Ewa Villages
deal falls through

Unity House backs out of a plan
to develop 200 rental units

By Gordon Y.K. Pang
Star-Bulletin

Unity House Inc. has backed out of a deal to develop a 200-unit rental project as part of the city's Ewa Villages bailout plan.

City Council members are concerned about what Unity House's flip-flop will mean to the city's financial picture and bond rating with a $63.5 million short-term note due by the fall.

Budget Director Malcolm Tom said he does not believe the city is in financial trouble even if it cannot pay the note.

The bailout plan approved by the Council earlier this year was to produce $38.5 million for the city, with Unity House's now-aborted "Parcel H" bringing in $5.7 million. The remainder of the debt would be paid for by lot and house sales on other parcels.

Plans for "Parcel H" called for multifamily and elderly rental units on 24 acres behind Ewa Elementary School.

Priority was to have been given to former sugar workers and their families who have remained in the plantation housing and to Oahu families making less than 80 percent of median income.

"The desired project cannot be accomplished with the resources currently available to this project," Unity House President Tony Rutledge wrote in a letter to the city.

Rutledge wrote that $1.9 million in federal block grant funds the city is providing "is not sufficient to ensure that the desired project could be constructed and developed."

Rutledge did not return calls yesterday and Friday.

City Council Chairman John DeSoto, who represents the area, said: "I'm a little bit disappointed because when we were looking at it, what was proposed was what we were going to get, no ifs, ands or buts."

Tom refused to characterize the deal as canceled. "Unity House is re-evaluating their planned acquisition of Area H," he said.

"They are looking at a number of alternatives for developing that property."

The city has not been shown those alternatives, Tom said.

Council Budget Chairman John Henry Felix and former Budget Chairman Duke Bainum both wondered aloud what the failed "Parcel H" deal will mean to the city's long-term financial outlook.

"In five months, the city has to pay off a $63.5 million note," Bainum said. "This was pivotal to coming up with the money."

Felix described the whole situation as "troubling."

"The alternative is to roll (the note) over," Felix said. "A big question is how this will affect our bond rating."

Felix said he and Budget Vice Chairman Mufi Hannemann expect to pursue that question when they meet with bond raters on the mainland later this month.

Hannemann said he's also not happy, given that the administration's proposed operating budget for next year does not even take the loan into account.

Tom said Council members have nothing to worry about.

The city has sold 40 units and 30 lots in recent months and is still expecting to come up with the entire amount of the note, he said.

Refinancing the note, however, won't hurt the city's bond rating.

"The bond raters and lenders are aware that these types of loans are taken out on the basis that they will either be paid off or refinanced. That's why they're called bond anticipation notes," Tom said.

But Lowell Kalapa, executive director for the Tax Foundation of Hawaii, said the public should be worried.

"If they can't meet their obligations, certainly it will jeopardize their bond rating," Kalapa said. "It's like not meeting your mortgage payment."

Meanwhile, Council concerns that Unity House's other project at Ewa Villages was also being stalled appear unfounded.

Rutledge laid down 13 new conditions he wanted in place before Unity House moves on its commitment to develop "Parcel A."

But according to Tom, the city has accepted all but one of the conditions and Unity House "is proceeding on their acquisition."

The "Parcel A" portion is to provide the city $14.7 million, including $7.3 million in federal block grant funds.

"Parcel A" is envisioned to have 153 lots with longtime residents once again having priority on a third of the homes.

Tom said Unity House has closed on 96 of the lots and is moving to do the same with the remaining 57 lots.