Battle brewing on
Big Isle over coffee
roasting plant

There's a $25 million project brewing on the Big Island and the venture is not something that the local coffee industry wants to wake up with in the morning.

Albert Kam, a founder of PLK Air Services Group LLC, said the company's proposed coffee roasting and packaging center will enhance the Big Island's coffee industry, providing a market for growers and a boost to the island's heralded export.

The proposed project, to be built at Hilo Airport, also will process and package macadamia nuts for export and include a fulfillment center where PLK can process orders before sending them out on airplanes.

But many Hawaii growers, roasters and packagers say the venture is bad for the local coffee and nut business. They say the Big Island doesn't need more roasters battling for a limited supply of unroasted coffee beans. A new player the size of PLK, they say, would drive up local prices of unroasted coffee beans and macadamia kernels to unsustainable levels, leading to a painful bust in the future.

In addition, there's a question of whether PLK will sell only Hawaiian-grown coffee. Although Kam insisted that it will, others fear PLK will import nuts and coffee beans from elsewhere, package them on the Big Island and misleadingly label the products as Hawaiian.

Finally, Big Island coffee and nut producers point to their central gripe: PLK has gotten special support from the state Legislature, which granted PLK the right to issue $25 million in tax-exempt bonds for the project.

The project has turned into a political football, just as PLK faces more bureaucratic hurdles before it can issue its so-called special purpose revenue bonds to finance the facility.

Last week, Gov. Linda Lingle's senior policy adviser Linda Smith attended a meeting in Kona where more than 100 Big Island coffee and macadamia growers and executives, including some of the state's biggest players, decried the project as a state-supported behemoth that would hurt their businesses.

PLK must submit an application with the state before it can issue the bonds, and the state Department of Budget and Finance must study the company's business plan to determine if it is sound before granting approval.

Smith said there's no guarantee that the state will grant final approvals.

"There are actually numerous special purpose revenue bonds that are approved (by the Legislature) that never get issued," Smith said.

"We just feel (PLK) has been given unfair advantage and there's no need for it," said Una Greenaway, owner of Kuaiwi Farm, an organic coffee grower.

Dennis Simonis, president and chief executive of nut grower ML Macadamia Orchards, agreed.

"I think the last thing Hawaii needs is another processor of macadamia nuts," he said.

Also this week, one of the original sponsors of the measure backing the project's bonds, state Rep. Josh Green, D-Honokohau-Keauhou, said in an e-mail to coffee executives that he had been asked to support the bill only because it would "support Kona businesses."

"I now realize the intent of the bill was misrepresented that day," Green wrote.

With the tide apparently turning against him, Kam is engaged in a bitter fight to keep his project on track.

"These people -- when you read through the rhetoric -- simply don't want competition," said Kam, whose partners in PLK are Frederick Parr and Robert Lindsey Jr.

"It's ridiculous that anyone wants to contest a bill that went through public hearings, that went through public testimony," Kam said.

Kam said the minutes of the Hawaii Coffee Association's March meeting show that the group discussed the bill, and therefore was aware of it back then.

But Jim Wayman, chairman of the Hawaii Coffee Association's governmental affairs committee, said the group didn't understand the bill's significance at the time.

Wayman, president and chief executive of Hawaii Coffee Co., said the association didn't hear about the bill again until it was about to become law.

"Who's fault is that?" Kam said. "Are people supposed to call (the Hawaii Coffee Association)? That's a lame excuse."

Kam also is fighting the perception that he is getting a special break from the state. He said the project needed the special purpose revenue bonds because the airport would not grant the type of long-term lease PLK needed to obtain standard financing.

Special purpose revenue bonds essentially transfer to a private entity the state's ability to issue tax-exempt bonds, Smith said. The bonds are not serviced with taxpayer money, she said. Plus, PLK is required to provide collateral covering the full amount of the bonds, Smith said, so the state's coffers would not be exposed if the project were to fail.

Still, Smith said, the tax-exempt status of the bonds represents a benefit to PLK that has not been granted to many other coffee companies, which would face new competition if PLK's project got off the ground.

Kam acknowledged that his project could drive up prices for unroasted Kona coffee beans, which he said would be good for local farmers. Kam noted that Howard Yamasaki of C & H Farms of the Big Island testified in favor of the project before the Legislature, saying it would "ensure a more secure marketplace for farmers."

"How can we be bad for the industry if we're here to help farmers?" Kam said.

Kam, who was once a senior executive with the predecessor of Wayman's Hawaii Coffee Co., said it is wrong to assume that the market could not sustain higher coffee prices. Whether consumers would be willing to pay higher prices in the long run is a question of marketing, he said.

Kam cited Jamaican Blue Mountain coffee, which he said sells for $48 per pound.

As for whether he would import coffee from elsewhere, Kam said: "We are marketers of 100 percent Kona coffee. I have never said we're going to do anything but that."

Critics are unmoved by such rebuttals. In the end, Wayman said, if PLK wants to develop its facility, it should do so without support from the state.

"The state is creating a preferred competitor by backing them," Wayman said. "I haven't heard anything from PLK to change my mind."