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Home My WebLink Aboutpcminwksp2-22-11 KAUAI PLANNING COMMISSION WORKSHOP February 22, 2011 A workshop of the Planning Commission of the County of Kauai was called to order by Chair, James Nishida at 9:18 a.m. at the Lihu`e Civic Center, Mo`ikeha Building, in meeting room 2A- 2B. The following Commissioners were present: Mr. Herman Texeira Mr. Jan Kimura Mr. Hartwell Blake Mr. James Nishida Mr. Caven Raco Ms. Camilla Matsumoto Discussion of the meeting, in effect, ensued. APPROVAL OF THE AGENDA On motion made by Caven Raco and seconded by Herman Texeira, to approve the agenda, motion carried unanimously by voice vote. RECEIPT OF ITEMS FOR THE RECORD On motion made by Camilla Matsumoto and seconded by Herman Texeira, to receive items for the record, motion carried unanimously by voice vote. Workshop on Zoning Amendment ZA-2011-3 (Draft Bill No. 2386),proposes to add a new Article 28 to Chapter 8 of the Kauai County Code 1987, as amended, to authorize the Planning Commission of the County of Kauai to process and issue zoning permits, subdivision approvals, and variance permits for"transient accommodation units"pursuant to the provisions of Article III, Section 3.19 of the Kauai County Charter=Kaua`i County Council(For Information Only). Planning Director Michael Dahilig For our workshop this morning the way we are going to approach it first is that our staff planner Marie Williams will be giving a presentation. Based on the portion of the public hearing that happened at the last meeting as well as some sticky but salient points that we thought based on the discussion last meeting it would be helpful to go over again. After we go through her presentation I will ask the Chair to then ask for public testimony. At that time, after the public testimony is done, we have three individuals that we have invited to sit as a panel, a cross section of the different sectors that are impacted by this particular measure to come up and Marie will introduce each one of them and explain what sector they come from. From there what will happen is we will ask each to them to give, if they want, a short presentation or position statement about the measure that is before the Commission at this point upon which time the Commission can start asking questions of panelists. After it seems that the Commission is done with the panel and we will leave it at the Chair's discretion whether any Commissioner would want to bring up somebody that has testified previously to follow up with any more questions that they have found through going through the discussion. Upon which time we will try to wrap up the workshop around noon for lunch. Is that okay Mr. Chair? Chair: Yes. Ms. Williams: Good morning Planning Commission Chair Nishida and Planning Commission members. Today's presentation is based on questions that you may have had when the Planning Department contacted you last week regarding the public hearing two weeks ago. This presentation will be an overview of the Charter Amendment, the Draft Bill 2386, as well as the process that is embodied in the draft bill and it will also answer some of the questions that you had. To begin with we need to start with the Charter since this is what the draft bill is based APR 12 2011 upon and the Charter Amendment section 3.19. It really gives Council three options and the first is to maintain the status quo and keep the permitting power pursuant to section(b) of Charter section 3.19. And again.this is the permitting power to process and approve more than one transient accommodation unit with a zoning permit,use permit, variance, or subdivision approval. The second option is to return this permitting power to the Planning Commission by enacting a rate of growth ordinance that limits the rate of increase in the number of TAUs to no more than 1.5%per year on a multi-year basis. And then the third option is to return the permitting power to the Planning Commission by enacting a rate of growth ordinance that limits the rate of increase in the number of TAUs to a growth rate that is within the planning growth range of a future General Plan. In the draft bill before you it implements the second option. Now getting to the draft bill, so what it does is it will establish a 1.5% annual growth rate cap and it will apply to zoning permits, variances, use permits, and subdivision approvals for more than one TAU. It will be implemented via a yearly random lottery for certificates and it exempts existing resort projects. To implement the Charter the draft bill creates essentially a transient accommodation unit certificate allocation program. And once again use permits, zoning permits, variances, and subdivision approvals for more than one TAU will apply to this program however existing resort projects will be exempt. There is a cycle based on the growth rate year, it begins December 5th when the Planning Commission adopts the number of TAU certificates that can be allocated and let's call that number N. An N is determined by the number of TAUS in the base year plus the number of TAU lots in the base year. You multiply that number by 1.5% and then you add to that number the number of unused certificates from previous years and that will determine how many certificates can be allocated that year. On February 5t11 would be due the applications for use permit, zoning permits,variances, and subdivision approvals for more than one TAU and they would have to concurrently submit those applications where they request for a TAU certificates. February 20th would be the lottery day, it would be conducted at a Planning Commission meeting, and there would be two pools based on N. The first one would be 10% of the number of TAU certificates that can be allocated and this would be for small projects, for applications with equal to five or less TAUS. And the second pool would be for larger projects, for applications for six or more TAUs. And then there would also be an option,the Planning Commission could decide to provide the lottery winner with TAU certificate allocations up to the amount equal to that of four perspective years to accommodate the number of TAUs requested by the winning application. Mr. Blake: What was that again? Ms. Williams: The option? I will go into more detail about that later but to repeat, the option while you are holding the lottery is that you can also provide the lottery winner with allocations beyond N that I just described and that number would be based...you would have to take it from a perspective year. And you can do that, it would be sum of four perspective years so for example if each year there were 150 TAU certificates that could be provided to applicants, four times 150 is 600 so you could provide up to 600 additional TAUs. And that is just an example I am giving. Does that answer your question? It might be answered at a later slide. Once those TAU certificates are given out they are held and reserved and issued only when the applicant obtains final approval for his or her permits. Once final approval is obtained the TAU certificates will be issued and then the clock starts ticking, the applicant has four years to commence substantial construction or the TAU certificate will lapse. Essentially there are two options that TAU certificate that has been has been issued can either result in a constructed TAU that will add to the inventory on this island or if it lapses it will go back into the pot of unused certificates from previous years to be allocated at a future date. Another question is what exactly is a TAU? I just wanted to go over the two definitions that we are working with, the first is the Charter Amendment's, what the Charter Amendment says, "A TAU is an accommodation unit or a portion thereof in a hotel, timeshare, resort condo fractional ownership facility, vacation rental unit, or similarly used dwelling that is rented or used by one or more persons for whom such accommodation unit is not the persons primary residence under the Internal Revenue Code." You can compare this with the draft bill's definition which is shown, "A dwelling unit or hotel unit, an apartment hotel, motel dwelling unit, or hotel unit located in a visitor destination area, a dwelling unit or a hotel unit in a resort Planning Commission Minutes Workshop—2/22/11 ZA-2011-3/Bill 2386 2 district, a timeshare unit, a transient vacation rental, a single family vacation rental, or a multi- family transient vacation rental. And excluded from this definition are dwellings whose deed restricts its use to a primary residence only and is used by the owner as a primary residence." Getting to what exactly would be exempt from this certificate allocation program and what would be exempt are existing resort projects, and a project qualifies as an existing resort project, they can apply to the Planning Director for approval to be such but they must apply for the exemption within one year of the draft bill coming into effect. They must be located in a VDA and zoning district that was approved and established prior to December 5, 2008, pursuant to a project zoning ordinance, and they must have obtained the necessary governmental permits and approvals for, expended substantial sums on, and commenced construction on any of the following prior to December 5, 2008, and this includes improvements authorized by the VDA or zoning ordinance, improvements required by the conditions in the VDA ordinance or zoning ordinance, compliance with Article 3 of the County's Housing Policy, or if they have paid an in lieu fee or dedicated land pursuant to an affordable housing agreement with the County. Next question,who gets to enter the lottery, only applicants with completed applications for a use permit, zoning permit, variance or subdivision for more than one TAU may request TAU certificates. And once again those applications would have to be submitted concurrently with their request for TAU certificates. How does the lottery work, the Planning Department will conduct the lottery at a Planning Commission meeting, it will be a random drawing. And as I described earlier the first drawing would comprise 10% of the certificates and be for applications for small projects,the second drawing would be 90% of the certificates and be for applications for six TAUS or more. And of the winner of the lottery requests more than what is actually available in the pool then the Commission may choose to take certificates from subsequent years. This is just one possible lottery day scenario that I thought could help illustrate what might go on, say 150 certificates are available in pool 2 and the first winner requests 50 certificates,that obviously would mean the project he is applying for approvals for has 50 TAUs, once those are given to him now only 100 certificates remain in the pool so the lottery continues. The second winner, his or her application was actually for 250 certificates however given that there are only 100 certificates remaining the Planning Commission may decide to provide the second winner with the extra 150 certificates that him or her needs by taking it from next year's allocation or from unused certificates in prior years, and then the lottery would end for that year. And how many certificates will be issued? While this is completely dependent on the number of TAUS and TAU lots in the baseline, and I went into detail about that in the last staff report for the draft bill. I won't go into too much detail except that say the number of...say we include the number of TAU lots in the baseline and this is what is included in the draft bill and I put here 2,000 TAU lots although we don't know that exact number, this is just to illustrate what could happen. So if we had 9,200 TAUs, and this is the number in the visitor plant inventory for 2008, and say there were 2,000 TAU lots also in 2008, we would add that number together which would be 11,200, times that by 1.5%and that number would be 16 and that would be the number of certificates that could be granted through the lottery process. However if you exclude TAU lots you would only, your base number would be the number of TAUS in the base year, 2008, and again say that number is based on the visitor plant inventory that is 9,200 units and we don't add to that number the number of TAU lots. Then that number would be 13 8 units and you can see obviously since we are dealing with a smaller number the allocation number would be smaller as well. The final question was does this change other CZO requirements and the short answer seems to be no. All the other CZO requirements will remain in place; resort development would still be limited to our Visitor Destination Area. And willing a TAU certificate does not guarantee project approval, somebody who wins a certificate would still have to go through whatever process he would have had to without a certificate and the Planning Commission could still decide to no approve the project. Existing resort projects may be exempt from the draft bill but they are not exempt from other CZO requirements and a transient vacation rental that is built via a TAU certificate will still have to apply for a TVR registration permit. This concludes the presentation, hopefully it shed light on some of the questions you had, thank you. Planning Commission Minutes Workshop—2/22/11 ZA-2011-3/Bill 2386 3 Chair: Questions for Marie? Mike, before we continue on this we had a question by Caven to go over how we got to this point. Mr. Dahilig: How we got to... Mr. Raco: I think Herman had a question. Mr. Texeira: I did but I deferred to you. Mr. Raco: I guess the question is how did we come up with this, why did.we come up with this bill and why are we considering it? Mr. Dahili : For reasons that are I guess I would say privileged at the time, Councilman Kaneshiro had decided on his privilege to introduce this measure for consideration to implement this section of the Charter. So he sought guidance from the Office of the County Attorney as well as Council Services to help create this bill and forwarded it right before he left the Council back in this past December. Is that what you asking, about the bill in particular? Mr. Texeira: Not completely Mike. I think our concern was between the Planning Commission and the County Council, it was transferred, this responsibility was transferred to the Planning Commission and we just wanted to elaborate on why that was. Mr. Jung: Within the CZO every ZA or zoning amendment which goes to the CZO or any type of zoning approval has to come through the Planning Commission before it gets sent back up to Council. So Council, although they introduced the bill,per the Charter it comes down to the Planning Commission for comments and any amendments and then it gets sent back up to Council and they do their first reading, hold a public hearing, and second reading and action. So it is just part of the process. Mr. Texeira: So the process is complete, it is going to go back to the County Council and they will make the final determination. Mr. Jung: Correct. Chair: Regarding that process Mike,the bill is going back in tact but the report is going to recommend if there are any changes, how does that part work? Mr. Dahilig: What would happen is at the next scheduled Commission meeting based on what we heard here today as well as input from the Commissioners we will finalize the staff report to include suggested edits for the Council to adopt as part of the processing of this bill. Then we would have to ask for the Commission's blessing on those recommendations and if there is anything else on the floor that the Commission would like to insert or tweak we will bundle those in as well as part of that transmittal. Chair: Questions for Marie? Mr. Blake: I have a question. How do you differentiate between a TAU and a TVR again? Ms. Williams: Let me go back to the slide but a TAU and a TVR are different. A TVR doesn't include a hotel unit or I believe a timeshare, I think, and a TAU essentially is more...it includes hotel units, motel units, hostels, and it is much broader than a transient vacation rental. Mr. Blake: So a TAU is always a transient vacation rental but a TVR is not always a TAU? Ms. Williams: That is correct. Mr. Jung: I think Commissioner Blake,the Charter is what defines a transient accommodation unit. In our CZO we don't have the definition of a transient accommodation Planning Commission Minutes Workshop—2/22/11 ZA-2011-3Bill 2386 4 unit and so we had to harmonize the definition within the Charter to the definition of what is in this draft bill. What we tried to do was encapsulate everything that our CZO defines as a potential TAU and put it in this bill based on the list of what is identified in the Charter. So technically TAUs aren't defined in the CZO which we now have to define because we are going to deal with this process so a TVR is a TAU but a TAU could include all other things. Chair: And isn't the definition of a TVR a single family residential within or outside as permitted by a certain bill? Are all TVRs single family residences? Mr. Jung: No, there could be multi-family TVRs and that was the original definition of a TVR but now that the new bill that came down in 08 and 09,TVRs are no longer allowed outside the Visitor Destination Area so any new TVRs have to be within the Visitor Destination Area. So when they do come in they will be a TAU, any new TVRs. Mr. Texeira: In the draft bill, the second slide,pertaining to the exempt existing resort projects, could you expand on what a resort is? Ms. Williams: A resort project would essentially be any project for more than one TAU but regarding what would be an existing resort project, and existing resort project is the term given to a project that we would consider to be exempt to this TAU certificate allocation program. And I outlined the requirements that a project must meet to qualify as an existing resort project and on top of that the Planning Director must approve, he decides if the project which meets all the criteria shown on this slide can in fact qualify as an existing resort project and thus be exempt. Mr. Texeira: So the term resort is kind of a loosely, when I think of a resort I think of a hotel. It seems like your definition is a little bit different from what I think a resort might be. Ms. Williams: Yes and this is the definition that is in the draft bill but you are right, existing resort project, it could be a project for only two TAUs, that is true. Chair: Other questions for Marie? Mr. Raco: Do you have a definition of commence substantial construction? Ms. Williams: I will let the County Attorney... Mr. Jung: When we looked at trying to identify what substantial construction was there are two, actually three different definitions within that, one is whether or not they...are you looking at exempting the existing resort projects? Mr. Raco: Yes. Mr. Jung: Then it would be 20% of the assessed County tax value of the project or of the property,which is the 2008/2009 year. So if they have done any construction on any improvements whether it be onfite or offsite improvements or did anything that fulfilled the housing policy then they would be exempt once they go through the process to be determined exempt which is they will be filing a petition within one year. So we would have to have, the department would take a look at whether or not they satisfied the substantial construction element of 20% of the County appraised value of the entire project. Mr. Raco: Does that appraised value include as far as the professional fees like the offsite improvements? Mr. Jung: The focus is on hard improvements not soft costs so in the ground type materials. Mr. Dahilig: It would essentially be whatever it takes to put up. Mr. Raco: So that would be the soft costs. Planning Commission Minutes Workshop—2/22/11 ZA-2011-3/Bill 2386 5 Mr. Dahili2: That would be soft costs as well because ultimately we can't, even though something is in the ground it takes an architect or it takes an engineer to determine how to put it in the ground and so we would take a look essentially at whatever was...we would have to go through an audit of the invoices and whatever purchase orders or those types of things, we would ask for that type of documentation to support that this money has actually been expended for this particular improvement that they are showing in the ground. Mr. Blake: And they have four years to complete it? Mr. Dahilig: They have four years to...this is for, substantial construction in the context of new TAU units would be just to start within four years to vest the certificate allocation. So we don't issue the certificates for new projects until they meet that substantial construction standard within four years after the allocation has been awarded. When you are looking at it from a grandfathering standpoint the substantial construction is 20% for stuff that is already in the ground, which exists as of December, 2008. Chair: Just to follow on that, substantial construction, the definition for substantial construction resides where? Because in the draft bill you are only saying 20% substantial construction so where does that definition reside and does it apply to... Mr. Dahili2: It is essentially a standard that is not...we are taking a look at essentially what is case law. There are constitutional requirements based on past cases that if somebody is making investment backed expectation expenditures that those in and of its self can vest the entitlements on a property. And so what we are looking at is determining, I guess there is no percentage per say but what we are looking at is 20% based on previous cases that we have taken a look at and say well, 20% seems like a number that could be used as a benchmark whether you have expended money expecting to get something back in return as investment. Chair: So the bill it's self,this 20% requirement, is for TAU projects, existing TAU projects alone? Mr. Dahilig: Alone. Mr. Blake: So if you have four years to commence substantial construction, once that has happened on the 365th day of the fourth year then you have how much time to finish? Mr. Dahilig: That is a good question. Ms. Williams: Some of these concerns would also be appropriate for us to recommend changes to the draft bill as well. If you see problems with the draft bill we can try to clarify them in the recommendation that we present to Council for edits. Mr. Dahilig: Essentially the way we are reading the timeline is meant to make sure that people aren't coming into the market and trying to essentially monopolize the flow of TAU units. So if they do not construct and they are not showing they are putting their money where their mouth is, it is just like in the circumstance we are dealing with right now with the cell phone towers, we don't want our permits being used as a way to block people out of the market. And so if you think, Commissioner, that there is maybe a mechanism where we can close that off or force them to a higher standard or whatever, we are open to incorporating those kinds of measures in the bill. But the way we are reading it right now is really as a guarantee to make sure they are not trying to delay any type of other development if they come in and apply for a certificate and try and sit on it. Mr. Blake: Because according to the chart when you apply for your certificates you have to have already obtained a use permit? Ms. Williams: You would have to concurrently submit your completed application for the permit. Planning Commission Minutes Workshop—2/22/11 ZA-2011-3Bill 23 86 6 Mr. Blake: So all these use permits, zoning, variance, subdivision, etc., they are in the pipeline already when you apply for your... Ms. Williams: Approval would not have been granted yet but the application would have to be complete and ready to be processed by the Planning Department and that processing would begin only if their request for TAU certificate is granted through the lottery. Mr. Blake: So if you are a developer and you have prepared your use permits, zoning permits, etc., you have submitted them to the Planning Department and they are sitting there on February 5th because you plan to enter the lottery on February 201h. So on February 201h if you are not lucky then what happens to all those, that file, do you give it back? Ms. Williams: You would have to wait until next year's lottery and apply again but those applications could not be approved. Mr. Blake: So if you are lucky on February how much time does the department have to process all of these applications? Ms. Williams: I think we would go through the normal processing time that is provided in the CZO, nothing would change regarding that, regarding the deadlines that are currently in our CZO. Mr. Blake: Can certificates be sold? Ms. Williams: No,they would have to be attached to the application for the use, zoning, variance or subdivision approval, that is why they would be required on February 5`h which is the due date to be concurrent with the application and then tied to that application, they can't be separated. Mr. Blake: Lapsed TAU certificates, how do they lapse? Ms. Williams: If the substantial construction has not commenced within four years of the permit's approval date then they lose their entitlement essentially to build the TAU through the TAU certificate. Mr. Blake: So if we have a major player come in and he wants 2,000 TAUs and then the Commission is tasked with yes you can have prospective TAUs which will take those out of the market for the future years, right? Ms. Williams: That is correct and then there wouldn't be a lottery held in those years. Mr. Blake: How far can you go prospectively? Ms. Williams: Only four years. Mr. Texeira: Along that same line if you have a very worthwhile resort project for example and it is more than the number of units allocated in that four year period could that project be phased to include more units in later years? Ms. Williams: That could happen but I think that under how the draft bill is right now they would have to enter the lottery once again for the subsequent phases of their project which could be a little risky. Mr. Dahilijz: One other option is also that the way we are reading the Charter Amendment, essentially the bill is a delegating bill. The 1.5% is a cap that the Commission has the authority for. Let's say the Commission only has authority for the 1.5% and something comes in like you mentioned with a large number, ultimately the way the Charter Amendment read and again this is just our interpretation here, that particular applicant can go to the Council and try to persuade the Council and say this is within the planning growth range of the General Plan that is really kind of undefined at this point and say that this comports with whatever is Planning Commission Minutes Workshop—2/22/11 ZA-2011-3/Bill 2386 7 consistent with the General Plan and those types of things. And the Council could come in and actually issue the permit on that behalf. So there is a limit to the Commission's authority based on the way this bill is written. Chair: But just to clarify I think you have a letter into the County Attorney to respond on that so when your say our, you are talking about the Planning Department that has question regarding this bill. Mr. Dahiliz We have a number of legal 'inquiries into the Planning Department, one of which relates to, well I would rather not go into that for the record but we do have inquiries about related items. Mr. Jung: There are many inquiries. Mr. Blake: One thing that was mentioned at the public hearing was that the cap grows every year,the 1.5% increases each year. How much of that is tied to infrastructure and availability of water and other public services or is any of it tied to that? Mr. Dahilia: How the 1.5% is arrived at? Mr. Blake: You have 1.5% of 2,000 this year and several get built so next year you have 1.5% of 2,500 so every year the cap grows so you can build more and more and more on the same amount of space, Our space isn't increasing to accommodate the increased TAUS and secondly we have other things that TAUs need like everybody else does and that is water, roads, Police, Fire, etc. So is the 1.5%, is there any consideration in the 1.5% for the availability of public services? Mr. Dahilig: It is essentially piggybacking on our normal permit process where those elements are considered by the various agencies once we shoot an application out to Water, Health, Sewer, Police, Fire in certain circumstances, so if let's say these conditions that are put in the by the Water Department on the piggyback permit are too much for the applicant to bear then they can't build, essentially, they are not going to get the approval for the permit. So that is why the same considerations still come into that thought process, all this is, is saying we are going to reserve this allocation for you now go through your normal processes to determine if your activity is going to have these infrastructure or social impacts before your permit is granted. We cannot issue the certificates until these permits are issued and they start building. So that element doesn't get lost. Mr. Blake: And do we have any ongoing studies about what our carrying capacity is for TAUs? Ms. Williams: The General Plan did do a build out of our VDA. I am sorry I don't have that number with me right now but it was determined that the amount of zoning available in the VDA as of when the General Plan was updated would be enough to meet our future needs for resort growth. I can get that number for you,there was a study done. Mr. Blake: So there is a cap, there is a carrying capacity that has been determined. Ms. Williams: I would call it a build out more or less of what is currently existing that hasn't been developed in the VDA. Chair: Marie, what you are talking about is the density compared to the amount of permitted units within the VDA and the build out is that difference between the existing units and what you possibly can get based on the zoning. Ms. Williams: That is exactly right. Chair: Other questions for Marie? Planning Commission Minutes Workshop—2/22/11 ZA-2011-3Bill 2386 8 Mr. Texeira: Marie, in discussing your visitor plant inventory you listed 9,200 units and I noticed that in the draft bill they talk about the TVRs. Now in this count of TVRs does that include TVRs outside of the VDA? Ms. Williams: The visitor plant inventory includes every single visitor unit on island regardless of whether or not they are in the VDA. It is actually a report prepared by the State Department of Economic Development and Tourism and so they don't care if it is in the VDA or not. Mr. Texeira: Do we know how many potential units there are outside of the VDA, TVRs? Ms. Williams: I don't think there are any potential VDAs given the bill that was past restricting new TVRs to within the VDA. Mr. Dahilia: You will see based on the ordinance recently passed, you may see certain ones come up for the Commission's entertainment if they are in Ag. outside the VDA because the new law requires that they also obtain a special permit under HRS 205. So there are potential numbers but for the purpose of actual counting you are looking on the order of tens versus hundreds in that particular case. Chair: And is the TVR outside of the VDA a set number or are you still processing applications? Mr. Dahilig: We are still processing applications at this point under the new law. The new law requires everybody to come in within one year if they are going to try to obtain the necessary TVR certificates and approvals. Chair: And what is that date? Mr. Dahilig: I believe...we can get that for you. Chair: But it is going to be prior to implementation of this bill? Mr. Dahilig: Anything is possible. I will just put it that way. We don't know how fast this could run up at the Council or how slow it could be, it is hard to say. Chair: Other questions for Marie? Mr. Raco: I just had one more question, regarding this portion outside of the VDA, option No. 6 on your slide, can you give an example of No. 6 of other similarly used dwellings that would be... Ms. Williams: That is included in the Charter Amendment and I believe that is what the draft seeks to shed some light on because there could be several meanings for that. It could be someone who has a month to month lease for example; it is not their primary residence under the Internal Revenue Code so there could be several meanings for that. Chair: How does the draft bill clarify that section? Ms. Williams: First of all it connects the definitions included in the Charter Amendment to our CZO and then it does, in some ways it might be viewed as very broad because it does as you see include dwelling units located in the Visitor Destination Area and Resort Districts. And as you know there are people who live in those areas that are long term therefore it adds the exception in the draft bill which is excluded from this definition"are dwelling units whose deed restricts its use to a primary residence only and is used by the owner as a primary residence." And that is how it seeks to define No. 6 of the Charter Amendment's definition for a TAU. Planning Commission Minutes Workshop—2/22/11 ZA-2011-3Bill 2386 9 Mr. Jung: Commissioner Raco I think that question would be pretty good for Mr. Imparato who drafted the Charter Amendment just to see what his thoughts were on what he intended with that because it is fairly ambiguous and broad so clarification would be helpful. Mr. Texeira: This is for Mike, in terms of if this gets refined by the County Council and gets back to us for enactment how is the Planning Commission supposed to handle this in terms of manpower requirements, etc.? Mr. Dahilig: The way the Planning Commission would handle it is, if you could go back to the date slides, essentially the Planning Commission's involvement from its level would be essentially to set the number which would be on December 5th and then hold the lottery on February 201h. Where the bulk of the work is going to be done is going to be pretty much with our office in house, behind the scenes, to process the permits,process the applications, make sure that all the...just like we would with any normal staff report. And I did have a conversation with the Chair this morning, my concern is that right now the Council is not essentially prepared, they don't have a staff planner and the way that the Charter Amendment is written we at this point, we have to rely on the Council to process these types of applications, not us. We essentially would be and this is a discussion that is still ongoing with the Council but essentially the power to process the way it is written is with Council and not with this department. However because the expertise in the County does lie with my staff we anticipate that we are going to have to be in some type of supportive role for the Council unless the Council decides to start hiring planners on their end. That would mean that my staff would probably have to be going down to the Council more often which does require a different type and a different level of service that would be provided down there and it would be an increased burden on us staff wise if we had to also service the Council for these types of permits. Mr. Texeira: So in our recommendation back to the County Council would this be a consideration, manpower requirements of the Planning Department? Mr. Dahilig: It is something that we have entertained putting in possibly in our final report regarding manpower. Ms. Matsumoto: I have a question about the dates, how were the dates determined? It seems that, I can understand the December 51h until February 5th, I think there is enough time but is there enough time from February 5th to the 20th to do all that work? Mr. Juna: To answer the first part of your question the dates were determined because that is when the Charter Amendment was enacted on December 5th so theoretically we needed an amount of time to let all these, to establish the number and let all the applications come in and then hold the lottery. Whether or not that is good enough for the Planning Department, I think they are going to have to analyze that to see if they need to buy themselves more time. Ms. Matsumoto: I have another question about the lottery, the slide that says "One possible lottery day scenario", could you explain more about the unused or future, the next year's numbers. I can understand using parts that aren't used but I don't understand the future part. Ms. Williams: To accommodate large projects that would be...say the number of certificates available in one year is 150. In order to accommodate projects that are larger than that which those pretty projects do come through the Planning Commission sometimes,you would be allowed to under the draft bill to take allocations from up to four future years should you decide that the project that won the lottery is a good project that you do want to approve. So essentially you are taking it from the future and then in those future years where there are no more certificates available no lottery would be held that year. Chair: Other questions? So Marie, do you want time to close that down or do you want to keep it as reference? Ms. Williams: I will close it down. Planning Commission Minutes Workshop--2/22/11 ZA-2011-3Bill 2386 10 Commission recessed at 10:15 a.m. Meeting was called back to order at 10:21 a.m. Chair: At this point we will open up to public testimony. Does anybody want to speak on this agenda item? Mr. Chet Hunt. For the record my name is Chet Hunt. I have been a resident of Kauai for 37 years, raised my family here,my son lives here, we have grandchildren here and I am here to speak on this bill. I noticed on the three options I think there was, isn't there a fourth option that the County can say that the Charter Amendment is unconstitutional and take it to court and save you guys a lot of trouble? Has anybody explored that? Mr. Junz: Right now I can't opine on that. The County did look at that issue but as of right now what is pending before this body is the draft bill. Mr. Hunt: If I were on the Planning Commission or Planning Department of the Water Department or the Health Department or Public Works I would take offense to this Charter Amendment. Basically they are saying you guys don't know what you are doing and we can do it better. I can speak from firsthand experience that you don't get things done without paying attention to what is needed, what is required. As an example I am directly involved with the project we just finished called Po`ipu Beach Estates and in order to get from when we started to where we are it took about seven or eight years. We started with the State Land Use Commission to get their approval, then the Planning Department and Planning Commission,we have had to deal with the State Health Department, and we have had to deal with the County Water Department which required spending millions of dollars upgrading building a water tank, running water lines, building Wells. Public Works, the previous owners of the property had given a park dedication, they had given two million dollars to the affordable housing program, we had to give an additional four hundred thousand dollars to provide employee housing although we don't have the employees but we had to anyway. And because there is a steam along our property we had to get a report with the Army Core of Engineers, we have had to deal with the EPA; we have had to deal with the State Archeologist. I just want to demonstrate that the growth on Kauai is not uncontrolled. It is strongly controlled by intelligent people that know what they are doing. The other people we have had to deal with, State Archeologist, Hawaii Burial Council, Federal Fish and Wildlife because of endangered species, Hawaii has more endangered species than all the other States combined. We have to protect some blind cave spiders because there was a cave on our property, no spiders but we still have to protect the cave in case they happen to find it. And I have heard figures thrown out about this quadrupling growth over one hundred years,well one hundred years is a long time, we will all be dead, our children will be dead, our grandchildren will be dead but this amendment will still be on the books. I am not too happy with it. I have one other thing, under your proposed,to get back to the main source here, 286, we have a project that should be exempt, it was completed in 2007. We have transferred lots, we have sold lots to people so I need to know can we exempt the remaining...do we have to apply to exempt the remaining inventory? What about the properties that we have already transferred, do they have to come in individually now if they want to be exempt and apply for that? Mr. Dahilig: At this time we cannot provide you any guarantees regarding what you are requesting. Ultimately this is an authority shifting measure before the Commission. It is something that could be entertained if this bill does pass. Again not knowing the specifics of the project and the actual costs that were expended, that would all be laid out if this bill does pass in terms of how we would interpret if your project would be exempt or not. But at this time I wouldn't want to put on the floor any type of statement or lead you to believe that your project could be,that your project is in fact, would be grandfathered under this particular measure. Chair: That being said can you go over in the bill how you are trying to address existing projects, lots, single family residential projects, lots of record with individual owners within the VDA? That was one of my questions earlier so can you address how the bill addresses it? Planning Commission Minutes Workshop—2/22/11 ZA-2011-3Bi112386 11 Mr. Dahilig: As Marie laid out in previous presentations you would have to come in and show that expenditures that were directed, that were made on direction of the County, for instance subdivision requirements or things related to housing as Ian had mentioned earlier would be essentially counted. And the assessed value of the improvement based on what was...by what the building costs are back in 2008 would be looked at to see whether 20% of that was actually put into the ground. Mr. Hunt: What I am saying is we are 100%, we have completed everything. Mr. Dahilig: That is why I am saying that without any kind of documentation or any type of information in front of me, again, I am not going to make a spot opinion on your project on the floor without being able to one, even have the authority to do it in the first place and secondly, the documentation. I would say it is possible if this measure does pass but it is on a case by case basis that our staff would have to come in and take a look at it and then either on my recommendation grandfather you or not grandfather you. Mr. Hunt: Thank you, any questions? Chair: Thank you, anyone else wants to speak on this agenda item? Can the panel come forward? Ms. Williams: I would like to introduce our panel members. I want to thank them for agreeing to serve on this panel. They didn't have a lot of time to prepare. We have Carl Imparato who is the Chairperson for Responsible Government, they are the group behind the Charter Amendment on which the draft bill is based and then next to Carl is David Arakawa of the Land Use Research Foundation based in Oahu. And then we also have Peter Sit who is the General Manager of the Pono Kai Resort and he brings to us his expertise in the resort industry, he has been working in it for over 30 years so thank you panel members. Mr. Raco: I was listening to Peter Sit's background but can you go again and give David's and Carl's background again? Ms. Williams: I will allow them to provide information on their background but Carl Imparato is the Chairperson of the Coalition for Responsible Government, they are the group that is behind the Charter Amendment that was passed in 2008 upon which the draft bill before you is based. And David Arakawa is the President I believe of the Land Use Research Foundation and I will allow him to talk about what the Land Use Research Foundation does. So perhaps each of them can take turns introducing themselves and also we are giving them the opportunity to spend some time providing us with some background about their position on the draft bill should they decide to. Chair: We are going to start with Carl and then David and then Peter and then you are going to present the position papers,position statements and then we are going to open it up for discussion. Mr. Carl Imparato: By the way I am an electrical engineer so I don't know if I can get this microphone turned on properly but that is my background, my career has been as an electrical engineer. I spoke two weeks ago to give some background as to why the Charter Amendment was crafted and maybe I will just briefly summarize that for others who weren't in the room at the time. The concern of a number of Kaua`i residents was that over the years, 2000 to 2008, over 4,000 tourist accommodations had been approved or were under construction and when you looked at the General Plan, the General Plan had scenarios in them. The scenarios in the General Plan were very hotly debated when the General Plan was passed because they put forward the vision of what Kauai should look like in the future. And under the high growth scenario of the General Plan there would have been 1,000 additional tourist units constructed over the 20 year period of 2000 to 2020. Now, that 1,000 units was being dwarfed by the fact that over the first 8 years of the 20 year period more than 4,000 units were approved. So the question is what is the meaning of the General Plan and of course really the reason for even asking that question was because of all of the impacts that people were seeing. Of the Planning Commission Minutes Workshop—2/22/11 ZA-2411-3/Bill 2386 12 4,000 units that were approved only about 1,000 were even in place, 3,000 weren't even in place yet but traffic was already getting worse,more crowding when you try to go to the beach parks, and so you can imagine that when the other 3,000 units were in place the impacts on infrastructure, demand for housing, everything else that you can think of would have been enormous. And unless something would be done what was going to happen with the next 4,000 units with the units that were already in place,the 9,200 units that Marie alluded to. Kauai would have as many tourist units per capita as Maui. And so people always say we don't want Kauai to turn into Maui but we were already in the situation where we had approved 3,000 more units than the scenario where we had as many tourist units per capita as Maui. So there were a lot of concerns that something needed to be done to look at the big picture. Mr. Hunt talked about the various processes that people have to go through to have development approved but that process doesn't look at the big picture question, it doesn't ask the question how many more tourist on island do we want to have, how much more traffic,how many more tourist units,how much more of the whole infrastructure do we Want to have to keep Kauai the way the residents want it. And that is why something needs to be done in the picture and that is why the Charter Amendment was put into place and the goal of the Charter Amendment was to basically require the County to comply with the General Plan vision. Now it was drafted as Marie has pointed out to have a number of options and one of the options was to say well,the current General Plan talks of a 1.5% growth rate when you crunch all the numbers and so the Planning Commission can approve growth at that 1.5%per year rate. But it also has the option in there of saying that as Mike as pointed out that even with that transfer of authority to the Planning Commission the Council can act in an extraordinary measure and approve projects as long as it finds consistency with the General Plan. And it also has the option that says that if there is a future General Plan which may say that we have changed our minds about what Kauai should look like,that it is okay to have 5%per year growth or unlimited growth or half a percent per year growth. Then the Charter Amendment said so be and that is what the Planning Commission and the County Council should be looking at approving. So the whole idea behind the Charter Amendment was to say let's... we work on a vision for Kauai through the General Plan and now we need to give some teeth to that by having some reason for the Council and/or the Planning Commission to say we are limiting and pacing growth,we are pacing it because that is what it takes to conform to the General Plan's vision. With that said we have no problem,the Coalition for Responsible Growth,with the Council electing to pass this authority to the Planning Commission as long as it is accomplished in a way that is consistent with the terms and the intent of the County Charter. We believe there are three major requirements that bill 2386 has to meet, first of all and foremost it has to comply with the terms and the intent of the Charter. The Charter is very clear in that it says that the rate of growth ordinance has to limit the rate of increase in the number of transient accommodation units in the County to no greater than 1.5%per annum on a multi-year average basis. It doesn't make exceptions to say 1.5%plus approved but not yet constructed projects or partially constructed projects or 1.5%per year plus vacant lots that in the future might become a transient accommodations. The rate has to be on an average basis,no more than 1.5%per year based on the number of actual transient accommodation units. As so we have a problem with the bill because the bill does not comply with that. A second and major goal is there has to be equitable treatment of existing projects and developers that have spent substantial sums winding their way through the permitting process. And again that can be done in a way that is consistent with the terms and the intent of the Charter and I will go into that in a moment. But the bottom line is its not unreasonable to exempt certain projects from these permitting requirements from this lottery as long as the number of transient accommodation units in those projects are counted when we consider the one and a half percent growth limit. And the third issue that we think is really important is that there is a rational and complete process for approving future projects and the problem right now with the bill is, and this is a first draft, it leaves a lot of loose ends out there and there are lots more technical issues that need to be addressed. So we see four major issues with the bill. First of all when it calculates the base number of transient accommodation units as Marie has pointed out,as your staff has pointed out,there are about 9,200 units. But the bill says we are also going to include the number of lots in the Planning Commission Minutes Workshop—2/22111 ZA-2011-3/Bill 2386 I3 Visitor Destination Area. Well existing transient accommodation units is defined in the Charter and it doesn't include empty lots and so when we put together the language,hopefully, ultimately, about calculating the base, it is based on the existing number of transient accommodation units. When we look at the number of new transient accommodation units that you can approve there needs to be more sophistication there as well, if I come in with a project for a 100 unit hotel obviously that is 100 new transient accommodation units. If I come in for a project for a 100 unit multi-family project in the Visitor Destination Area, historically only two thirds of those are visitor used and around one third are occupied by residents. So we shouldn't require someone to have to get 100 chits for something like that necessarily,maybe just 67. Similarly for single family projects in the VDA, if you look at Princeville as an example only about a third of those are used by visitors and the other two thirds by residents or as second homes and so there we need to say you don't have to acquire 100 of these transient accommodation unit certificates,maybe you need to acquire 33. So there is a level of sophistication that needs to be added to the bill to basically reflect on both sides that we are not over allowing the number of units that we can approve per year but then we are not subtracting too many for the existing,when developers come in. Secondly,when we talk about treating existing resort projects wherever they may be,at Kukui`ula that has gone through so much of the process it is fine to say that those are exempt from having to go through this process but the number of units there have already,have to be counted in the annual growth limit when they come on line because the Charter says 1.5%per year. For example let's just take one number, if we look at a 20 year horizon, over the 20 year horizon if you base it on the 9,200 units that staff has mentioned, 1.5%per year on a 20 year basis adds up to 3,200 new units. That means that over the 20 year period under the Charter Amendment you would be able to hand out 3,200 certificates, each one entitling you to build one transient accommodation unit. That is a 37% growth increase by the way but that is what the General Plan says so 3,200 certificates means 160 units per 160 certificates per year on the average. Now if we go and exempt 2,000 units of existing resort projects we can't just say you can put these 2,000 units in and hand out 3,200 certificates because then you will have a growth rate that is more like two and a half percent,not one and a half and that violates the Charter. What we can do though is say that these exempted projects,these 2,000 units or whatever the number may be are overdraws on the bank account and so that instead of handing out 160 certificates per year in the lottery we will hand out only 100 certificates per year in the lottery on the average and the other 60 are used to pay back over the long period, over the multi-year average to pay back the debt that we have created with the existing resort projects. A process like that basically allows for existing resort projects to be treated fairly and not have their vested rights taken away from them and allows the Charter Amendment terms to be kept whole. And so we would urge that as you look at this bill that you consider that type of an exemption rather than a wholesale exemption which we believe is something completely different. There are a number of other levels of sophistication that need to be brought into that and I think staff has referred to certificates may expire,they may be handed out in a lottery and no one builds, the project goes belly up or whatever. Those can be used to pay off the debt or they can go back into the lottery for a fixture year. Other projects that have been approved already in this slug of 3,000 un-built units already,they have approved, some of them may go by the wayside and so those are projects that basically should be credited against the process as well. There is going to be leakage because and maybe this talks a little bit towards what Mr. Hunt was raising, any owner of a lot in the VDA, of a single family lot in the VDA can go out tomorrow and apply to build a unit, an additional dwelling unit,that may be another transient accommodation unit. They don't need a zoning permit for that,they don't need a building permit,they don't need a subdivision permit,they can do that and this whole process doesn't even touch them. And that being the case that is fine, there is no reason the process should touch them but when we calculate the amount of certificates that are left in the future we have to take into account that some of these little twos and fours have come through and leaked through. My point is that these are all a lot of details that need to be worked through,we think they can be worked through,that there is a real way to handle this and in the end both meet what the Charter Amendment requires and the obligations for fair treatment of the existing resort projects. And with that,that is what I wanted to review as the background and I thank you for your attention. Planning Commission Minutes Workshop—2/22/11 ZA-2011-3/Bill 2386 14 Chair: Thank you, David. Mr. David Arakawa: Thank you Mr. Chair,my name is Dave Arakawa and I am the Executive Director of the Land Use Research Foundation. The Land Use Research Foundation is an organization of the large landowners across the State, every single island and Hawaiian Electric Companies are involved also. We monitor land use laws,we monitor land use policies and we try to do education and we do lobbying and show up at these kinds of things and we talk story. We also get involved in lawsuits and things like that,we take sides on the developer's side. I started in land use in the mid 70s before some of you were born as a paralegal at the Legal Aid Society in the native Hawaiian Rights side. My job was to stop resort developments so that was part of my job to stop resort developments based on native Hawaiian gathering rights and trail rights and access to fishing areas and religious areas. We also were involved in drafting the Consent Decree to stop the bombing on Kaho`olawe so those are some of the projects I worked on as a University student working as a paralegal at the Legal Aid Society. I went to law school unfortunately and ended up at the prosecutor's office. After that, some people are laughing, some people think there is not that much difference between resort development and prosecutor's office but anyway...maybe there's not. I worked at the law firm of Fujiama,Duffie,Fujiama and was able to do resort development work and development work developed Kolina Resort, got all the permits for Kolina Resort and a number of projects for the McCormick family, Wailea 670,the only golf course in Hawaii built on Conservation land so was involved in those kinds of things. Became corporation counsel for the City and County of Honolulu for 8 years, I was the County Attorney at the City and County of Honolulu for 8 years. And during that time we had a huge vested rights lawsuit and that is primarily what I am going to talk about here today. I am not sure if many of you folks remember but there is this place in Oahu called Sandy Beach, it is near Sandy Beach,body surfing,your body surfing lasts about three and a half seconds or two and a half seconds and then you wipe out on the shore break. There was this movement to save land around Sandy Beach, Kaiser and Kamehameha School had land across the street from Sandy Beach and they had their permits to development,they had General Plan, they had their zoning,and they had their last discretionary permit in Honolulu which is zoning. So they were ready to go,ready to get subdivision,ready to get their building permits and a group of citizens said hey,we don't like that and we don't want any more housing built across from that area, across the street from Sandy Beach. And we call that,it was a lot,golf course 5 and 6 lots,that is what we call it,golf course 5 and 6. It was approximately 30 acres of land, it was zoned for residential development for a number of years and obtained it's shoreline management permit also. And at the reliance of that permit the owner also expended over two hundred thousand dollars on planners, architects, soft costs, over two hundred thousand dollars in planners, architectural fees, etc. for 171 homes. And after these discretionary permits were approved the public again was upset and they started an island wide campaign to have the property down zoned and there is that phrase some of us remember, save Sandy Beach. And what happened was there was a ballot initiative,there was a vote by the public on Oahu and the public said no,no development on golf course 5 and 6. And so what happened was it went up to the Supreme Court,the Supreme Court said no you cannot do that,in Hawaii you cannot zone by imitative, you cannot take a vote by the people and take away somebody's right to develop their land,to take away that zoning. So the Supreme Court said no you cannot do that but what the City Council did and City Council's, okay you folks are appointed not elected,but City Councils are elected and so because the popular vote went that way what the city Council did was they voted to down zone that property which was residential to preservation. So they down zoned it to preservation and of course you folks know what happened, we got sued by Kamehameha School and the developer Moanalua Associates went to court and we got nailed,we got smashed,the City and County got smashed. We had great attorneys, we hired outside attorneys, and we used our on-staff attorneys so we had a team of attorneys working on the case. Never the less the judge ruled against,a Circuit Court judge ruled against us and the judge said the landowner had vested rights to build that 171 homes on the golf course 5 and 6 property and their rights were vested because number one, they were issued their discretionary Planning Commission Minutes Workshop—2/22/11 ZA-20I 1-3Bill 2386 15 permits...there is a two-part test,number one they had their discretionary permits and second, the developer expended substantial sums in reliance on the zoning and any discretionary permits. And in this case the court looked at the two hundred thousand dollars in architects and planner fees and they said enough,that is enough. I am on the other side,I am the City and County, I am saying no,please don't,please don't but the court ruled that they said once the landowner's right to develop was vested,once they got their discretionary permits and they expended substantial sums in furtherance of those permits they had a constitutional guarantee. And it prohibited the taking of property by the government,by the County,without compensation and without due process of law. So that was the court ruling against us and the court also ruled that the government down zoning of the property was unenforceable so the court reversed our making the property preservation. Well they gave us a choice,they said you have a choice, you either turn it back to residential or you pay them fair market value for that property. And because the landowner was entitled to damages calculated based on lost profits and attorney's fees,the judge hit a homerun against us,they got the grand slam. So what we did is we had to find other property and I don't know if many of you have seen that Wal-Mart out in Pearl City,that whole Wal-Mart area and that big development out is Pearl City,that was City land that we had to give to Kamehameha Schools in exchange for those 171 lots because of that lawsuit. So basically my comments with respect to with respect to the legislation,I commend the Department of Corporation Council and the Planning Department for taking a look at this and for all of your folks for really taking this issue seriously,the issue of this ordinance and treating everyone fairly. I think there are four things,four things I will try to get through really quickly. There are four major issues that we thought that we would want to cover and the first issue is it is good to read the whole thing,the first thing is it is good to read the whole thing. When I was appearing in court the judge always told us you know what, read the whole sentence don't just read part of the sentence,read the whole sentence so I will get back to that, read the whole sentence. The second issue is when does exempt mean exempt? What does exempt mean? Does exempt mean you are exempt of does exempt mean hey,you are exempt you know what, you have to comply with this,you are part of the number...that is not exempt,that is part of the ordinance, right? You are exempt if you are exempt. So the second issue is, is it exempt or are you playing with words? That is the second issue. The third issue is you know what,planning is not just about numbers,planning is not just about numbers. When you really think about it your job every time you folks meet you are thinking about what the future of Kauai is,what you want Kauai to look like, you are not thinking about numbers,numbers,numbers so that is the third issue. And the fourth issue is fundamental fairness, fundamental fairness for landowners,for people who own resort lands who have put money into their property. So I will just go quickly through some of those issues. I give credit to Mr. Imparato and his organization for authoring this Charter Amendment but you look at the last line of the Charter Amendment, look at the last line. Mr. Imparato read the third line, he said"No greater than one and one half percent per annum on a multi-year average basis", no greater than one and one half percent per annum on a multi-year average basis. But all of us went to school,right,there is a coma there and what comes after the coma,"or such growth rate that is within the planning growth range of a future General Plan adopted pursuant to section 14.08." There is a big coma there,"or such growth rate that is within the planning growth range of fixture General Plan adopted pursuant to section 14.08." So what that means in plain English when I went to school is that there are two ways this can be handled, a specific number, 1.5%,or whatever the future growth rate is. And that is the part that wasn't read to you but I read it to you. So that part goes to planning, it is not just numbers. I think the planning staff report did an excellent, excellent job and you folks should commend the Planning Department. They have a section in here that is very interesting, it is on page 3 and it talks about consistency with the General Plan at the bottom of page 3 and it talks about what the future of Kauai was planned to be, encouraging and supporting resort development on lands planned and zoned for resort use primarily at Princeville, Kapa`a,Wailua, and Po`ipu, and they talk about a limited number on the Westside. So this is what planning is,it is not strictly numbers it is where you want these types of developments to go. I will move on,the other issue is, I talked about that enough I think,what is the meaning of exempt and I am from Oahu, I grew up in Waipahu,a plantation town, very simple. Exempt means exempt, no need comply. And we believe that fundamental fairness would say that these Planning Commission Minutes Workshop—2/22/11 ZA-20I 1-3Bill 2386 16 projects who have their discretionary approvals and based on their discretionary approvals or County permits,the County permit says dig a Well,put in water lines,have a reservoir and they do all that for say a thousand units. They only have approval for 200 units right now or 400 units or 500 units but the County tells them based on the permits we gave you, General Plan or whatever zoning,you build a water facility for a thousand people. Or you build sewer facilities to accommodate a thousand. If the County tells them to build the Well,build the sewer,build the water facility and they actually spend millions of dollars or in our case,the City and County of Honolulu,two hundred thousand dollars worth,they are vested,they should be exempt. They don't come under that 1.5%, we would argue that they don't come under that 1.5%and that is how your ordinance is drafted right now. They have that 20%requirement,the ordinance does but the way the ordinance is drafted now we support the thought process and the concept of the ordinance that says if you did this based on your County permits,the County told you to do this and you did that in reliance of your permits you should be exempt. So we agree with the thought process of this ordinance. What we differ with in this ordinance is this ordinance talks about zoning, zoning only. But there are some projects that may have their General Plan approval. There are some projects that may have their shoreline management permits. There are some projects that have other County permits, discretionary approvals and those County approvals say you have to do this and these projects did it,they did what the County told them and now we are going to tell them sorry, you cannot build what we told you. You cannot build what you got approval for under your General Plan approval or your shoreline management approvals. So we think that it should be extended not only to zoning but to any discretionary approval where the County tells the landowner you build this and the person did build it. Very simple,fundamental fairness,I am sorry,that is where I come from, that fundamental fairness. If the County tells you to build something and you build something because they tell you and they said hey, look, we have your General Plan approval for x number of units,you should be exempt. That is our position. And that position is not unusual,we already talked about Honolulu or that Oahu case,in Illinois,vested rights,there are cases that say you have vested rights for the entire project in all phases of the project if you put in improvements that benefit the entire project.That is the Illinois law,the case law in Illinois. In New Hampshire they look at a single homogeneous project, even though you don't have approval for portions of your project they look at the project as a whole because that is how the project will be developed eventually. In New York they allow vested rights for a site where there is no substantial construction,where there is no substantial construction but that site is part of a single project where construction had been commenced and substantial expenditures so the overall project spent some money. Anyway, in wrapping up, those are some of the issues that we would talk about and basically that fundamental fairness and the last thing about planning is not just numbers. I was sitting here when Mr. Imparato,he is an engineer so he has to talk about numbers and measurements and stuff like that but you know what, what should be exempt, what shouldn't,what should be vested,what shouldn't. I was sitting here, it is February,Valentine's Day was a week ago and I am just thinking what if I went home and my wife told me,you know what,you kiss me three times a day,you love me. If you kiss me less than three times a day you don't love me. If you kiss me five times a day we are going on our second honeymoon or whatever it is. So it's not a numbers game, it is 'not a numbers game and although the Charter Amendment talks about 1.5 always remember the second part of that sentence,always remember the second part of that sentence and I hope you folks remember fundamental fairness. We look forward to working with the Planning Commission and the Council and the other County staff on this,we think it is very important for Kaua`i. The members of the Land Use Research Foundation live,work,and have businesses on Kauai and they want to see a beautiful Kauai also so thank you very much for your time. Mr. Peter Sit: Good morning Commissioners,my name is Peter Sit,the General Manager of Pono Kai Resort. I don't have a presentation like the two gentlemen did. I have been in the business about 30, 35 years,the last 12 have been in timeshare and previous there was hotel management, emphasis on restaurant. I don't have a true position in regards to the bill before us. My general comment and I don't speak for the industry I speak for myself, I believe in controlled growth which I think this Commission does a wonderful job in doing. This bill is a limit on growth,it ties you hands and there are a lot of loop holes and fairness involved. The lottery, I Planning Commission Minutes Workshop—2/22/11 Z.A.-2011-3/B i 1123 86 17 have a lot of questions about the lottery system on who gets on it. For a developer to come in to invest all this money to the variance, the shoreline and all that and then have to wait in line in a lottery, money is spent, no developer is going to come in and do that and spend millions of dollars to get to the process of standing in line in a lottery and hopefully you get drawn. I have real difficulty in understanding the lottery system. The definition of the TAU and how many certificates they issue each year is another very vague number and I don't quite get the 9,200 units, existing units. Another question I have is exempt; if you have been approved then you are approved to grow. What if a property, existing property down grades from 200 units to 100 which there are examples of those where you switch from a hotel unit to a timeshare unit, you combine the units. So what happens to the 100 units? Does that go back to the certificates to be issued down the road? I am not an expert in this area, never claimed to be one but I have been in the business 30 some odd year, I am delighted that I was asked to sit on the panel and I would rather entertain questions and share what I know about the operation of hotel and timeshares, thank you. Chair: At this point why don't we try, we will go to questions for each speaker and then we will open up to questions, if there are questions after that, questions for any speaker. So at this point, questions for Carl. Carl, when you were speaking about the 1.5% cap you were saying that the cap applies strictly,that you cannot go above the cap. What if the Council decides that the rate should be greater than the 1.5%? You mentioned something about how that would work. Mr. Imparato: Right. The Charter gives several options here and the existing way things are working right now without bill 2386 is that an applicant has to go before the County Council for approval of transient accommodation units. The Council if it is going to approve something has to make a finding that granting the permit would be consistent with the planning growth range of the General Plan and in the best interest of the County and the people. So even if bill 2386 passes and authority is delegated to the Planning Commission the Council could still act on its own because the Council is given the leeway to, in passing bill 2386, to give the Planning Commission the authority to process all permits or just some permits. So the Council can retain that additional authority. Now the language doesn't say that when the Council looks at things that it has to do it within a 1.5% annual growth rate, it says within the planning growth range of the General Plan in which this current General Plan does translate to a 1.5% annual growth rate. So I would argue before the Council that they need to find some exceptional way if they are going to approve something that goes outside that growth range in order to make that finding. I mean maybe there is a way to make a finding that approving something that would bring us to a 2% annual growth range on a multi-year average basis would be consistent with the planning growth range for the General Plan. I don't know how they would do that but if they can make a credible finding then they could do that. But again along the same lines there is the third option in there and David has pointed it out and I mentioned it earlier that the Council can pass a new General Plan and that new General Plan could have a different growth range. It can actually have a different way of looking at growth entirely which gives more flexibility to the Council so there is a multiplicity of ways for this to work out. But under the current General Plan the Council would have to do something credible to say why approving 5,000 units was consistent with the growth range in the General Plan. I don't know how they could do that. Maybe there is some argument I haven't thought of. Chair: Other questions for Carl? Mr. Texeira: Carl, you talked about your 20 year horizon and then you mentioned the draw down, the example that you used was 160 units of which 60 units was going to be used for the draw down. Was that based on a formula or what was that based on? Mr. Imparato: The 160 comes out of 1.5% growth per year applied for a 20 year horizon. The 20 year horizon (inaudible) that comes out of basically looking at the horizon that is already in the General Plan so once you say you 160 units per year then the question is what is a credible way of doing the draw down,the pay back. You could say let's just take 10 units a year and use that pay off,well that isn't very credible because when you have 1,000 units you are talking Planning Commission Minutes Workshop—2/22/11 ZA-2011-3Bill 2386 18 about 100 years to catch up so that obviously doesn't even pass the laugh test with respect to complying with the Charter. On the other extreme you could say well, we let's draw it down at 130 units a year that way we can draw down the surplus, this extra preapproved development that is exempt that we can get it over with in 10 years. And that is something to think about but from looking at it but that would only leave 30 units if you are drawing down 130 and that is not really fair to developers who come in, in the future. So it seems that the number 60 gets you to draw down these surplus's on a credible timeframe and leaves enough there credibly for future development. Whether it should be 60, 50, 70, that is up to the Council I suppose or Planning. Chair: Other questions? What about for David? You said that the vested interests that the court applied in the Sandy Beach was the two hundred thousand soft costs. Mr. Arakawa: Yes. Chair: There were no hard costs? Mr. Arakawa: No hard costs. I can go back and check the opinion but based on the records I looked at over the weekend it was, my note says two hundred thousand on planners and architects. I did put etc. so I will go back and check but I think the bulk of the two hundred grand was on planners and architects. Chair: And they got all the use permits and the requirements for the infrastructure improvements and all that but nothing was done? Mr. Arakawa: Nothing was done. They just got zoning actually, they didn't get subdivision and they didn't put anything in the ground. Chair: All they had was zoning. Mr. Arakawa: Zoning, all they had was zoning and they spent two hundred thousand on planners and architects, etc. I will get back to you on that. Chair: Why didn't the Legal Research Foundation get involved at the time of the Charter Amendment, like after the Charter Amendment was passed, what was your involvement? Mr. Arakawa: I was probably asleep at the wheel in Honolulu, I don't know. We had talked to some people on Kauai, not our members, but they felt that or they didn't think that the Charter Amendment would pass. They thought that it probably wouldn't pass,they were wrong. I can tell you that when it passed, after it passed I woke up and said wow,what is this? We have to make sure the people who have put in their improvements based on their County approvals are exempt. I don't mean to interrupt you Mr. Chair but I want to clarify something for the record. I just realized that I said I was a prosecutor, I was a Deputy Prosecutor. I wasn't the Prosecutor I was a Deputy. Organized crime, career criminal but still a Deputy but I was the court counsel so I didn't want that on record. Chair: So the 20% rule that is in the bill, your thoughts. Mr. Arakawa: We think that is high. We think that is conservative. We do believe that the Corporation Council Office and the Planning Department are trying to protect the County, very conservative. But we believe that there are...in the Hawaii case law there it ranges between 85,000.00, Hawaii courts have looked at and said substantial costs have gone between 85,000.00 to 275,000.00, that is the range and we can get (inaudible)those cases but in Honolulu that is not Kauai, you folks can decide on your own. You folks are unique so you folks can decide on your own. We just wanted to give you folks a flavor of how in Oahu the courts have been ruling over the years and some of these cases go way back. And we can provide those cases to Corporation Council and they can brief you folks in executive session or whatever it is but we think that the 20% is a bit high. And perhaps in a couple weeks when you have your next meeting will be able to make some kind of a recommendation, hopefully. Ms. Matsumoto: I have two questions. You say you have members on the island, that is interesting, I didn't know that. Planning Commission Minutes Workshop—2/22/11 ZA-20I 1-3Bi112386 19 Mr. Arakawa: A&B, we have D.R. Horton, Kamehameha Schools, I don't know if Castle and Cook has property, Puhio Resorts, Kukui`ula is one of our members because of A&B, Grove Farm of course. I am going to miss somebody but our list of members is on the website. We don't represent the Robinsons, I know that but I think that is most of them. Ms. Matsumoto: I will look at your website, thank you. I have another question about you read the Charter section 3.19,right, that is what you were referring to? Mr. Arakawa: Yes, section(e). Ms. Matsumoto: If you could elaborate a little bit more on your thoughts on that section. Mr. Arakawa: I agree with Mr. Imparato because what it says is it talks about that 1.5% per annum on a multi-year basis so that is the number but it does say, coma, "or such growth rate that is within the planning growth range of a future General Plan." So I think what you folks and the Planning Department and the Council are looking at is what does the General Plan require, what does the General Plan say, what thought went into the General Plan, and what would a future General Plan say. And again I have to go back to this report, I am impressed with this report that the Planning Department prepared for you folks but it is very interesting on page 4, the type of analysis they go through for the General Plan projects and the General Plan visitor unit demand study. To tell you the truth I am not good at math and so that is why I became an attorney but looking at these calculations, a lot of thought went into this, a lot of thought. And so this report also says at the very beginning you know the Charter Amendment is not consistent with all this work we did because it just goes with a hard number. The number is based on something, I heard Mr. Imparato say it is based on something from this growth plan but when you look at all the work that went into this on pages 3 and 4, what your Kauai Planning Department,people who live and work on Kauai, want for Kauai, and when you look at the front two pages and you say hey, the Charter Amendment is really not consistent with all of the work that we did. So when you read this report it is very, very interesting, informative, and I was totally impressed at the work that your Planning Department and your counsel and you folks, because you guys have to pass this before it goes to the Council, so all the work that you folks and counsel and the Planning Department have done on the General Plan and these formulas. But you know,the Charter is the Charter so we are trying to, I think Corporation Council and the Planning Department, all of us are trying to fit the Charter into what the General Plan is doing. And that is why we say exempt means exempt. I just had to slip that in; exempt doesn't mean part of that 1.5%. Another issue, I am sorry you didn't ask me this but we noted that some of the projects that are listed, it doesn't go back before 2000 maybe. I think there are other projects that have zoning and have their discretionary approvals before 2000 so you might want, the Planning Department might want to check out some of those properties along with the properties that have General Plan or SMA, no zoning, General Plan, SMA, but did put in infrastructure because of the County permits. Chair: Any other questions? Mr. Texeira: When you discussed fundamental fairness in which you talked about the General Plan approvals and other approvals as part of that fairness that you considered, as you just mentioned if the projects that have been approved, overlays by the General Plan that designates certain areas for example R-20 but no vested monies have been put into these projects how would you categorize it in your view as part of this? Mr. Arakawa: I think that is a great question and you hit on one of the main factors and one of the main factors is discretionary permits and the second part is expended substantial sums in reliance on those. And usually what it would be is there is a permit, like maybe you get General Plan approval for 1,000 units. When you get that General Plan approval they say you have to do your water improvements, you have to do your sewer, you have to build your roads, and you build it all for 1,000 units. But you only get zoning for 500, you only get zoning for one third and you have to come back for zoning for the other 1,000 units. So you are asking about Planning Commission Minutes Workshop—2/22/11 ZA-2011-3Bill 2386 20 hey,what about those other 1,000 units you don't have zoning for? And we are saying that they should be covered because you built all your infrastructure for 1,500 units because the County told you, you have to build the water, you have to build the sewer,you have to build the road for 1,500 but we are only going to give you 500 right now for zoning. So because you expended that, because you put in the whole thing we feel that the fairness would dictate that you get it. One judge, for a long time one standard for commencing substantial construction was if you put in your backbone infrastructure (inaudible)if you are a financier of a developer or you are a developer,if you put in your backbone,all your roads,your sewer,your water for the entire project, even though you don't build it out in five years you have a commitment to the County that you are going to build it because you put in all that infrastructure up front,you spent upfront costs. And developers and banks, banks are going to lend and developers are going to develop if they have certainty and predictability. And the lottery like my developer friend Mr. Sit said,the lottery adds some uncertainty. I am not going to say it's like going to Vegas but there is uncertainty involved in that. So to the extent we can truly exempt those projects who were loyal to the County and built that infrastructure because the County told them to,to the extent we can truly exempt them they are not part of the 1.5%. We feel that would be fair because they listened to the County,they did what the County said and they thought that they would get their approvals. Mr. Texeira: There is like a two-part to this, so if a project got approval but no funds expended,they just got zoning approval how would that be in terms of vested interests? Mr. Arakawa: The law would say that they wouldn't satisfy the vested rights test if they didn't expend substantial sums. And like we say in the State of Hawaii it is kind of,the case law goes from 85 grand to 275 to 20%of the real property value. It could be whatever you folks decide. But no,if they don't expend substantial sums no vested interests,that are the fairness part I guess. Ms. Matsumoto: Along those lines do you have any examples of that? Mr. Arakawa: Yes, actually I do. Well part of it was my project,Kolina Resort,they put in their infrastructure over 20 years ago,the EIS is over 25 years old, Disney is building their resort there now but it took them over 20 years and they are still not built out. Ewa Marina is another resort project in Honolulu that is not fully built out,they don't even have their marina in and it has been over 20 years. They do have housing though,they did their affordable housing. So the market kind of dictates and maybe that is how you get to the 1.5%over time because the market dictates when projects go. Makena Resort,they are a long time resort that is taking many years but they put in their infrastructure. Some of you may know Kapulei the second city,that has been under construction for over 25 years,the EIS is over 25 years old,Mililani,40 years. So you see how these projects take time and they are based on market. When the economy is good,when people can work for companies and work for government and they can afford a mortgage they will build a house. You don't have government saying,no, only 1.5%homes now even though it's good because then people are going to fight for homes and the price for homes goes up, right? So when the market is good that is when developers build houses for working people,there is no cap on them so that is kind of how we think that it should be handled. We respect the Charter Amendment and we know it is 1.5 but again, exempt the guys who should be exempt and we will be okay. Ms.Matsumoto: How about any examples of the opposite where people who didn't do any work? Do you know of any projects like that? Mr. Arakawa: Yes. I think there is a project on the Big Island. I don't think it is a resort project but there is a project on the Big Island where the State Land Use Commission just revoked their approval because they didn't develop in time. Years and years and years,excuses, excuses, excuses. Every.new owner would come in fresh with good faith and try to get the project off the ground but the economic cycles are hard sometimes. Mr. Blake: In the examples that you used where the EIS was issued 20 plus years ago and now major improvements are coming on line,you are aware that in our permits they all say Planning Commission Minutes Workshop—2/22/11 ZA-201 I-3Bill 2386 21 that the County reserves the right to make changes. So have you had to address changes that took place from the time the EIS was issued and approved, for instance on the leeward coast where there used to be just cane field out there and pineapple to now have your members been required to do updates and how has that been effected? Mr. Arakawa: Two-part answer, I will answer your question first. Yes,right now over the past 6 months when they come in for subdivision they have to prepare a document for the Planning Department to show whether there have been any substantial changes which would require a supplemental EIS. So right now as we speak for the past 6 months they have been turning in that kind of document, after the Turtle Bay case they have been turning in those kinds of documents so that is the direct answer to your question. The planning answer to the question is when Kapulei was developed, when Kapulei got all of its approvals they said okay, I don't know how many, 10,000 homes,this much traffic,this much water,this much...and that has not changed. The next project that came on line was Kolina so what the Planning Department does is they say okay,we take into account these 15,000 homes or 10,000 homes,we take into account this much water,we take into account this much traffic. So Kolina,you have to do these other things because of this project in front of you because we have already taken into account this. Then Ewa Marina came on and so the County told Ewa Marina hey,we have Kapulei with this many people,this much water,we have Kolina with this much people,this much water, and so each successive project,the State and the County planners said okay, we take into account this many people. So that is why I think planners are much smarter than attorneys actually because they look into the future,they take into account these things and as you said Mr. Blake, at the end of every permit there is that little,there are actually two sentences but one sentence says you shall comply with all State, County, Federal laws,whatever so whatever comes in the future you have to comply with. And the other portion says the authority whether it be the Council or the Commission or whoever can change conditions to a permit as they need on a reasonable basis as the need arises. And I would say every day when these projects who have been permitted for over 25 years have gone along when they go into the County Planning Department they are going to find somebody at the desk to say you know what,you have to put another lane over here. Or hey,you have to put a stop light, 10 years ago we told you,you didn't have to but now you need to put a stop light there. So what does the developer say,he doesn't say no, sure of course we will do that,right, because it is health and safety. And I think Mr. Hunt or somebody testified earlier the County Planning Department and Corporation Council and Public Works Department,their whole job is health and safety,to protect the people of the County. So when they review the plan, you know, you work for the Council,right,when they review the plans they are going to make sure that the County doesn't get sued and they don't get called as witnesses. The Planning Department, Public Works, Corporation Council, all taken care when new projects or when existing projects,a long time project comes in for successive permits,they are going to look at it,they are going to make sure it is up to snuff,the latest standards and everything else. Chair: Questions for David? I have one,before approval is given for a certain use permit, zoning approval,whatever it is, there is a certain amount of expenditures that happen before that point. So in the current bill it allows for,it says that all your processing for the permit needs to be completed when you apply for the TAU so it is a concurrent application. So how does the vesting apply for those expenditures that occur prior to any discretionary permit approvals? Mr.Arakawa: Based on the law that we have been following and based on how I think this ordinance was drafted if you spend sums in reliance on the permit that you get. So it is not the soft costs prior to getting that government approval or discretionary permit it is after you get the discretionary permit,you go out and say okay,now I have everything I need or now I got my permit and they tell me I have to build a water reservoir or water line,water source, or road, okay now I have to do it. So in answer Mr. Chair,it's afterwards and it's based on the case law, vesting case law. Chair: But once the approval is given all that expenditure gets drawn into the vesting? Planning Commission Minutes Workshop—2/22/11 ZA-2011-3Bill 2386 22 t Mr. Arakawa: No it's any expenditures that the landowner or developer spends in reliance on or after, I would say after they get that discretionary approval. And right now you folks have zoning, we would like to see it say General Plan, SMA, or other discretionary permits. Chair: When Peter was talking I thought about having the TAU application occur before the discretionary permits. But actually you cannot do that because then you would be vesting based on a TAU application that you would be spending this money and that would be vesting whereas previously it wouldn't have vested. So the TAU permit almost has to be at the same time the discretionary permits happen in order not to expose the County to additional kinds of exposure that never happened before then. Mr. Arakawa: The TAU would happen after that vesting permit event whether it be zoning, right, somebody gets zoning and then they would come to you folks, is that right, I don't know, I am not sure. Mr. Jung: Right now it is drafted if you came in for zoning approval before December 5, 2005, you would have to petition the Planning Director and show how you have established so there is a process to identify it so it will be lined out. And that process is subject to appeal at the Planning Director's discretion so technically there is a remedy if someone wants to challenge whether or not the Director made the appropriate call. Mr. Arakawa: But the vesting starts after you get the discretionary permits, not the vesting but the substantial expenditure of sums starts after you get the discretionary permits? Mr. Jung: You have to come in for what we are calling the project resort ordinance or something of that nature so technically the law of vesting as you know is a creature of case precedence and it is hard to interpret. And when you look at the reliance standard it is still open for interpretation so I can't opine on the floor and I can go into executive session if you guys want to kind of give you my thoughts on vesting. But to do that here would probably not be appropriate. Mr. Arakawa: But good question. Mr. Raco: But Chair, I hear them saying prior to those applications but are you saying what Peter was saying? Chair: I was thinking you could apply the for the TAU permit ahead of the process so that you would know whether you could get them or not. Mr. Raco: That is not what they are talking about right now. Chair: Well they answered the question. I think what they are saying is they have to be concurrent or at least afterwards because otherwise you are going to vest, well that is what you didn't want to talk about. Mr. Jung: The theory behind it is, the reason why a lottery was set up is we have to think of a fair way to allocate these things. If we hold a chronological type system where people just come in to the Planning Department one after another then there would be people in lines out the door and how are we going to set up that process would be difficult. Mr. Arakawa: Just like camping permits. Mr. Jung: Exactly. And that is available to you guys if you want to look at doing that option. There are several options. The option that imposes the lottery is before you guys right now. Mr. Dahilia: Just as a note why it is pegged to...one of the four permits that is numerated, well the three permits and the subdivision approval is again we wanted to try and look at this issue of people coming in and trying to eat up allocations and just sit on it without actually using the allocation. So tying the allocation or the certificate approval or certificate application to an actual zoning, use, variance, or subdivision approval was a way to gage the Planning Commission Minutes Workshop—2/22/11 ZA-2011-3Bill 2386 23 seriousness of an application versus just having everybody stand in line like a camping permit and say I want my five or I want my ten and just sit on it indefinitely. Mr. Jung: We want to avoid the banking type situation where people just come in and bank them up and not have any plans or projects on the horizon. Mr. Arakawa: Now that you guys talk about banking and Director Dahilig was talking about four years, did you guys ever have the situation where you lost your bank book? You know when you were a kid or a teenager you had a bank book and you would lose your bank book, you cannot find it for years. I wanted to get back to that issue, you get one year for people to apply for exemptions but there may be projects like I said that got their zoning approvals in the 60s, 70s, 80s, 90s, and they don't know, the new owner of the property doesn't know. So perhaps you could give a little leeway for that one year for these kinds of projects that have to go back and get documents and find out did we get our zoning? So if you could please consider that. I know you have to put a year in, you have to put a deadline in but for instance even for Important Ag. Lands, the landowners have three years to dedicate. I don't know what is reasonable for your folks but for IAL to give landowners three years to make that decision, important decision to designate those lands and Important Ag. Lands. So perhaps the Planning Director, Mr. Chair, Commissioners, you folks could look at maybe more than one year for people to go back and check their records just to see whether they actually qualify for an exemption. That is all we ask, it's just like you lost your bank book. Chair: Questions for David, questions for Peter? I have one, so your project, well the hotel in your opinion, I don't think we have seen a pure hotel project development for a long time, they have been timeshares or single family condominiums with 6 hotel units attached to it, that kind of thing. Why is that? Mr. Raco: SVO is one? Chair: Coco Palms, SVO is one, there are a bunch of them, Waipouli Resort, the one across from the Safeway I am pretty sure is one of those. And in fact the Sheraton they are converting from a hotel so.why is that? Mr. Arakawa: The question is why there are not new hotels being built but shifting to timeshare types of operations. Chair: Yes and the reason I ask that is because like I think Carl pointed out many of the new projects, some of them are single family residential within the VDA and right next to them can be like two thirds...all these new projects coming up in fact I think your project is like that where individual owners own the unit and then this whole project is a mix of people that live there and people that are transient accommodation units. I just thought if you had any thoughts on that. Mr. Sit: My project consists of 242 units,timeshare, the majority, 80% is timeshare which we manage 167 of them. We have small groups of individual owners, Vacation International has 22, American Vacation International own 12, and there are a bunch of private owners that own the unit themselves. They use it for vacation rental partly and some of them actually live on the property 4 to 6 months throughout the year. To answer the question on why there is a shift from hotel to timeshare is a matter of a cash flow situation. Just imagine you have 100 units, you can sell it for 51 times per unit at a certain rate and then you turn around and the developer can manage the property and that is another cash situation. The trends of the market today are moving toward what we call vacation clubs and not just the old day timeshare where you own a week and you have to come back there and stay for a week. Vacation club concept is there are a bunch of hotel timeshares that works together and you can use points to redeem the number of nights that you can stay. So example (inaudible) you don't have to spend a whole week on Kauai on one property, you can spend two nights at the Pono Kai, two nights at another and so on and so forth. It is cash flow, the example is real clear, a hotel you have to earn your living every day. A timeshare vacation club, you collect the money ahead of the game,the members pay every year or maybe Planning Commission Minutes Workshop—2/22/11 ZA-2011-3Bill 2386 24 quarterly or annually, you have that money in front of you and that is a major cash flow. Whereas a hotel, it is a struggle, every day you have occupancy up and down and it affects your cash flow. So I hope I answered your question. Chair: Clarification, so you have some groups, some entities that own the units and then they timeshare it quote/end quote timeshare it out to their members that are not like Pono Kai or...they buy a unit or maybe 2 or 3 units in your project and some other project on Maui, some other project other places, is that what you are saying? Mr. Sit: We have 3 groups on the property, Vacation International, they actually own 22 units, they also own at Kapa`a Shores, they also own at mainland properties. Chair: And in addition to that you have individual units that are owned by several different people that use it based on different times of the year? Mr. Sit: No. We have owners that own the unit,they are not timeshare, they vacation rental 6 months out of the year and 6 months they live there. Chair: Do you have units were you have multiples owners that split the time up like say one owner gets 3 months out of the year? Mr. Sit: No we don't. Chair: So for the Director,the fractional, how do we view fractional ownership and these corporations or whatever entity ownerships that(inaudible)vacation rentals? Mr. Dahilig: Those all fall under the prevue of this authority, of this Charter Amendment. Chair: How do you determine that if there is more than one owner? It becomes a fractional ownership? Mr. Dahilig: There are definitions in the law that make distinctions between fractional ownership,timeshare, hotel use, transient vacation rental use, so we would look back at that. Chair: In the CZO? Mr. Dahilig: And also in the State code or the State Statute has definitions that we would look at as well. Chair: Other questions for Peter? Just one more question Peter, it seems like people like these single family units, other than your units,people like these single family units. How big of the market do you think these single family units market is compared to something like your project where they would come to a timeshare? Do you have any idea? Mr. Sit: Can you give me an example of a single? Chair: A house, they like to rent a house rather than stay in a hotel complex. Mr. Sit: I don't have an answer for that. Chair: Questions? Carl, do you want to say something? Mr. Imnarato: I just wanted to add a little bit because earlier on during staff's presentation the question came up what was behind the Charter Amendment's definition of a transient accommodation unit and it ties to the question that you were just asking Peter. We had in the definition hotel,timeshare, resort, condo, fractional ownership, vacation rental unit, and other similarly used dwellings. And the point of the other similarly used dwelling was to say that there could be other terminology that comes up in the future, vacation club for example and that is what that is intended to cover. For example four or five years ago it was never a concept of Planning Commission Minutes Workshop—2/22/11 ZA-2411-3/Bill 2386 25 fractional ownership and we didn't want new financial arrangements to create loopholes here so that sixth omnibus provision in there, other similarly used dwellings,wasn't meant to try to drag in second homes but other new concepts such as vacation clubs or whatever it might be that are virtually the same market as people who go to hotels or timeshare facilities, tourist units. So I just wanted to answer that question that came up earlier. Mr. Jung: So you just said it wasn't intended for second homes? Mr. Imparato: I don't believe it was intended for second homes. The only other thing I wanted to add was that there has been a lengthy discussion about what it means to be exempt and I agree one hundred percent with David that exempt means exempt from the standpoint of the property owner. That also doesn't mean though that the number of units that are exempted don't count against what can be released in the lottery in the future and I think the gulf, if there is one between us, whether it is just a little valley or a chasm really comes about when one decides what is fair to exempt, someone who has spent substantial sums or is it a property that just happens to have zoning. So it is really a grey area that I think separates us and how far we are separated, that would need to be discussed in more detail at some point. Chair: Questions for the planner? Thank you, any last words? Mr. Arakawa: No,thank you. Mr. Sit: No, if you have any questions I will be around to answer any future questions. Chair: Thank you. Does the Commission want to call anyone? The workshop is adjourned. ADJOURNMENT Commission adjourned the meeting at 11:50 a.m. Respectfully Submitted. Lani Agoot Commission Support Clerk Planning Commission Minutes Workshop—2/22/11 ZA-2011-3Bill 2386 26