������Ƶ

The Maui County Council is moving ahead with plans to help Texas real estate developer Paul Cheng build a sorely needed affordable housing project north of Lahaina, the biggest on Maui in decades.

But its recent vote to give him millions of dollars to cover some of the costs comes despite major questions about the project’s access to water and significant state and county regulatory hurdles.

County Department of Water Supply Director John Stufflebean said in an interview this week that there simply is not enough water available in West Maui to give the potentially 1,000-unit project a green light.

“We do not have sufficient source,” he said.

Council member Tamara Paltin, who represents thousands of residents displaced by the Aug. 8 fire in Lahaina, introduced the budget amendment to help fund the project. The measure, which the council passed 6-3 on first reading last week, rescinds $18 million the council had awarded Cheng in 2022 for his Pulelehua project and reallocates it along with $15 million more for a total grant of $33 million next fiscal year, which starts July 1.

The additional funding for Pulelehua would come out of the county’s Affordable Housing Fund, according to Council Chair Alice Lee. The council will take it up Wednesday for final reading as part of the overall $1.7 billion county budget.

Lee said she stands by her support for the project in light of the desperate need for permanent homes in West Maui for fire survivors.

“The people of Lahaina have told us repeatedly that they want to stay in Lahaina, not Central Maui or somewhere else,” she said in an interview Wednesday.

While some on the council see Pulelehua as a must-have project because of the dire need for affordable housing, which was a considered a crisis even before the fires, others continue to point at the lack of water and even Cheng’s character, given his time in prison.

The budget amendment contains a provision saying construction can’t move forward without a “will-serve” letter from the county guaranteeing the supply of 75,000 gallons of water daily, something the Department of Water Supply says is currently impossible.

West Maui is one of the hottest and driest parts of Hawaii and even before the fires the Department of Water Supply was poised to put a halt to issuing new water meters due to stress on the Lahaina aquifer and streams.

Those water sources can produce a reliable supply of 4.1 million gallons of water per day, according to the Department of Water Supply. Before the fires, daily demand totaled 5.6 million gallons and the county met it by pumping wells in excess of their capacity and by using stream flows, Stufflebean said.

Since the fire destroyed more than 2,000 structures in Lahaina, the demand for water has dropped to 3.5 million gallons per day but it’s expected to return to pre-fire levels once the town is rebuilt.

Because demand exceeds supply and no new sources are immediately on the horizon, the department cannot issue the will-serve letter, Stufflebean said.

Cheng did not respond to a request for comment. (Update: Cheng said in an email on Friday he plans to challenge the DWS’ denial of water to his project.)

‘That’s How I Roll’

The $33 million grant to Cheng and MOV Construction LLC would offset the cost of building the first 240 rental units at Pulelehua for households earning between 80% and 140% of the . In 2023, a family of four with $92,640 in annual income would be earning 80% of AMI. If the same family earned $162,120 annually, they would hit the 140% mark.

Those units would constitute phase one of what will ultimately be a much bigger development by Cheng, who also owns the Maui Harbor Shops in Maalaea but otherwise has not built prior developments in Hawaii.

Cheng has a long track record of real estate developments on the mainland after he served six years in federal prison in the 1990s following his conviction on multiple counts of wire and bank fraud, making false entries and transporting ill-gotten gains across state lines.

Cheng has said he was exonerated but there is no evidence of that in available public records.

The fact that Cheng is a convicted felon who didn’t disclose that to the County Council when he first asked for public funding and continues to say he was exonerated without providing proof doesn’t sit well with some council members.

“The character of this particular individual was not somebody that I like to do business with, that is not somebody I would like this county to do business with and that’s just who I am and that’s how I roll and I will be voting no on this,” said council member Tasha Kama.

Pulelehua spans more than 300 acres mauka of Honoapiilani Highway near the Kapalua Airport. Cheng acquired the property in 2016 for $15 million from Maui Land and Pineapple Co. If fully developed, the community could have up to 1,000 residential units offering a mix of affordable and market-rate rentals, single-family homes with optional ohana units, parks and trails, according to its website.

A temporary school opened at Pulelehua in April to replace King Kamehameha III Elementary which burned in the Aug. 8 wildfire. The school, built by the U.S. Army Corps of Engineers and funded mostly by the Federal Emergency Management Agency, is expected to cost between $100 million and $120 million if it’s used for five years as planned.

After the wildfires, Cheng appeared by video before the County Council saying he wanted to help house fire survivors.

Two months later, the council approved a resolution supporting Cheng’s request for $50 million to reconfigure his mixed-used project and make it 100% affordable and to accelerate the construction timeline. The resolution asked Mayor Richard Bissen to support the request.

Although the administration never acted on the resolution, Cheng has found plenty of support on the council.

“This will be one of the biggest solutions for the people of West Maui,” Lee said during the council’s April 26 meeting.

Council member Nohe U‘u-Hodgins joined Kama and Sugimura in casting no votes last week.

In addition to concerns about access to water, U‘u-Hodgins said Cheng is not paying his workers prevailing wages at the construction site as required by law. But water for the project remains the major sticking point.

In an April 25 to Lee, Stufflebean said, “there is no unused water in the County system in West Maui.”

Stufflebean noted that the state Commission on Water Resource Management in 2022 placed ground and surface water in West Maui into a after concluding that local aquifers and streams were threatened by current and future withdrawals, saltwater intrusion, climate uncertainty and water use conflicts.

Any new wells or stream diversions in West Maui must be approved by CWRM. The water commission is currently processing permits for existing uses, not issuing permits for new uses like Pulelehua. When the commission will get around to issuing new permits is unknown.

“To be very clear, the CWRM has taken complete legal control of the water sources in West Maui. All new sources are subject to water use permit allocations” and will be affected by interim instream flow standards that require water to be left in streams, Stufflebean wrote.

The county is drilling a new well in the Honolua aquifer which is projected to be online next fiscal year. But water from the Kahana well will be used to offset the gap between existing supply and demand, not for new uses.

Stufflebean said the county is also considering desalinization plants and recycling water as future sources. When supply exceeds existing demand, the county could entertain a request like the one that Pulelehua is making, he said.

Cheng had two wells dug on the property in 2022. The work was completed in December of that year but no permanent pumps were installed and Cheng has not applied for permits to use water from the wells through CWRM, according to the Department of Land and Natural Resources.

The water has turned out to be brackish, or salty, Paltin said at the April 26 budget committee meeting. It could be turned into drinking water through desalinization and would require CWRM authorization.

“We have no assurance that their wells will be permitted and they also need approval of well injection for the residue from the reverse osmosis process,” Stufflebean said.

Paltin’s frustration at the May 21 meeting was palpable.

“We can come up with endless excuses but at the end of the day we need housing in West Maui,” she said.

The county had offered to purchase the portion of Pulelehua that contains the affordable housing units, according to Josiah Nishita, director of the Office of Recovery. But the amount of money Cheng wanted for it was beyond the scope of what the county considered feasible, Nishita told the council.

Housing advocate Sterling Higa questions the wisdom of allocating $33 million to a project with no guaranteed water supply and one that didn’t move forward with the $18 million previously granted to the developer.

Higa said most affordable housing projects that receive public assistance get it in the form of loans not as grants.

Loans rather than grants give the government more leverage, he said, including the right to foreclose and recoup taxpayers’ money if a project goes sideways.

Civil Beat’s coverage of Maui County is supported in part by a grant from the Nuestro Futuro Foundation.

Civil Beat’s coverage of environmental issues on Maui is supported by grants from the Center for Disaster Philanthropy and the Hawaii Wildfires Recovery Fund, the Knight Foundation and the Doris Duke Foundation. 

Read the Department of Water Supply’s letter to Paul Cheng that was released on Friday: