Waikoloa Mauka Project Now Subject of FBI Investigation, Developer Says
by Patricia Tummons, Environment Hawaii, September, 2020 (reprinted with permission)
Danny Julkowski threw himself on the mercy of the Leeward Planning Commission of Hawai‘i County last month. And as sympathetic as the commissioners were to his plight, their mercy was more limited.
Julkowski was asking the commissioners to recommend that the Hawai‘i County Council approve zoning and boundary redistricting changes so he could develop commercial lots and housing on an oddly shaped 11.7-acre parcel he purchased in 2018 a short distance beyond the Urban District boundary of Waikoloa Village.
The parcel had once been part of a much larger development that was proposed in the late 1990s as the Waikoloa Highlands golf estates. That development received county zoning approvals, but the owners never got much further than the construction of a rustic rail fence and a stone entry gate before state law changed and the type of residential subdivision on Ag land that was envisioned for Waikoloa Highlands was no longer an option.
That larger parcel was eventually sold to an entity called Waikoloa Mauka, LLC, which was required by the county to submit a redistricting petition to the state Land Use Commission, asking that the land be placed into the Rural land use district, a move that would allow the planned development of nearly 400 houses on some 760 acres to proceed.
In 2008, the LUC approved the boundary amendment with conditions, including one that required Waikoloa Mauka to comply with county regulations concerning affordable housing. In this case, that meant building, underwriting the construction of, or donating land to the county or a non-profit entity that would build 80 dwellings affordable to families earning less than the county’s median income.
In 2017, Waikoloa Mauka subdivided off an 11.7-acre parcel on which it claimed the affordable housing units would be built. It is this parcel that Julkowski purchased in 2018 for $1.5 million.
And in so doing, he unwittingly bought into a scheme that is now the subject of an FBI investigation.
Broken Promises
Between the time Julkowski’s company, Pua Melia, LLC, purchased the property and now, the state Land Use Commission revoked the Rural designation owing to Waikoloa Mauka and its successor, Waikoloa Highlands, Inc., having failed to do much of anything in the 10 years since LUC had approved the boundary amendment petition. With all the acreage in the original petition – including what was now Julkowski’s parcel – having reverted to Agriculture, Julkowski could no longer move forward with his plans absent County Council approval.
That set the stage for Julkowski to ask the Leeward Planning Commission to bless the approvals he needed to develop 32 units in four-plexes and duplexes, five commercial lots, and a larger lot where he was hoping to build a large hardware store.
“So, uh, what we have here is an interesting, challenging project,” Julkowski’s planning consultant, Zendo Kern, told the commissioners in their August 20 WebEx meeting, live-streamed on YouTube.
The formal advice of the county planning director, Michael Yee, was that the Planning Commission forward to the County Council a recommendation against approving the redistricting and zoning requests. The proposal involved “spot zoning,” staff planner Alex Roy said, with no existing infrastructure and no sidewalks to allow future occupants of the residential units to walk to Waikoloa village, among other things.
“What we heard is a presentation from the Planning Department that talked about basic land use components,” Kern said. “What we haven’t talked about is how we got here.”
Kern went on to say that he was approached about a year and a half ago by “a person who at that point in time worked for the county.” This person, not named by Kern, told him that he “had a client who had a 201H application,” referring to the state law that governs construction of affordable housing. To Kern, it seemed like a “simple, easy project.”
“I said, sure, happy to assist … and then talked with Mr. Julkowski,” he continued.
The project “seemed to make sense,” but then, on speaking with Planning Department staff, Kern discovered that the “Planning Department was not supporting the 201H application, as [the Office of Housing and Community Development] was … Generally, when there’s a conflict, it gets complicated.”
(As Environment Hawai‘i has reported, Julkowski was not the first party to purchase the 11.7-acre parcel designated for affordable housing. Shortly after the parcel was subdivided off from the larger Waikoloa Mauka parcel, and in an arrangement that seems to have been worked out by a former county housing office employee, Alan Rudo, a for-profit entity called Plumeria at Waikoloa, LLC, purchased it for $55,000, despite Hawai‘i County requirements that the land be donated either to the county or to a qualified non-profit. Plumeria at Waikoloa did not develop the affordable housing but instead sold it to Julkowski for $1.5 million.)
The 201H process was dropped and Kern and Julkowski went with a more straightforward application for housing – which Julkowski said he intends to be affordable – the hardware store, and several commercial lots that Julkowski was hoping to sell.
From his home in Minnesota, Julkowski then related the history of his involvement with the project, which he said began in January 2018, when a county employee “contacted us and asked if we were interested in purchasing property.”
“I had known this guy from the past because he was trying to get us to do affordable housing,” he said, noting that at one time he had been a general contractor.
“We talked back and forth. He came up with a price, and we decided to go with it. Then he wanted a little bit more and I said I don’t have that type of funds. I can work with this.”
Julkowski had “multiple meetings at the Housing Department [sic]. I signed documents at your county buildings with lawyers to do the affordable housing.
“We invested quite a bit of money. They were telling us that they’re going to help us. If we do the housing, they’ll help through this whole project.
“Then one day I get a phone call from the FBI, saying, ‘What do you know about this project?’ … Before that, I had threatening phone calls towards my family.” “The main thing is,” Julkowski said, “the county employees came to us. We sat down with county employees. So I purchased that property based on county employees working with us. All of a sudden they get fired and they disappear. And then I’m standing alone.”
‘Something Really Funky’
Commissioners seemed mystified by the events Julkowski related. Planning deputy director Jeff Darrow filled them in on the problems that led ultimately to the Land Use Commission placing Waikoloa Mauka’s property – and, with it, Julkowski’s – back into the Agricultural District.
“Things happened that are under investigation right now, and we are where we are,” Darrow said. “Currently, the state land use designation is ag for the property, county zoning is open and rural, and the general plan reflects the zoning.
“There’s discussion as to the whole background of this, but as far as [the Planning Department] goes, Planning looks at it from the planning standpoint.”
Kern tried again to win over the commissioners. “Something really funky happened between having that 80 units of affordable housing [and the property] being sold to my client. Really funky. … It doesn’t look well on the county level. …
“I actually did speak to the original consultant. He didn’t even know what happened. Something really funky happened in that transfer.”
Commissioner Max Newberg made a motion to recommend against the rezoning and redistricting requests. “It’s unfortunate,” he said, “everything before us today.” Still, he added, “I have a hard time looking at anything that would be anything other than unfavorable.”
Commissioner Perry Kealoha concurred, saying that he suspected “fraud along the way. But this is not the place to litigate any fraud that may have taken place.”
In the end, commissioners voted four to two against the rezoning and redistricting requests. Commissioner chair Nancy Carr Smith and commissioner Michael Vitousek were the two dissents.
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For Further Reading
Environment Hawai‘i has reported extensively on the Waikoloa Mauka development, including the irregularities surrounding the proposed satisfaction of the affordable housing requirement. See: