I am a full-time resident of Wailea and submit this written testimony to the Land Use Committee on the subject of Makena Resort’s request for a zoning change.
1. The Water Sourcing Plan for Makena Resort is Lacking in any Meaningful Detail
I am concerned that the Committee may act on this project without requiring the applicant to submit all relevant information regarding its water sourcing plans. Applications for changes in zoning must address a host of criteria, showing that, if granted, they “would not adversely impact the social, cultural, economic, environmental and ecological character and quality of the surrounding area . . . .” [19.510.040 (A) (4)(a).] I don’t believe this burden has been met on several levels, in particular with respect to the source of potable water and the effect desalinization techniques and processes will have on the environment. Given this, the project is not ripe for Council review without the LUC first developing information to enable it to make an informed decision on this critical subject matter, particularly in light of the size of the proposed development.
2. As a Matter of Public Policy, Essential Utility Services for Large Developments Should Not Be Provided by Private Developers
The LUC should reflect on “lessons learned” from Molokai Ranch: Is it good public policy to put essential utility services for major developments into the hands of third party developers, or should the County, as a matter of public policy, prohibit further development unless large development projects can be supported by government-provided infrastructure? The Molokai Ranch experience illustrates the danger inherent in poorly planned projects that rely on private parties for essential utility infrastructure. If/when private utilities supporting large developments fail, the County will invariably be called upon to provide a solution, which can be both costly and inconvenient for the County and its people, not to mention placing affected homeowners and their families at tremendous and unreasonable risk of economic loss, dislocation and emotional distress.
3. Makena Resort Likely Lacks the Ability to Finance this Project: Job Generation is a Fiction
I urge the LUC to examine the applicant’s ability to finance this project and test whether project approval would likely produce the jobs the developer is promoting, presumably to induce the LUC and Council to approve its zoning request rapidly – and without real inspection. Based on all the evidence, there is no reason to believe this developer has financing in hand given significant changes in the world of finance in just the last two months. Consider the following:
ML&P lost financing for its Kapalua project due to Lehman Brothers bankruptcy in September 2008.
The Baccarat project in Wailea is stalled for lack of financing; the former hotel now sits idle in the midst of one of Maui’s premier destination resorts.
The Maui Lu project recently hit the skids due to withdrawal of its financing.
Wailea 670 is likely stalled due to the bankruptcy of Lehman Brothers and the lack of other financing means. General Growth Properties, a real estate investment trust that owns, among other things, the Ka’ahumanu and Ala Moana Shopping Centers, declared itself insolvent this month and plans to seek bankruptcy protection if it cannot refinance its debt.
Morgan Stanley, the money partner behind the Makena Resort project, nearly failed in October 2008 and was saved, temporarily, by a capital infusion from a Japanese bank, followed by a further infusion of capital by the federal government. Morgan Stanley stock has tumbled 80% from its value a year ago reflecting this tenuous circumstance. Wall Street analysts question the viability of Morgan Stanley. In any event, it needs to raise additional capital to survive and is in no position to finance a high risk, multi-year project of this size, nor will it be positioned to do so anytime in the near future, defined as the next 3 – 5 years.
U.S. and world financial institutions are facing a 1929-type meltdown causing the government to develop a $700 billion bailout plan.
Bear Sterns collapsed last spring.
Lehman Brothers filed for bankruptcy protection in September 2008.
Washington Mutual collapsed in September 2008 while Countrywide Bank sought a merger with Bank of America earlier this year in its effort to survive.
Merrill Lynch was acquired by Bank of America this fall to avoid collapse.
Wachovia was acquired by Wells Fargo Bank this fall to avoid failure.
In effect, financial institutions at home and abroad are in free-fall and none is in a position to finance high risk real estate development like that proposed by Makena Resort.
Further to the point, construction workers on Dowling’s Maluaka project are reporting that they’ve been told to stop work due to a loss of financing for this significantly smaller project. This deserves further inquiry.
The LUC should not accept at face value the developer’s claim that rapid action will produce jobs. I submit that it will not and, further, that the LUC and the Council must keenly focus on the legal requirements for zoning change approval and not be led astray by what I believe to be false promises of jobs. It is your duty to make relevant inquiry on behalf of the people so that you can serve our interests well. We support you in that effort and thank you for your service.