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John De Fries, CEO, Hokulia

More than two years have passed since an out-of-court settlement restarted construction on Hokulia, a 1,550-acre development outside of Kailua-Kona. John De Fries, CEO of Hokulia, spoke with Hawaii Business on the lessons learned.

 

John De Fries

Photo by Kevin Blitz

Click here for an online-only extended interview

Q: During the standstill between 2003 and 2006, what was going through your mind?


A: I was in the courtroom the day that the judge issued the ruling [stopping construction on the Hokulia]. I was stunned by the ruling itself, but I under-stood enough about our customers to know that we could manage that situation. My immediate concern went to the employees. At that time we had roughly 210 direct employees, of which months later 110 got laid off. The day after the ruling, approximately 300 contractors and subcontractors got laid off. The following 12 months that followed the ruling, we were on schedule to spend roughly $70 million in construction dollars.

So when you add those elements on in a town that’s as fragile as Kona is, that’s a big impact. That was very painful because the small communities like that, you’re making decisions to lay off a father and keep a mother, or lay off a son and keep an uncle. It’s that interwoven into the communities. … I was so moved by the attitude of the employees. They truly took these announcements and layoffs in a very positive way and kept encouraging us to move forward in hopes that this could be resolved and most of them could return.
 

Q: On Kauai, Kukuiula is constructing a bypass road for Kauai County, pretty much what you guys are doing. [Hokulia is constructing the Mamalahoa Bypass Road in Kona.] Do you see that in the future as part of master-planned developments, private developers doing infrastructure work for the county?


A: I do. I think it’s something to be handled on a case-by-case basis so that there’s some balance in the economic equation. I think what was contemplated in the case of Hokulia, the County of Hawaii was respectful for allowing the project to mature at the same time infrastructure was being laid in place. By that I mean cash flow drives not only the master-planned community but also drives the community infrastructure. I would just caution the county governments from putting too big a demand on infrastructure up front prior to the developer being able to get that economic engine started, because the two are intricately involved in the success of one another.
 

Q: Hokulia is an agricultural subdivision. Maui and Kauai had legislation go through within the last year trying to put a moratorium on these kinds of developments. How does that affect Hokulia and the future of agricultural subdivisions?


A: It doesn’t affect Hokulia in the sense that when the judge amended its final ruling, Hokulia was free to move forward unencumbered by any of those agricultural issues. We did commit in the settlement agreement to seeking a reclassification for rural, which would then make agriculture on each of these home sites optional. But in a macro sense, the state of Hawaii has a little over 2 million acres zoned agriculture, of which we’ve even been told by the state that half of those lands are not suitable for agriculture. They’re tied to quality of soil, sources of water, that kind of thing. I do believe, in conjunction with the state Legislature’s Important Ag Lands legislation, there’s no question our important ag lands ought to be protected and reserved for agriculture. … But I do think the lesson here is that, if you’re not going to do agriculture, and the land’s not suitable for agriculture, then get it out of that class. That class of land can no longer just be a holding tank for lands that you don’t want in urban or conservation. ... Be more respectful to that class of land and start a reclassification process, because 50 years from now, somebody could come to apply for a subdivison on land that has good soil and try to argue that the global competition in agriculture makes it unfeasible to have agriculture.
 

Q: Hokulia is almost a precursor to what’s happened to the Superferry, where there was government approval but then it was stopped in the courts. What message can they learn from Hokulia?


A: As important as the media is in communicating to the public, I’ve learned that you can’t rely on it as a sole source because everyone’s got deadlines. It’s a very intricate, complex issue and I don’t expect somebody who’s talking to me at 11 o’clock and has a 2 o’clock deadline to file to try to grasp all of this. I would say this: As a state and in our respective Island communities, we cannot afford many more of these start-stop, start-stop scenarios. There is a process that is designed to serve the landowners, investors and the community. In Hokulia’s case, there were seven years of entitlement process, 33 public hearings in which [to express] your support or your opposition or your request to modify the project. That’s where it gets shaped. We need to look at that part of the process to make sure that certain things are accommodated. I don’t understand having weekday public hearings when the public’s working. You gotta be able to accommodate that voice, and that voice is critical to this. … There is a public process that is meant to serve everybody that’s involved. … But once that process concludes, that permits and entitlements are appropriate to grant them, then you gotta allow this to move forward. Because once you start investing tens of millions, hundreds of millions into a project and it’s brought to a halt like that, that’s something that doesn’t serve anybody.

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