Buying KGMB TV on OHA agenda

Two panels approve further consideration of the proposal today

The Office of Hawaiian Affairs is considering a move to buy KGMB-TV.

Two committees of the quasi-state agency approved a proposal yesterday to make a conditional offer to purchase the station and commit up to $50,000 for the cost of researching it. The full board of trustees will take up the matter at its meeting today.

Trustees voting in favor of the motion included Oswald Stender, Boyd Mossman, John Waihee IV and Dante Carpenter, chairman of the Committee on Asset and Resource Management.

Trustee Linda Dela Cruz voted against the motion, and trustee Rowena Akana abstained. Trustees Donald Cataluna, Colette Machado and OHA Chairwoman Haunani Apoliona were absent, though Apoliona sent a list of concerns and questions to fellow trustees. Apoliona's staff, at her direction, declined to release the list.

Stender and Mossman said the questions would be addressed before and during the due-diligence process.

One of the main questions raised at yesterday's committee meeting is whether OHA is allowed under state law to own a commercial business. It currently does not own any.

The OHA legal team has been told to find the answer, Stender said, adding, "I just assumed we could."

Akana expressed reservations about one approach to the deal -- the establishment of a nonprofit organization to run a commercial station -- given the IRS difficulties that Kamehameha Schools encountered with its tax-exempt status. OHA should "not go there," she said.

Waihee questioned the need to spend $50,000, saying it is "a lot of money," and that reporters do research to find answers all the time without such a cash outlay.

Stender said previous offers of $22 million and $25 million for the station by investor groups were rejected by KGMB's parent company, Emmis Communications Corp. of Indiana, because they were too far below the $40 million asking price.

Rick Blangiardi, senior vice president and general manager of KGMB, said he was "unable to comment at this time" about the figures being cited or any details of any possible deal.

Stender said KGMB's net income in 2005 was $3.2 million, but that figure likely represents another measure of station performance, according to an industry source. KGMB's gross revenue was $13.5 million in 2004, according to an October 2005 story in Broadcasting & Cable, a leading industry journal.

Nevertheless, Stender estimated that a $40 million investment in the station would provide an 8 percent return.

OHA has been told that Emmis will not entertain any offer below $40 million, Stender said. However, after the meeting, he added, "I bet that thing sells for $30 million."

OHA could pay cash for the station, offer bonds or get a bank loan, Stender said, citing OHA's $400 million in assets.

Since the previous offers for KGMB were from nonlocal investors and OHA is local, Stender noted, "We should be an attractive buyer, for the seller."

Any sale would include KGMB's headquarters on 41,000 square feet of land at 1534 Kapiolani Blvd., assessed at $6.7 million in 2005, and last sold for $5.2 million in 2000, as well as the station's facilities and equipment, and its FCC license.

The OHA trustees' interest in the station was whetted by a visit from the Aboriginal Peoples Television Network of Canada earlier this year. APTN owns and operates a radio and a television station "and they get a lot of support" from advertisers, especially for programs about native issues, Stender said.

According to an OHA staff memo explaining the KGMB proposal, ownership of a TV station offers potential value to the Hawaiian community as a "medium of accurate and timely communication regarding Hawaiian affairs to the general public, profit-generating investment featuring physical facilities and assets, a valuable FCC license and prime real estate property." It is also a "multi-media and technology center that serves as a platform for employment, job training and educational opportunities for native Hawaiians.

"Furthermore, ownership of a television station is consistent with the firm belief and experience among indigenous peoples in Canada that ownership and control of media is connected to cultural survival."

Reaction to possible OHA purchase of KGMB mixed

The prospect of the Office of Hawaiian Affairs buying KGMB-TV drew mixed reactions yesterday from a veteran journalist and a media watchdog.

Former KGMB news anchor Bob Jones said he "was fairly shocked" by the prospect. Now a MidWeek columnist, Jones said, "Right off the bat, I'm very uncomfortable with the idea of having a government agency running media. ... The media's job is to provide oversight of government."

One way to get around such a problem could be to put control of the outlet "in some kind of foundation or trust, so that there is a wall there," he said. "But for OHA, the possible pitfalls are numerous.

"Would they have a problem with the way the station covers OHA? Would they take heat from their colleagues and friends, if they, for instance, allow the TV station to cover some very embarrassing OHA meeting where people yelled at each other?"

One of the reasons OHA cited for purchasing the station was to better communicate its services, programs and relevancy to native Hawaiians and the broader community. Jones said he had never heard a potential owner announce an intention to use a station as a vehicle for communicating a specific message.

"I would just be surprised if the FCC would say that a government agency can own a major media outlet," Jones said.

Sean McLaughlin said he was intrigued by the OHA proposal. He is the former chief executive officer of Akaku, Maui Community Television, and is now the spokesman for Hawaii Consumers LLC, a research and advocacy organization.

"We like diversity of ownership, and it's not somebody who already owns a media outlet. We like the fact that it's local ownership," he said. "We naturally would be concerned that it's a government agency. ... But compared to the current ownership, it would be more responsive to local community needs and interests."

Knowing what OHA's interests are, as a station owner, would be preferable to not knowing the interests or agendas of the commercial entities that currently own Hawaii's major media outlets, McLaughlin said.

"The Hawaiians, as a community, have not been as well-served as they should be by the local media," which they could be, if OHA were to buy the station, he said. "I think that should be lauded."