HCDA: Is a Law Intending to Protect Small Businesses in Kaka’ako Now Being Cited to Help Developers?

News Release from Senator Laura Thielen, March 31, 2014

The Sunday Star Advertiser ran an article Donors with Kaka’ako Ties Spending Big on Elections.  Ironically, today our Committee reviewed the nomination of an appointee to the Hawaii Community Development Authority (HCDA), which is the Board that approves the plans, zoning and development in Kakaako.

The nominee seems like a fine gentleman.  But he works for a company that is a subsidiary of the Kobayashi Group.

According to PBN, the Kobayashi Group is an investor in a hui that plans to build one or more luxury developments in Kaka’ako.  When I asked the nominee if this was the case, he stated the Kobayashi Group had not yet announced plans, but if they did, he would recuse himself from any decisions on their permit application.

I then asked whether his voting on any Kaka’ako plans, policies and rules would be an indirect conflict of interest, because those items could make such developments easier or more lucrative.

The Director of HCDA immediately came up and testified that the law requires two members of the HCDA Board to be members of small businesses in Kaka’ako, and the law specifically stated that the “small business representatives” were permitted to vote on matters of general application, like rules.

But Senators Chun-Oakland and Slom, who helped put that law into place years ago, confirmed that the original intent of the law was to ensure that the small businesses who were getting pushed out by redevelopment would have a voice on the Board.  These were light industrial businesses, like auto-body shops, and small service businesses.

So think about this for a minute.  Let’s say the HCDA Board is going to vote on changing the height limit in Kaka’ako from 400 feet to 500 feet.  I could see supporting a law that allows the existing light industrial businesses like the auto body shop to vote on that matter.  It is highly unlikely that they could financially benefit from such a rule change.

But what about the “small business representative” who works for a subsidiary of the Kobayashi Group, which is going to develop or sell their property for luxury condominium development?  Isn’t a rule change that gives them 100 extra feet of height an extremely lucrative proposition?  Isn’t there, at a minimum, an appearance of a conflict of interest; the potential for self-dealing?  Is that really what the law intended, when it was passed years ago?

I was told today that the entire Kobayashi Group, including the subsidiary the nominee works for, is 10 employees, so it counts as a “small business.”  The other small business representative on HCDA apparently is a member of Mitsunaga & Associates, Inc., which, according to the Star Advertiser, is another firm involved in Kaka’ako development.

It seems to me we’ve lost the original intent of the law.  The business representatives appointed to the HCDA Board are not necessarily familiar with the issues facing the long-term small businesses who were the focus of the original law.  Furthermore, the permission to vote on general rules, which was originally intended to allow these small businesses to have a voice on the Board, is now being cited to allow Board members to vote on rule and policy changes that can potentially generate tremendous financial benefits for their firms.

I voted against the confirmation on those grounds.  I met with the gentleman afterwards and explained that it wasn’t personal to him.  But I’m not comfortable with the direction being taken regarding HCDA, and these kinds of appointments are not making me feel like it’s going to improve.

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