Totto said that his office wants to ensure that GTE Hawaiian Tel customers aren't unfairly billed for the phone company's decision to transfer its lease for a two-story Kakaako building to a company known as Movie Partners.
Movie Partners, headed by local builder Dick Gushman, plans to build a $28 million, state-of-the art theater complex for Consolidated Amusement Co. on the property, which is located on Bishop Estate land on Coral Street behind the Gold Bond building. The theater complex will be the state's largest.
Totto's investigation won't likely hold up construction of the theaters, which is scheduled to open next year.
On Monday, the state Public Utilities Commission approved the transfer of the lease to the developers but deferred any decision on whether the phone company or its customers would pay for it.
"What we're worried about is that cost could be passed on to the rate payers," Totto said.
"If we find that management could have done a better job, our recommendation would be that the company through its shareholders pay for the extra cost and not the rate payers."
Calvin Tadaki, Hawaiian Tel spokesman, said the company will actually save money as a result of the transaction.
Under terms of its lease with Bishop Estate, Hawaiian Tel would have paid up to $31 million in lease rent to Bishop Estate until the year 2002 when the building's 50-year lease expires, Hawaiian Tel has estimated.
The company also would have had to spend another $2.5 million upgrade the property, Tadaki said.
"In the long run, we could be saving money for the company and the rate payers," Tadaki said.
Currently, the building, dubbed the Central Division Headquarters, houses Hawaiian Tel customer representatives. Many of those workers are being relocated to other offices, said Tadaki.
Hawaiian Tel acquired the 1.88-acre leasehold property in October 1970, according to the PUC. Since then, the lease rents to Bishop Estate were renegotiated every 10 years. In 1992, the phone company's lease rent jumped from about $53,000 a year to about $1.2 million, as local real estate values soared, said Jim Tousignant, building services manager for Hawaiian Tel. "Over time, the building has become less useful to us," he said.
According to Gushman, the development plan is going as scheduled. The builders received approval for the project on Aug. 8 from the state Hawaii Community Development Authority, which oversees developments in Kakaako. They are also seeking building permits from the county government, he said.