Auditors: At best,
Ewa Villages to
The city's deputy managingBy Gordon Y.K. Pang
director, however, says the project
will show a surplus
The city has made a "questionable" projection that it can sell $44.8 million in Ewa Villages real estate by this time next year.
And even if it sells that many homes, the city would still be left with a $21.9 million loss.
That's the conclusion of an independent review of the city's Ewa Villages Revitalization Project released by the City Council yesterday.
Malcolm Tom, city deputy managing director, disputes the report and claims accounting firm KPMG Peat Marwick LLP is "hiding" the true numbers.
The Council's Policy Committee will meet 1:30 p.m. Thursday to discuss the review and hear the administration's response.
The city has until October 2000 to come up with a $43.5 million short-term note that's connected to the revitalization project.
To cover the payment, the city in February projected it would be selling $44.8 million in Ewa Villages property in the 19 months leading up to the deadline.
However, "The city's projection of $44.8 million in real estate sales over the next 19-month period appears to be questionable," KPMG Peat Marwick said in its report.
"In general, the remaining unsold inventory at Ewa Villages is less attractive to buyers and developers than the properties that have been sold to date."
And while overall home sales in the Ewa region are projected to improve, "the demand for residential real estate remains weak," the report said.
In response, Tom said yesterday, "As far as the city is concerned, it's sold out," he said.
The report also noted that the city is faced with repaying an additional $29 million in general obligation bonds for the project.
Selling off all the necessary properties to pay off the bond is "a daunting task," the report said, "with no identified saleable real estate assets and escalating rent losses at Ewa Villages."
The report also said the city's own financial projections indicate the project overall will show a $21.9 million deficit in the Housing Development Special Fund following payoff of the loan.
While that figure does not take into account other vacant and improved lands in Ewa Villages, "these properties are not presently planned for sale, may lack the required zoning or may be infeasible to develop due to infrastructure, historic preservation requirements or other market reasons," the report said.
Tom said the project is not losing money and will show a surplus.
The auditors also criticized the city for "the lack of comprehensive and meaningful financial reporting for Ewa Villages."
They further noted that a $5.5 million deal with Unity House to build houses at Ewa Villages is currently being disputed and that additional claims involving the Ewa Villages Nonprofit Development Corp. have not yet been resolved.
Tom said the city has done well in its handling of the Ewa Villages, which the administration inherited at a time when the economy went sour.
"We're very proud of the results," he said.
Critics had mixed reactions.
Councilman Duke Bainum said while problems appear to be lingering, he can see movement toward getting them resolved.
"At least actions are being taken to finish the project while fulfilling our commitment to the residents of Ewa Villages," he said.
But Councilman Mufi Hannemann, who called for the management report last year, said the findings show the administration has not been forthright about the project and has wrongly labeled it low priority.
"They're always trying to put a spin on it," Hannemann said, "like everything's gone away."