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The state’s embattled historic preservation division suffered another blow last week, with the Hawaii Supreme Court ruling that the agency had violated its own rules in allowing the city to begin construction on Honolulu’s rail project without completing an archaeological inventory survey for the entire route first.

While a lot of the criticism by anti-rail proponents has centered on the city’s haste to push the project forward, it’s the State Historic Preservation Division — which is currently at risk of losing its federal certification and funding due to a long history of dysfunction — that signed off on the deal.

The $5.26 billion rail project ground to a halt this week as a result of the ruling, with tens of millions of dollars in contracts to developers, construction companies and urban designers on the line. It’s not yet clear whether the city will face financial penalties for delays in executing the contracts. It could be months before construction starts back up again.

Federal and state officials have raised concerns in the past that the turmoil within SHPD, from understaffing, high-turnover rates, major permit backlogs and leadership woes, is a threat to construction projects.

And if the National Park Service strips SHPD of its certification and funding, things could get a lot worse for rail.

Federal officials are set to make a final ruling on whether the agency has made sufficient improvements to keep its federal standing early next year.

Federally funded projects, which include the rail project, must be reviewed by SHPD to make sure that they meet national standards for the protection of historic and cultural resources.

If SHPD loses its certification it could cause further disruptions in the rail project, which hopes to get $1.55 billion in federal funding.

The division would lose one-quarter of its budget and some of its staff. As a result, there could be delays in federal compliance reviews “which would drive up the costs of many federally assisted construction projects,” according to a report from the National Park Service.

Hawaii would be the first state in the country to lose its certification and the full ramifications of this scenario are not entirely clear. National Park Service officials have been working to devise a backup plan for reviewing state projects that require federal approvals after a progress report this past spring found that SHPD was in danger of not meeting the deadline for improvements.

Gov. Neil Abercrombie has been tracking the process, according to Donalyn Dela Cruz, a spokeswoman for the governor.

“The Governor has been closely monitoring SHPD’s status to ensure proper and timely compliance with the National Park Service’s Corrective Action Plan,” she wrote by email. “Reports we have received thus far are that they are on track towards bringing on the needed staff and rectifying the backlog that is needed to meet NPS’ deadline at the end of September.”

Consistently ‘Skipping Steps’

This isn’t the first time that SHPD has allowed construction on a project to proceed before a full archaeological inventory survey has begun or been completed on a project.

“The state historic preservation division has been violating its own rules for years,” said David Kimo Frankel, an attorney with the Native Hawaiian Legal Corporation which brought the lawsuit against the city and state on behalf of Paulette Kaleikini, who says she is a descendant of Native Hawaiians buried in downtown Honolulu. “We can point to a number of instances of this. We’ve been telling them for years and they have refused to listen.”

Some of the more high-profile cases include Ward Centers and Kawaiahao Church.

The state didn’t require Kawaiahao Church officials to conduct an archaeological inventory survey prior to the start of construction in 2009 on a $17.5 million multipurpose center at its downtown Honolulu location. In the course of construction, workers found dozens of burial remains resulting in emotional protests by Native Hawaiians, months of project delays and several lawsuits.

The same happened with General Growth’s Ward Villages development, where dozens of remains found in the course of construction have led to numerous delays and lawsuits.

“SHPD, in order to expedite construction, has been consistently skipping steps in the process,” said Frankel.

The results have been detrimental not only to the fate of Native Hawaiian burial remains, but also to developers, he said.

“That failure to do an archaeological inventory survey early is what is creating so many problems,” said Frankel. “Once you start doing an archaeological inventory survey up front, it should solve a lot of the problems and get rid of the controversy and get rid of the litigation. Developers know what the constraints are and so don’t wind up in these situations.”

Abercrombie Says Follow the Law

Asked why SHPD has seemingly made so many blunders over the years, Frankel posited several theories.

“Either they are so understaffed, or they are under political pressure, or they’re poorly trained, or they are getting bad advice from the Attorney General’s office, or they don’t care,” he said.

William Aila, chair of the Hawaii Department of Land and Natural Resources, which oversees SHPD, said he couldn’t comment on the case for now, as the Attorney General’s office was still reviewing the ruling.

Aila signed the “programmatic agreement” between the city and state permitting rail construction to proceed without the full archaeological survey in January of 2011, shortly after he took office. The agreement allowed the archaeological surveys to be conducted in four segments, as construction on the project progressed.

The Native Hawaiian Legal Corporation argued that not conducting the full survey before construction began could close off future options for altering project plans if burial remains are found.

The state high court agreed, ruling that the surveys should not have been split into four segments.

Dela Cruz said that the state and city made a good faith interpretation of the law at the time the agreement was signed. She said the governor didn’t play a role in the state approval.

“He didn’t have a role in that, no,” she said. “That was through the department. The governor didn’t review it. It went through the Attorney General’s office and the department as most things do.”

She said now that the ruling is out, “the governor is saying follow the law.”