The future of water in West Maui: community voices, part 4

Negotiate a good deal for taxpayers — no more corporate welfare

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The problem:

In the current proposal, Maui Land & Pineapple won’t guarantee it owns what it’s selling, it wants NEW water credits from the county (on top of existing ones), and it wants the mayor to advocate for pro-development zoning changes.

As Mayor Bissen himself put it, “the devil’s in the details,” and both MLP and the county are trying to get the best deal for themselves. This is also the area where the administration shared the least information, citing its ongoing negotiations.

We encourage everyone to read the full MOU here.

The experts we spoke with flagged several key details in the proposal that the public should pay close attention to as negotiations proceed:

MLP won’t guarantee it owns the assets it’s trying to sell
[MOU Section 12]

MLP wants to sell its assets “as-is, where-is, and without warranty of title” and “does not intend to quiet or clear any title or procure title insurance.”

MLP, WMLC, and other former plantation companies have systemically exploited Western land laws, which often prioritize protecting private property over the health of people and place, to claim land and displace Hawaiians, often illegally or through manipulative tactics.

If it turns out that MLP doesn’t have “clean title” for any assets it sells, that could become Maui County’s problem, a concern that Maui County Council raised during its Water and Infrastructure (WAI) Committee meeting on Monday, where it heard from Mayor Bissen’s team about a proposal to buy two water companies owned by West Maui Land Co.

Our experts described several known incidents involving MLP or land it now occupies:

• Honokōhau: Baldwin Partners, MLP’s predecessor, bought massive tracts of land in the 1800s. Lineal descendants who live in the valley now described how the company hired a surveyor to on the ridge overlooking the valley and map how much taro the ʻohana there were growing, and then Baldwin approached each ʻohana, told them they owed back taxes based on how much taro they had grown, and made offers to buy them out of their land in order to clear their debts (which many accepted), resulting in the displacement of many Native Hawaiians from the area.
• Honolua: MLP sued to force the sale of a 5,000 sq. ft. parcel so it could buy the whole thing, claiming it owned a 1/100th share — that turned out to be false. “For 80 years, [MLP] controlled this parcel, claiming to be an owner of it. But in fact, it turned out they had no ownership interest,” according to Lance Collins, an attorney involved in the lawsuit. MLP ended up buying out the true owner of that share and got to keep the land.
• Maui Komohana: Several sources described other examples of Native Hawaiians who have claims to kuleana (ancestral) land now occupied by MLP in West Maui, but declined to share details out of respect for the individual ʻohana.

MLP wants NEW water credits in addition to the 911,520 gallons per day it receives already
[MOU Section 8]

MLP is asking Maui County for (an unspecified amount of) water source credits,” a step developers sometimes take when they want to build a new development but don’t want to maintain the water infrastructure, instead offering the county other infrastructure, access, or something else in return.

Many of our experts said MLP hopes to develop new housing on its property, and all are skeptical that MLP would voluntarily build affordable housing.

As a result, their concern is that new water guarantees — combined with the zoning changes MLP is asking for — could help create a fast lane for MLP to build luxury and market rate housing.

How the water system is valued matters
[MOU Section 5]

Buying a massive water system and determining how much to pay for it is an exponentially more complicated process than buying, say, a house. With homes, sellers and buyers can look at “market comps” — how much similar homes in the area sold for.

That type of approach can be used in larger transactions like this, but would be extremely difficult with the uniqueness of West Maui’s geography and this specific system, leaving gray area that MLP could exploit to fetch a higher price, to according to experts we spoke with.

Here are a few other common approaches that could be used in coming up with a price for a complex deal like this: 

• “Replacement cost new less depreciation” method = how much would it cost to build the system from scratch today, minus the cost of how much the system has decayed over the past century.
  • Because of how much the system has decayed, this approach would protect taxpayers the most, according to one expert we spoke with, who has a background in the financial industry and has extensively researched the financials of MLP and other large landholders on Maui.  
• “Income capitalization” method = how much money could the system earn if MLP charged full market rates to all its customers over the next few decades.
  • By treating public trust water as a resource to exploit, this approach would dramatically inflate the value of the system, giving MLP the advantage, that same expert said.
• “Sales comparison (market comp)” method = how much other water systems have sold for recently.
  • As mentioned above, our expert said this approach would be highly vulnerable to manipulation by MLP.

The MOU allows MLP and Maui County to come up with their own numbers for how much the county should pay, meaning there could be a lot of variability in the final price tag.

Negotiation leverage
[various sections]

Several other clauses cover when, under what conditions, and based on whose approval a deal can move forward or not. MLP has a board of directors with extensive experience in corporate acquisitions, and the corporate finance expert we spoke with expressed concern that the current MOU terms could give MLP too much power in the negotiations.

The solution:

During negotiations is when the community has the most power to influence things by pressuring both Maui County and MLP to enact deal terms that prioritize the public trust and the public interest.

Community members will have various opportunities to make their voice heard, and the Bissen administration repeatedly told us that they want to hear the community’s feedback on these proposals.

Here are several ways our experts said Maui County can try to negotiate for a better deal:

• Title guarantee or alternative assets: the county could ask MLP to issue a warranty of title for all land in the deal. Or, if its own due diligence turns up any title issues, it could simply refuse to buy those assets or ask MLP to swap them out for other assets.
• Refuse to offer new water credits or reduce the amount: our experts said that, while Maui County does ultimately have to offer something of value to MLP, nothing requires them to give away water credits specifically, and they feel the county can — and should — negotiate harder here, as water credits will likely become more valuable over time as water availability becomes more scarce.
• Acknowledge hidden costs when valuing the system: nearly everyone we spoke with talked about the amount of damage the Honokōhau ditch system has caused and sustained, and how expensive repairs and upgrades could be, and said any appraiser looking at this system needs to genuinely take that into account.
• Seek outside expertise: one expert we spoke with suggested that Maui County hire outside attorneys with experience negotiating deals like this on behalf of local governments to ensure the County crafts the best possible deal terms on behalf of residents. In an email, the county told us it had not consulted outside attorneys, and said it “will continue to conduct its due diligence and seek the appropriate expertise needed to fully evaluate the proposal and ensure any decisions are made responsibly and in the best interest of the community.”
• Use eminent domain: Another option Maui has is to condemn MLP’s assets under its eminent domain powers (the MOU even says the county already threatened to do this). If MLP pushes too aggressively, the county could go that route, which could lead to costly and time-consuming litigation, but could also drive down the price it has to pay to get the system.

The stakes:

The community wants to reclaim control of their water.

MLP wants to get rid of a costly, aging system and clear the way for more profitable development.

The Bissen administration wants water systems out of private hands without wasting taxpayer money.

Maui County Council members seem to want the same, but want to use that system in vastly different ways.

The overall impression we got is that these deals are a balancing act, and no group will get 100% of what they want.

Nearly everyone seemed to acknowledge that, no matter how hard Maui County negotiates, whatever deal it comes up with will come nowhere close to repairing the harm caused by MLP, WMLC, and their predecessors over the past 180 years since the privatization of land in Hawaiʻi.

Yes and, still negotiate hard:

Our community experts and kiaʻi wai were extremely clear that they want Maui County to negotiate as hard as possible to protect water, ʻāina, and other public resources — people are tired of the government being an accomplice in subsidizing the extraction of Hawaiʻi’s resources.

Yes and, the election looms:

Among the experts who spoke directly about the politics involved, there was widespread agreement: they believe that if Bissen loses the mayoral election to his opponent, Yuki Lei Sugimura, Maui Komohana residents will end up with more corporate-friendly policies.

In all of our reporting around water issues in West Maui, we have yet to speak with someone who believed that Sugimura would be a better advocate for more equitable and sustainable water policies than Bissen.

We’re keeping those sources anonymous to help protect relationships within the Maui community and ensure those kiaʻi wai can continue doing their work without fear of retaliation.

Yes and, not all county council members believe there’s a water crisis:

At Monday’s WAI Committee meeting, county council members kicked the tires on the proposal to buy West Maui Land Co.’s two water companies, and in doing so, hints of their different visions for that system were on display:

On the surface, they seemed concerned about the same things:

• What condition are the water systems in?
• Is the county getting a fair price?
• What, if anything, might prevent the deal from going through (legally, bureaucratically, etc.)?

However, exchanges between several members highlighted a key difference in values lying below the surface: keep developing and extracting more water vs. reallocate and use it more sustainably.

Throughout the meeting, Chair Alice Lee and Vice-Chair Sugimura had asked multiple times about whether there was “surplus” water in Launiupoko and Olowalu and whether and how quickly that water could be pumped, moved, and used elsewhere.

“There seems to be a lot of water available [in Launiupoko] for additional housing,” Lee said, referencing its “sustainable yield” (a likely over-estimate of water availability, according to our experts). Lee implied that the conversation had made it seem like no water was available, something she clearly disagreed with.

Later, a visibly frustrated council member Keani Rawlins-Fernandez replied: “Sustainable yield doesn’t mean that we extract as much water until we get to sustainable yield. That’s not what that means. The community asking CWRM to make the west side a protected area because of the extractive use — and the abuse of — the water, that’s the whole point.”

“It doesn’t mean that we use up all seven million gallons per day,” she continued, “because: climate change, so it’s probably less [than seven million] at this point, and sustainable yield does not account for cultural uses… it’s not ‘excessive water,’ it needs to stay in the ground too, that’s part of the natural systems.”

In all of Kaheāwai Media’s reporting for this story, not a single expert advocated for increasing the amount of water Maui consumes from its aquifers. CWRM’s designation of West Maui as both a surface water and groundwater management area even before the 2023 fires is rooted in a similar concern about over-consumption of water.

The community voices:

“The County and taxpayers should not bear the burden of a corporate bailout for MLP after years of neglected system maintenance.”
~ Nā Mamo Aloha ʻĀina o Honokōhau

“The details of this transaction remain to be seen. The County and taxpayers should not bear the burden of a corporate bailout for MLP after years of neglected system maintenance. Moreover, we oppose any back-room deals or granting any development rights to MLP in exchange for the system, which would only perpetuate our Island’s history of over-development and abuse of public resources for tourists and the wealthy.”

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“The method chosen to value the assets will largely determine whether this is a fair acquisition of benefit to Maui’s people or a ‘billionaire bailout.’”

“If the deal is structured poorly, Maui taxpayers will take on vast structural liabilities, while billionaire Steve Case walks away with fresh capital, secure water credits, and county land-use support to build out his luxury real estate pipeline.”

“I’d just be curious to know, how many improvements have to be made [to the system], how costly that would be, and what the transition will look like because there is still institutional knowledge between MLP and Hawaii Water Service, what does that look like? Is it just the county contracting [MLP and HWS’] people now, but just having ownership of it? Who is serviced by this system currently? Most of their service goes towards Kapalua Resort [and] Golf Course, and also luxury development or more upscale housing. So, does that mean that the everyday taxpayer on Maui has to foot the bills for the county to continue servicing these folks?

What do the actual contracts look like? Will the county be required to continue servicing the same folks as Hawaii Water Service and MLP are currently, and if so, at what levels [of water]? Will it be status quo?

“There are always going to be trade-offs and compromises, so I would be curious to know what trade-offs or advantages the county is giving for this perceived benefit of control of this system?”

“The plantations have been here for 150 years, made their fortunes, wreaked havoc on the community, caused cultural, environmental, social destruction, and now that time is over and they’ve depreciated their own assets to the point that they’re no longer getting any value out of it — [and now] they get this parachute from the government that they get to kind of ride off into the sunset and not have to clean up, so I understand that perspective [that this feels like a bailout of MLP].”

“Even when [remediation happens], whether it’s Mākua or anywhere else, I don’t think anyone legitimately feels like any amount of remediation… could make up for the damage that has been done… But I do think there’s a sentiment of: can we at least move forward in a way that’s pono? And if there’s a promise of that, then maybe that is a good enough place to start.”

The Bissen administration:

“There will be some give and take, or there will be some compromise, or we won’t make a deal. But we’ve come this far and we plan to see it all the way through to the end.”
~ Mayor Bissen

Richard Bissen, Mayor:

“The devil’s in the details. That’s really where this is going… They want something from us, we want something from them. And we’re both trying to get a good deal… there will be some give and take, or there will be some compromise, or we won’t make a deal. But we’ve come this far and we plan to see it all the way through to the end.”

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Josiah Nishita, Managing Director, Maui County Department of Management [when asked about determining a fair price and concerns that taxpayers would be footing the bill for repairs MLP neglected to make]:

“That’s all a part of the due diligence process, [such as] condition assessments, to see what repairs or maintenance has been done or needs to be done. And all that can get factored into an actual valuation for purposes of acquisition. We can’t change the past or what has happened over the last century-plus. But what we can do is just make significant steps towards changing our future.”

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Check back tomorrow for the final story in this series, where our experts talk about the financial challenges — and opportunities — that Maui County faces in acquiring additional water systems.