HILO, Hawai'i — Opponents of the Hokuli'a luxury housing project in Kona find themselves racing the state Legislature this year, trying to reach an out-of-court settlement with the project's developer before state lawmakers decide the case in their own way.

At stake is a ruling in 2003 by Kona Judge Ronald Ibarra that found the 1,550-acre Hokuli'a project was essentially an urban housing project being built illegally on agricultural lands in violation of state law. Ibarra ordered a stop to all work on the subdivision after the developer had invested some $350 million in the project.

Environmentalists regard that ruling as a major victory in the effort to protect agriculture, and prevent urban sprawl and land speculation. They argue Ibarra finally enforced a longstanding law that was designed to keep agricultural land in agriculture.

Supporters of the project disagree, but people on both sides said the political momentum propelling a settlement this year has more to do with traffic than farming or housing.

Ibarra's ruling also halted construction on a $55 million, 5.5-mile bypass road that the Hokuli'a developer agreed to build as a condition of the county rezoning for the project. A nearly finished segment of the road now sits empty, paralleling the clogged Mamalahoa Highway.

As traffic worsened in the 30 months following Ibarra's ruling, that empty stretch of highway became a powerful symbol.

Kona lawyer Michael Matsukawa said anger at traffic delays pushed Kona residents to speak out, which accounts for new pressure for a settlement, and new momentum in the lobbying effort in Honolulu.

Matsukawa said it takes him more than an hour to commute the 11 miles from his office in Kailua to Captain Cook. Some have dubbed passage through the town of Kainaliu as the "Kainaliu Crawl."

"We talk to people who drive through Kainaliu, and they couldn't give a rip about the ins or outs of Chapter 205 (the land use law) or the judicial appeal or Hokuli'a," said Matsukawa, who is active with a group seeking to restart the Hokuli'a project. "They just know that they're stuck in traffic, it takes them about an hour and a half to go home, including myself, and they're frustrated."

'IT'S ALL ABOUT THE ROAD'

Jack Kelly, vice president of Protect Keopuka 'Ohana, an organization that joined in the lawsuit that stopped Hokuli'a, said the demand that the Mamalahoa bypass road open to relieve traffic is coming even from people in North Kona, who won't get much benefit from it.

"It's all about the road," Kelly said in an e-mailed response to questions. "Whatever people care about clean water, cultural preservation, land use — it pales compared to the emotional hot potato of the road. So in the last couple of years, as traffic and congestion get worse, people are over it, they want their road."

Ibarra ruled Hokuli'a developer 1250 Oceanside Partners should have applied to the state Land Use Commission to reclassify the Hokuli'a land for urban uses, and he ordered all work on the project stopped until the commission either reclassifies the land or declares Hokuli'a to be a legal use of agricultural lands.

Hokuli'a appealed that ruling to the Hawai'i Supreme Court, but lawmakers aren't waiting for the higher court ruling. The state House this week is scheduled to vote on a bill to declare Hokuli'a and other projects like it to be legal uses of the lowest four classifications of agricultural lands, preempting the appeal.

45,000 PARCELS AT STAKE

Critics of Ibarra's ruling contend that if it is allowed to stand, thousands of homes across the state already built on agricultural lands also would be illegal. The bill moving in the House also would declare those homes to be legal.

Rep. Bob Herkes, who is shepherding the bill through the House, said lawmakers need to act because Ibarra's ruling leaves a legal cloud over 45,000 agricultural parcels across the state, dictating that homes can be built there only if the properties are being farmed.

In past years, business leaders were too busy to lobby for a bill to fix the problem, and other parts of the state saw Hokuli'a as a Kona issue, said Herkes, D-5th (Ka'u, S. Kona). This year, "there's a general feeling that it needs to be dealt with," he said.

The movement of the bill put pressure on Protect Keopuka 'Ohana and plaintiffs Charles Flaherty, Patrick Cunningham and Michele Wilkins to reach a settlement while they are still in a position to bargain with the Hokuli'a developer.

All of the plaintiffs reportedly have signed off on a proposed settlement, and lawyers involved in the case are finalizing details and obtaining the necessary final approvals from all of the entities involved.

Alan Murakami, a lawyer with the Native Hawaiian Legal Corp., criticized the Legislature's intervention in the case because he said it favors a rich developer at the expense of local people.

Ibarra's ruling enforced an existing state requirement that agricultural lands be used primarily for agriculture. It prohibited what Murakami called "fake farm subdivisions," or luxury projects where little farming is done, which he said drive up the cost of housing in Hawai'i.

"For the Legislature now to be favoring the special interests of multimillionaires trying to build their second, third, fourth vacation homes in Hawai'i — and they don't even live here — over a local guy who can't afford his first home, and to spend so much time dealing with this issue, it's just outrageous and hypocritical," Murakami said.

DIVIDED COMMUNITY

State Sen. Russell Kokubun said settlement talks between the developer and the opponents of Hokuli'a had already gained momentum before the session began this year, because "the community has taken a much more active role in the project."

Kona residents were upset about traffic as well as a cultural and social "wedge" that the project has come to represent in the community, said Kokubun, D-2nd (S. Hilo, Puna, Ka'u).

"What's happening is, I think this lawsuit is dividing the community to the point where reconciliation is going to be a very, very tough thing to accomplish, and I think that's not our way," he said.

Reach Kevin Dayton at kdayton@honoluluadvertiser.com.