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EXTENDED INTERVIEW: John De Fries, CEO, Hokulia

Q: The last time we saw Hokulia was June Jones's press conference (announcing his resignation and his new position at Southern Methodist University). How did you pull that off?


A: Actually, he called me maybe 48 hours before the press conference, which led to the last minute invitation. At that point, June's resignation at the University had been announced. He knew he owed the media and the public a response. And it’s not like he could’ve done it at the university, he would’ve been in some hotel. And I think what he wanted to do was take the media to a place that he had a found a certain amount of peace and wanted to share that with them at his last opportunity with them. We’ll see him again in June when he’ll be back for the June Jones Foundation Golf Tournament which will raise funds for Ronald McDonald House. I’m glad that he’s decided to keep the foundation here.


Q: Can you tell me about the Hokulia Foundation? (One of the agreements of the 2006 settlement was to create a foundation that would better the community, and Hokulia would donate $2 million to it over five years.)


A: The foundation is focused on four major areas. One is the improvement of Kona Community Hospital. One is the improvement of public education in Kona. Also, a youth leadership, drug prevention initiative. And Hawaiian culture and arts. And on a separate tract, affordable housing, a priority there. I see the foundation issuing its first grants in those areas this summer. We’re excited about the quality of the board that we have. Leaders in the community as well as the five plaintiffs that were part of the lawsuit serve on the board as well. It’s important for people to know that when we decided the settlement, it wasn’t just signing a document and we all went our separate ways. It really was a commitment to coexist in an island community and benefit its construction. I’m extremely grateful to all five of them for the contributions that they’re making in this area.Q: Did you feel the settlement was fair for all parties?A: The biggest beneficiary was the community, so in that sense I think the only way we could get the settlement is if everybody focused on the future of Kona. I think to that end, all the parties achieved. There is an expanded public benefits package including the work of the foundation, including public access to the shoreline which was always part of the master plan but when you look at the contributions that the foundation will make over time, probably the biggest jewel in the whole package.


Q: Did you feel the settlement was fair for all parties?


A: The biggest beneficiary was the community, so in that sense I think the only way we could get the settlement is if everybody focused on the future of Kona. I think to that end, all the parties achieved. There is an expanded public benefits package including the work of the foundation, including public access to the shoreline which was always part of the master plan but when you look at the contributions that the foundation will make over time, probably the biggest jewel in the whole package.

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: As far as the employees that you had to lay off, were you able to rehire most of them?


A: Some of those in the interim found new employment. I don’t have exact statistics, but there was a meaningful effort to go back and visit those that had been laid off. … There’s a real positive story about how people take adversity and counter play it. Some of our rock workers that built rock walls started their own contracting company. We were able to assist them in that effort during the shutdown, so now we’ve been able to hire them as a contractor instead of rehiring them as an employee. The fact that they showed that kind of initiative spoke volumes about their character as well.


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 effect 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 agricultural on each of these home sites optional. But in a macro sense, the state of Hawaii has 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, and 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. I think what the trial court ruled in Kona, what the judge is trying to impart to both the county and the state and the private sector was, if it's not suitable for agriculture, get it rezoned, so start using your discretion on a case-by-case basis. The previous owner to the lands of Hokulia attempted agriculture. The core of that land base at Hokulia was in one family's ownership for 140 years. They were not able, they exhausted just about all the opportunities to try to get ranching or agriculture going. Ranching's a tough business, especially in low lands where water half of the year is difficult to come by. I think that what you see going on throughout the island counties is an awareness that the important ag lands need to be protected. And if you're going to do something other than agriculture as a primary use of the land, that you seek reclassification of the land use condition. So that ruling came down, the initial ruling that stopped the project, but 80,000 home sites across the state were in violation. What had happened was, the trial ruling, the initial ruling, was counter to how the law had been interpreted in the previous 40 years. 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. And that's how you get to the condition of 2 million acres and only half of that is suitable for agriculture, because it's been used as a holding tank and I think that that's really the paramount point of this whole case is, 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: I haven't had a chance to meet any of the owners or senior executives of the Superferry. 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. Thirty-three public hearings in which 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. So you gotta be able to accommodate that voice, and that voice is critical to this. For 3,000 residents who toured Hokulia during that seven year period, who actually were responsible for reshaping the density ... At one time, when I first got there, it was a master plan of 1,400 home sites. [It's now at 665]. There was an expanded shoreline access. That was important to them. Of course, the highway was important to them. There is a public process that is meant to serve everybody that's involved in this and there needs to be, we need to improve that process so it serves everybody equally. Communities are learning to become more organized and diligent within that process. 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. Going back to the earlier point about my concerns immediately going back to the employees and the contractors that we're about to lay off, you know, he's going to look at a project like Hokulia, to think of it as faceless [company]. But there are people who are getting hurt when these things get stopped. Not unlike the Superferry, having to face the lay offs of its relatively new people that they had just brought on. I think the lesson is really one that maybe the entire state needs to learn, which is be more vigorous, be more fair with the public process, allow the public voices to express themselves.

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