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Hilton’s pier
could go to
top bidder

The state land board is in
favor of a public auction
for the facility

By Ian Y. Lind
Star-Bulletin

The Hilton Hawaiian Village would have to outbid its rivals at a public auction to retain control of its landmark pier on Waikiki Beach, according to a proposal being pushed by state land officials.

The move toward a public auction marks a turning point in the history of the pier, which has remained in Hilton's exclusive and unchallenged control for almost 40 years under terms of a revocable permit issued in 1961.

The Board of Land and Natural Resources quietly approved the auction plan last year following a series of informal attorney general opinions questioning the legality of the existing arrangement, which did not involve competitive bidding. A concurrent resolution authorizing an auction was introduced during the current legislative session at the request of the Department of Land and Natural Resources.

State law allows the lease of submerged lands such as the site of the pier, but only by public auction and with approval of the Legislature and the governor.

State Land Administrator Dean Uchida said the auction, if approved, would not be held until the end of the summer at the earliest.

Uchida said he has been keeping Hilton officials informed as the process moves forward.

Peter Schall, managing director of the Hawaiian Village, confirmed that Hilton is aware of the pending resolution, but declined to comment further.

"The state said that's what they are going to do," Schall said, referring to the auction. "We accepted that and now we move forward."

State Ethics Commission records show Hilton does not have a lobbyist registered to represent the company at the Legislature, which would be required if they were actively supporting or opposing the auction resolution.

At least one other potential bidder has expressed support for the auction plan. Robert N. Iwamoto Jr., president of Roberts Hawaii, which operates Voyager Submarines, said late last year that he would definitely be interested in bidding.

"We have been inquiring of DLNR to put it out on public auction. Why should Hilton have a private deal?" Iwamoto said.

Hilton and the state have been at odds over the pier since 1992, when Hilton entered into an agreement turning over day-to-day control to Atlantis Submarines, which shuttles passengers from the pier to the company's offshore dive site.

(PI) At the end of 1993, Atlantis was paying Hilton a flat fee of $29,549 a month for use of the pier, while Hilton paid the state a monthly rent of just $1,826.

(PI) In February 1994, the Land Board ruled that the Atlantis agreement violated terms of Hilton's permit, which prohibited sublease of the pier. The board fined Hilton $11,109 for "unlawful enrichment," and approved a new rental of $30,500 or 3.5 percent of gross revenues generated by operations at the pier, whichever was greater.

But Hilton balked at the percentage requirement, and the proposed deal was never finalized.

(PI) In June 1997, the board increased the pier rental to $30,000 a month or $1.50 for each passenger using the facility. The move was an interim measure to give the state a fair share of the "sandwich" profit while the attorney general worked out a long-term solution consistent with state law.

Uchida said Star-Bulletin articles about the pier lease, beginning in 1994, made it possible for the state to realize more than $300,000 a year in new revenue.

The attorney general determined by January 1998 that an auction is required, according to a March 1999 memo from land agent Cecil Santos to Uchida.

"The basic analysis by Linnel (Deputy A.G. Linnel Nishioka) is that if people want exclusivity, they need to go to auction," Santos reported. "The disposition must be by public auction if it is exclusive. ... The disposition format will be a lease."

Uchida acknowledged that Hilton's unique advantages of direct access to the pier and available parking could discourage other potential bidders but said the state intends to address the problem.

"It is not our intention to formulate a lease that only Hilton would qualify to bid on," Uchida said. "We will have to balance requirements for dealing with logistical problems such as access with the need for a fair, open and competitive auction given the pier's unique history and location."