Hawai'i Community Development Authority

Lawmakers, via the state budget bill recently signed by Gov. Josh Green, appropriated $14 million to demo­lish the Country Club hotel plus $270,000 to reclaim the land lease under the golf course through condemnation if necessary.

In a separate measure, Senate Bill 2001, expected to be signed Wednesday, the Legislature appropriated $2.4 million for HCDA to advance master-planning work for the peninsula, which is threaded by Banyan Drive and also includes the 25-acre Lili‘uokalani Gardens cultural park.

The moves, largely spearheaded by Sen. Lorraine Inouye, a former Hawaii County mayor who once worked in Banyan Drive hotels, follow years of frustration over how the state Department of Land and Natural Resources managed the oceanfront hotel parcels under long-term land leases to private hotel operators.

“Over the years, I’ve seen the deterioration of Banyan Drive,” said Inouye (D, Hilo-­Pepeekeo), who described the new action as big steps to return some of the lost luster to the area.

County support

There were some community concerns about HCDA, a Honolulu-based agency formed in 1976 to transform Kakaako from industrial blight to a live-work-play community dotted by high-rises, being given the master-­planning role. But county leaders and DLNR backed the move.

“Banyan Drive serves as a key gateway to Hilo and is of significant cultural and economic importance,” Hawaii County Mayor Kimo Alame­da said in written testimony supporting SB 2001 in February. “However, the area faces ongoing challenges with infrastructure, safety, and underutilization.”

James McCully, chair of the Banyan Drive Hawaii Redevelopment Agency established by the Hawaii County Council in 2016 to effectuate revitalization and redevelopment of the peninsula, also endorsed the bill.

McCully said HCDA, which has experience creating park space, improving infrastructure and establishing zoning, would bring coordinated redevelopment governance that replaces fragmented land management by DLNR.

“This is not a criticism of DLNR,” he said in written testimony. “It is recognition that redevelopment requires different institutional tools than conservation and lease administration. Under DLNR, parcels are managed. … Under HCDA, communities can be built.”

HCDA has more than a half-dozen development districts, including 3,700 acres in Kalaeloa that are part of a former Navy base closed in 1999, land around Aloha Stadium in Halawa, about 400 acres of Windward Oahu wetlands at Heeia, and a 988-acre district on Maui called Pulehunui where the agency is tasked with improving infrastructure to support development including a possible Judiciary complex and jail.

Ryan Kanaka‘ole, director of DLNR, also supported SB 2001. “The Department recognizes that the Waiakea peninsula area, which includes Banyan Drive, is underutilized, but has an exceptional potential for revitalization,” he said in written testimony. “Further, the Department acknowledges the frustration over the current state of the area and recognizes the need for and importance of revitalizing and redeveloping the area.”

DLNR struggles

DLNR’s difficulty along Banyan Drive stems from agency rules governing land leases. The agency in the 1960s leased several parcels to hotel developers for 50 years, and for decades the area prospered as a tourism base that the county said at one time represented roughly 85% of all East Hawaii overnight visitor accommodations.

“The place was booming,” recalled Inouye, who started as a desk clerk at the Orchid Island Hotel, which opened in 1967 and was destroyed by fire in 1986, and later became assistant manager at the Hilo Hawaiian.

Two hotels on the peninsula today, the 388-room Grand Naniloa and the 286-room Hilo Hawaiian, have land leases with the state that were modified and don’t expire for more than 40 years. But for other lessees, it didn’t make economic sense to keep investing in upkeep as the end of their lease terms neared because DLNR stood to inherit the hotel buildings upon lease expiration.

This predicament left DLNR facing the prospect of inheriting two dilapidated buildings — Uncle Billy’s Hilo Bay Hotel and Country Club — about a decade ago.

At that time, then-DLNR Director Suzanne Case said, the agency was working with Hawaii County, Hilo business and community leaders “to plan the best future for the Banyan Drive area.”

Hawaii County’s Banyan Drive redevelopment agency also came out with a conceptual plan in 2016 envisioning a community and cultural center on part of the golf course land next to a new resort area. This “Banyan Drive Tomorrow” vision also included turning DLNR’s bay-front hotel sites into park space, and adding a boardwalk and boat slips extending into Reed’s Bay.

Uncle Billy’s was condemned by the county in 2017 following a year-long attempt by local developer Peter Savio to sustain and improve the property after the original lease ended with the family of the hotel’s original developer, William J. “Uncle Billy” Kimi Jr.

The empty 146-room hotel later become a target for break-ins, squatters, vandalism and arson fires. DLNR couldn’t obtain funding to demolish the building and an adjacent general store until 2024. The demolition cost $8 million and was followed by $4.7 million spent to remediate the site last year.

Ground leases for the Country Club and a third property, Hilo Reeds Bay Hotel, also are expired, while the lease for another DLNR hotel site occupied by Bayview Banyan Apartments has about six years remaining.

In January 2024, planning firm PBR Hawaii produced a preliminary Waiakea Peninsula strategic market assessment for DLNR and HCDA. The 124-page report noted that the state’s waterfront parcels are at risk of inundation from sea-level rise or other flooding, making the golf course land the key opportunity for redevelopment.

Potential uses envisioned in the report include cultural and historical projects including restoration of a heiau in the area, interpretive trails, an outdoor hula mound, a community and cultural center, hotels, retail, entertainment and a performing arts center.

The report noted that a prior planning study and some area stakeholders had envisioned a performing arts center that possibly could accommodate expansion of festivals including Merrie Monarch.

Later in 2024, the Legislature appropriated $1 million for HCDA to expand its planning work for the peninsula.

Craig Nakamoto, HCDA director, told members of two Senate committees in February that the agency proceeded with master-­planning work before being given authority to create zoning rules for the district to avoid having the $1 million appropriation lapse.

To address public criticism that HCDA, which is governed by a board, would be making land-use decisions for Waiakea Peninsula without pull from lineal and cultural descendants of the area, Nakamoto said the agency planned to assemble a community advisory committee with such representatives.

Later, SB 2001 was amended to have a lineal descendant of the Waiakea ahupuaa as a voting member on HCDA’s board for the new district in addition to several state agency directors, the county planning director, the chair of the county’s Banyan Drive redevelopment agency, a cultural specialist and two other representatives of the district.

Still, some community members opposed HCDA’s proposed role.

“While we obviously love Waiakea Peninsula, Makaoku and the Banyan Drive area and we do need to revitalize that area, this bill takes a top-down, state-controlled approach that concentrates decision-making authority within the Hawaii Community Development Authority … rather than the Hilo community that it directly impacts,” Tanya Yamanaka, a representative of the Chamber of Sustainable Commerce, said during a House Finance Committee on April 2 opposing SB 2001. “True revitalization must be community-­led, culturally grounded and accountable to the people who live and work there every day.”

Inouye believes the right mix of stakeholders are being put in place to achieve that goal, and the House and Senate voted unanimously to approve the bill.