.
“The prospect of $18.4 million in spending that could go towards construction jobs and citizen benefits is something that warranted our attention. We conducted extensive research over the past 18 months on whether drawing the letters of credit was possible and it was under this premise that the county engaged in good-faith discussions with Canpartners.”
• Paul C. Curtis, assistant editor and staff writer, can be reached at 245-3681 (ext. 224) or pcurtis@kauaipubco.com.
