Should the Honolulu Department of Planning and Permitting’s delay in acting on an agricultural subdivision permit for lands result in an automatic approval?
And is there a process by which a landowner can appeal a determination by the DPP that a Special Management Area permit is required?
At an August 29 hearing on a motion for summary judgment (and a motion to defer hearing that motion) in a federal lawsuit filed two years ago by companies owned by the developer of the Marconi Point Condominiums on Oʻahu’s North Shore, U.S. District Judge Jill A. Otake found that she needed further briefings on those two questions.
The companies’ complaint alleges that corruption within the DPP prompted the agency to reverse what they argue was the DPP’s position that a Special Management Area permit was not needed for development of the agricultural condominium property regime. And by requiring an SMA permit before further development could proceed, the DPP violated the companies’ rights, they argue.
Those companies — Makai Ranch, RCA Trade Center, MP Unit 21 and Marconi Farms — have since shifted their focus away from the corruption allegations, but still argue that their roadway subdivision and agricultural subdivision applications should have been approved without needing to go through the SMA permitting process.
Automatic Approval
Makai Ranch submitted on February 14, 2020, its application to subdivide its 96 acres into four 20- to 23-acre agricultural lots with roadways.
At the hearing last month, Otake asked Patricia Sendao, corporation counsel for the city, about when the clock started ticking on the 30-day timeline for automatic approval.
Hawaiʻi Revised Statutes Chapter 91-13.5 requires agencies to “take action to grant or deny any application for a business or development-related permit, license, or approval within the established maximum period of time, or the application shall be deemed approved.” And DPP subdivision rule 2-202(b) establishes a 30-day window for its director to act on a preliminary subdivision map.
That rule suggests that unless the DPP grants a deferral beforehand, its director has 30 days to decide on the application for a tentative subdivision approval before it’s deemed automatically approved.
The DPP did not grant a deferral until April 24, 2020. In its deferral letter, the agency listed 14 conditions that Makai Ranch needed to satisfy before the application could be tentatively approved. The initial deadline to meet those conditions was July 24, 2020, but it was later extended at Makai Ranch’s request to January 23, 2021.
On August 27 and 28, Makai Ranch attorney Greg Kugle and consultant G70 addressed, but did not exactly meet, the 14 deferral conditions. Instead of satisfying the condition requiring consultation with DPP staff about compliance with the Special Management Area ordinance, Kugle argued against having to meet it. With regard to conditions requiring evidence of compliance with other agency requirements, they argued that the state Department of Agriculture’s lack of response to Makai Ranch’s Ag Feasibility Study amounted to acceptance of it. With regard to a memorandum of agreement to preserve the property’s historic structures required by the state Historic Preservation Division, Kugle said it was being finalized, when, in fact, it was not approved until almost a year later.
After months went by with no response from the DPP, Kugle wrote the department on January 22, 2021, a day before the subdivision application was to expire. He argued that the DPP’s failure to respond to the August letters within 30 days constituted an automatic approval of the application.
At the hearing last month, Otake wanted to know why, if the application was submitted in February and the deferral letter not issued until April, the application wasn’t automatically approved in March. Did Makai Ranch somehow waive the automatic approval? she asked.
Sendao said that COVID may have had a role in the delay in the city’s response and that under DPP rules, automatic approval did not apply to tentative subdivision approvals.
She also argued that by July, the plaintiffs had assented to proceed with the deferral period deadline.
Sendao ultimately agreed that the February application date started the clock ticking on automatic approval, but said Makai Ranch waived the 30-day deadline when it assented to the timeline set forth in the April deferral letter.
In the city’s memorandum supporting its motion, its counsel stated that the Hawai‘i Supreme Court held in its 2014 decision in Kauai Springs, Inc. v. Plan. Commission of County of Kauaʻi “that a party can assent to extending an automatic approval deadline based on that party’s conduct before the automatic approval deadline. Public policy favors allowing such extensions to enable counties to thoroughly and accurately consider the merits of an application, as ‘the public should not have to suffer the consequences of having an ill-advised or harmful project go forward.’”
They continued, “Plaintiffs’ conduct would lead any reasonable person to believe that they assented to an extension. Plaintiffs requested an extension of the deferral period before the alleged automatic approval deadline on September 30, 2020. DPP then extended the deferral period six months until January 25, 2021. Plaintiffs did not assert that automatic approval occurred until January 22, 2021— days before the deferral period ended and almost four months after the alleged automatic approval date. Before the expiration date, plaintiffs admittedly ‘continued to meet with DPP and other agencies to discuss and resolve the deferral comments.’”
They added in a footnote: “Ironically, in a December 4, 2020 letter, plaintiffs wrote DPP to reinstate expired building permits and requested leniency because of COVID-19 delays.”
To Otake, Sendao added that the August letters from Kugle and G70 could not reset the automatic approval deadline. To start with, they did not comply with the deferral conditions, she said. And, she argued, basing the trigger date on the letters would mean that new deadlines could be set “every time they submit correspondence.”
“They were given an assignment. They did not complete it. Now they’re here in court requesting passing marks,” she said.
At the hearing, Kugle did not argue that the agricultural subdivision was automatically approved in March 2020. “It is correct to say we treated their deferral letter seriously,” he said. “Our automatic approval argument focuses on the August 28, 2021, letters in which my office and G70 planners provided information.” He said they believed they had complied with the conditions and that those letters triggered the running of the 30-day deadline.
He also reiterated how months passed without a response from the DPP.
Otake later asked Sendao why Kugle was wrong, adding that the DPP “sat on their hands for months.”
Sendao replied that the plaintiffs had not established that a piece of correspondence would trigger the approval deadline.
Still, Otake took issue with the DPP’s delay, asking “Why is that an acceptable process?”
Sendao conceded that it was not acceptable by customer service standards, but argued that did not mean an incomplete application should be automatically approved. She reiterated the city’s position that the plaintiffs had not complied with the deferral conditions.
SMA Determination Appeal
Years before Makai Ranch filed its agricultural subdivision application, in early 2017, the DPP issued a deferral letter on the company’s application for a roadway subdivision. The letter included 13 conditions that needed to be met, including compliance with the Special Management Area ordinance.
Again, Makai Ranch resisted and eventually withdrew the roadway subdivision application.
One of the counts in the complaint alleges that the DPP violated the companies’ due process rights by withholding approval of the subdivision applications.
The city has argued that no taking of property rights occurred and that DPP did not violate the plaintiffs’ procedural or due process rights. It has also argued that the plaintiffs’ claims are unripe because the DPP “never issued a final discretionary decision, and plaintiffs have no legally protected interests in their subdivision applications.”
“Plaintiffs could have exercised their opportunity to be heard by appealing to the Zoning Board of Appeals. They did not. And DPP’s valid use of discretion to protect the SMA does not make its actions arbitrary,” the city’s counsel wrote.
The plaintiffs’ attorneys, however, argue that Makai Ranch had no avenue to appeal the DPP’s determination that an SMA permit was required.
“By rule, the Zoning Board of Appeals may hear an ‘action of the director,’ defined as ‘a decision rendered on an application pursuant to the Land Use Ordinance or the Subdivision Ordinance.’ If, as defendants argue, an appeal to the ZBA was available to plaintiffs then DPP has reached a final decision on the matter. Conversely, if DPP has not reached a final decision, the ZBA would have no jurisdiction to hear an appeal, leaving plaintiffs without a meaningful opportunity to be heard. Defendants cannot have it both ways,” they wrote.
Briefs
Following the hearing, Judge Otake directed the parties to submit supplemental briefing addressing the following questions:
“(1) Given that defendants [the City & County of Honolulu and DPP] conceded at the hearing that plaintiffs’ February 14, 2020 agricultural subdivision application triggered the 30-day deadline for a response, … and also conceded that DPP did not ‘take action to grant or deny’ the application within those initial 30 days, did defendants somehow waive the automatic approval contemplated by HRS § 91-13.5? Alternatively, is there a reason HRS § 91-13.5 does not apply to the agricultural subdivision application?
“(2) At the hearing, when asked whether plaintiffs had an avenue to appeal the determination that plaintiffs were required to obtain a Special Management Area permit, counsel for defendants pointed to chapter 25 of the Revised Ordinances of Honolulu. In their Motion for Summary Judgment, defendants instead cited to ROH § 22-3.7(a). How, if at all, does ROH § 25-10.1 affect any of the arguments before the court, in particular the motion for summary judgment’s attack on plaintiffs’ due process claim and plaintiffs’ suggestion that they were forced into withdrawing the roadway subdivision application?”
ROH § 25-10.1 states, “If any person is aggrieved by an order issued by the director pursuant to §25-9.1 and 25-9.2 [which deal with enforcement of SMA rules], the person may appeal the order in the manner provided in HRS Chapter 91; provided that no provision of the order shall be stayed on appeal, unless specifically ordered by a court of competent jurisdiction.”
ROH § 22-3.7(a) states, “An applicant aggrieved by an action of the director in the administration of the subdivision ordinance or rules and regulations may appeal to the zoning board of appeals within 15 days after receipt of the notice of such action.”
Briefs are due September 12.
— Teresa Dawson
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