‘Worst state for doing business’

When the state Supreme Court ruled on Dec. 2 that the Board of Land and Natural Resources erred in issuing the construction permit for the Thirty Meter Telescope, it sent a chilling message to the business community in general.

The decision has also forced existing telescope backers on Mauna Kea to assure edgy donors that Hawaii is still a place where astronomy can continue. That’s according to the island’s chambers of commerce — which say that businesses can’t operate under the kind of uncertainty generated when the state gives the green light for massive projects, but the courts strike down the government approvals.

“The observatories have communicated to me that they have had to assure their donors they can continue to do business here,” said Kona-Kohala Chamber of Commerce director Kirstin Kahaloa. “The donors of all of the other observatories are watching what is happening with TMT. They are concerned.”

The chambers will continue to try to send the message that the TMT — and a broader industry that brings in $167 million annually and employs 1,400 statewide — is welcome, Kahaloa said. They are actively seeking more businesses to get on board and show their support for the project, she said.

“If the TMT doesn’t move ahead, it will send a strong message that the state doesn’t want astronomy here anymore,” said Kahaloa.

“This decision proliferates our reputation as the worst state for doing business,” she said.

Bill Walter, vice president of the Hawaii Island Chamber of Commerce, said the court ruling isn’t an isolated one. A common thread winds through multiple decisions going back to the Hawaii Superferry and the foundered Hokulia project, he said. Commonalities include an organization that wishes to invest tens of millions of dollars in a project, guidance on the process and permits from government agencies, then the courts later halting the project based on incorrect procedure.

The Hawaii justices ruled that the BLNR erred when it issued the TMT permit before a contested case hearing was resolved. The decision halted the $1.4 billion project for months and potentially years while a new permitting process is undertaken. The conservation district use permit allowing the telescope’s construction was first approved in 2011.

“What we see is a system that has become so complex that even government itself cannot give us a clear route to decisions based on merit,” Walter said in an email. “A decision based on process where government has defined the process and it has been followed — and then rejected by government, can only be seen as a failure of governance.”

In a follow-up interview, Walter put it more bluntly:

“If any other organization in our society operated this way, it would not last long. I think it’s appropriate and important for us outside of government to say: Get it together. Give us a simple system. This doesn’t work.”

It is not clear what effect the decision will have on the project. TMT remains mum on its plan of action — if it indeed has one.

“TMT is still assessing its next steps following the Hawaii Supreme Court ruling, including all issues related to the project,” spokesman Scott Ishikawa said in a statement to West Hawaii Today.

Department of Land and Natural Resources spokesman Dan Dennison said the department’s response on concerns surrounding the recent ruling is the same as the one given earlier. DLNR deferred to the state Attorney General’s Office for comment after the ruling was released.

AG Doug Chin said then that his office would be advising the Land Board on future steps, and that the decision afforded a new opportunity for discussion on Mauna Kea’s future. The AG had nothing to add this week to that earlier statement.

Judi Steinman, a former HICC director, said the disconnect between regulatory and judicial rules presents a challenge to the business community.

“I expect our judicial system to serve the purpose of improving the process so that TMT and other investors in our island community can move forward in a legal way,” she said.

The Hawaii Superferry went bankrupt in 2009 after the Supreme Court declared unconstitutional a law created by then Gov. Linda Lingle and the Legislature allowing the ferry to operate interisland routes while an environmental study was being conducted.

Protesters greeted the first of two ferries as it arrived on Kauai, and the ship’s high rate of speed caused concerns about impacts to whales, dolphins and other marine animals. Concerns were also raised about vehicles spreading invasive species between islands.

The first ferry, the Alakai, had been struggling along for two years before the venture closed its doors. The Huakai, the second of two vessels designed to pack 866 people and 282 cars, was set for deployment in 2009, but that ship was also abandoned upon the bankruptcy.

Superferry Chairman John Lehman, a former secretary of the Navy, reported that the venture lost $300 million, including $85 million from his own equity firm. The ships ended up in the hands of the U.S. Navy, which purchased them at a fraction of their construction cost.

Since then, lawmakers and others have talked about the possibility of creating a new superferry.

The Hokulia luxury subdivision project south of Kona-Kailau endured years of legal battles in the early 2000s as opponents of the project sought to preserve the land’s agricultural and historical legacy, arguing that the subdivision didn’t follow state land use law. Third Circuit Court Judge Ronald Ibarra in 2003 halted development of the 1,550-acre project, ruling that Hawaii County had lacked the authority to approve the development on agricultural land.

At that time, investors had already put $350 million into the project.

John DeFries, president of 1250 Oceanside Partners, the developer, said at the time that the decision unraveled a dozen years of “good faith” permits and approvals from the county and state.

A 2006 out-of-court settlement allowed the Hokulia to go ahead in return for a list of concessions by 1250 Oceanside. But the project continued to endure years of financial struggle and bankruptcy.

Critics say the disagreement between the government’s branches — and the bleeding that follows — is all too often business as usual in the Aloha State.

Walter said: “The result of these failures has been loss of hundreds of millions of dollars that we see and undoubtedly far more in investments that are made elsewhere because of the impact of these decisions.”