Ward's plan for Kakaako mall delayed

The landowners did not get the legislative support they had sought

By Rick Daysog
Star-Bulletin

Victoria Ward Ltd.'s plan to build a $200 million retail and entertainment complex in Kakaako could be delayed up to a year.

That's the assessment of Victoria Ward Chief Executive Officer Mitch D'Olier after state Legislators approved only a small portion of a $60 million bond issue that Ward had sought for a 4,500-stall parking structure.

House and Senate budget negotiators were deadlocked on the issue, approving just $2 million in bond financing for planning and design of the garage. Legislators did approve about $36 million in state bond financing to extend Ward Avenue in Kakaako along Victoria Ward lands.

"Our project is delayed at least six months and maybe a year but our project is going forward," D'Olier said.

"We have to go back to next year's legislative session to see if we can tell the story better and get support."

Sen. Lehua Fernandes Salling, co-chair of the Senate Ways and Means Committee, said she was concerned that taxpayers may end up paying for the bonds in case of a default. If revenues from the parking structure didn't cover the bonds' interest payments, taxpayers may also be liable, she said.

"We have to look at the worse-case scenario: What if the receipts don't make enough money to pay off the bonds?" she said. "The state will ultimately have to step in."

Dubbed the "Ward waterfront village," the 1 million-square-foot project is a centerpiece in Victoria Ward's retail expansion plans and is a major attraction in the Cayetano administration's redevelopment of Honolulu's waterfront.

Victoria Ward said the project - which would include a large department store, a multi-screen theater and a redeveloped Farmers Market - would add 1,700 retail jobs and 1,650 construction jobs and pump millions of dollars into state tax coffers.

Victoria Ward and partner Indianapolis-based Simon DeBartolo Group Inc. have said the bonds wouldn't cost taxpayers since they would be paid for by revenues from overall project and not just from parking receipts. The bonds also would be backed by assets of Simon DeBartolo, D'Olier said.

The idea was to use the state's strong bond rating to get a lower interest rate than a commercial loan, said Rep. Calvin Say, chairman of the House Finance committee. Say, who supported the bond plan, said the bonds would lower the developer's interest rate to about 5.5 percent from the typical 8 percent commercial loan.

But Fernandes Salling said the type of bonds being sought, known as reimbursable general obligations bonds, put the state at risk in case of default. Other types of bonds, such as special-purpose revenue bonds which have been used to finance private hospitals, don't put the state at risk, she said.

Fernandes Salling said she could support a bond issue in the form of special purpose revenue bonds for the parking structure.