A federal judge's order that the state agency in charge of developing the area surrounding Aloha Tower pay a Texas developer $1.6 million for botching its plans could be the agency's final misstep. State Sen. Donna Mercado Kim has called for the demise of the Aloha Tower Development Corp. and the Legislature should consider transferring its functions and closing its doors.

U.S. District Judge David Ezra has confirmed an arbitrator's ruling that the agency acted in bad faith in dealing with Dallas-based Hughes Development LP. The plans were for a residential-retail project at Piers 5 and 6. The case also cost the agency $1.15 million in attorney fees and other expenses.

Kim is chairwoman of the Senate Ways and Means Committee, which approved transfer of the agency's non-harbor issues to the Hawaii Community Development Authority. Harbor functions would have been transferred to the Transportation Department's Harbors Division. The bill won Senate approval this year but died in the House.

The bill was opposed by Ted Liu, director of the Department of Business, Economic Development and Tourism. He said “;substantial changes ... would seriously hamper adequate oversight”; by his department of “;numerous critical projects and extensive responsibilities”; of the agency.

That appears to be a sharp reversal by the state administration. In 2003, Gov. Linda Lingle testified before the Senate money committee in favor of such a move.

“;Right now it is just costing us money, it is in bankruptcy court and it is not on a good track,”; Lingle said then. “;This change will make government work better and be a stimulus for the private sector.”;

Since renovation of the iconic tower and development of a surrounding marketplace after its creation in 1981, the Aloha Tower Development Corp.'s track record has been abysmal. While the marketplace emerged from three years of bankruptcy, Kim points out, the agency has entered into four other development agreements, three of which ended in lawsuits. The fourth was dropped.

Dallas developer Kenneth Hughes said his $300 million development plan for residential condominiums, stores, a hotel and new parking “;would have acted as a wonderful front door for Hawaii.”; He faulted the agency for lacking in real estate expertise and being unwilling to hire outside consultants.

Kim asserts that the Hughes contract failed because of the Aloha Tower agency's “;mismanagement, poor communications and slow performance”; that “;were the same factors that killed its predecessors.”;

The failure of one plan ostensibly could be blamed on the developer. The failure of four raises serious questions about the agency — the subject of a state audit which is due to be completed soon.