PA'IA, Maui — What to do with a $7.5 million beach house?

That's the question Maui County officials are mulling six months after acquiring a 1.5-acre parcel adjacent to Baldwin Beach Park in a lawsuit settlement stemming from improper land-use approvals granted by the last administration.

Sitting vacant in the meantime is a two-story, 2,250-square-foot teak wood home with an Asian-influenced design and two double-car garage/workshops. The home, with landscaping and a garden pavilion, is mere steps from a sandy cove that extends east from Baldwin Beach Park.

The house is on one lot of the three-parcel, 5.7-acre Montana Beach LLC condominium that was developed where a lime kiln was used years ago for sand and coral mining. The county also purchased a second lot last year — a vacant, 1.4-acre oceanfront parcel — and is negotiating with the owner of the third unit.

Environmentalists, beachgoers and other community members had criticized the development because it threatened beach access and was built on land designated in the area's community plan for park and open space. Among the opponents were the Maui Group of the Sierra Club, the local branch of the Surfrider Foundation and Hui Alanui O Makena, a cultural and land preservation group.

Rob Parsons led the Sierra Club's campaign against the Montana Beach project and is now the county's environmental coordinator under Mayor Alan Arakawa. He said allowing the luxury homes on an otherwise undeveloped coastline would have set a bad precedent.

While few questioned the need to prevent development, the county now finds itself in possession of a multimillion-dollar home it didn't really want and one that will require high maintenance due to the salt air.

Parsons is preparing a virtual tour and other materials for public presentations aimed at gathering ideas on use of the home.

Although plans are preliminary, Arakawa said he is looking at using it as a Maui County Environmental Center to provide the public with information on native and invasive species and other issues, conduct educational programs, and perhaps as a meeting space for volunteer activities.

The mayor has also been talking with Mary Evanson, a leader in Maui's environmental community, about the possibility of using the house as a natural history museum.

Evanson said that for years she has had a vision of a natural history museum covering the entire Hawaiian archipelago. The Pa'ia property might not be suitable for such a purpose, Evanson said, but she does like the location.

"When you look across (Kahului Bay) there to the Waihe'e dunes, that whole area is very different from the Baldwin Beach area," she said. "It's a wonderful contrast; it's almost like two islands."

Parsons said the beach house could become the "crown jewel" of a north shore regional park.

Controversy over the Montana Beach development began when then-Planning Director John Min was accused of improperly granting special management area permit exemptions for the project in December 2000. Min claimed he had authority to use his discretion to rule that the individual owners of the three single-family house lots within the condominium — in this case a single-family home project with shared ownership in common areas — did not need coastal zone management permits, even though state law said one such residence can be exempt as long as it is not part of a larger development.

A later opinion by county attorneys said Min's action was not permitted under state law, and a stop-work order in August 2001 halted construction.

Dennis and Diane Holland, owners of the parcel with the house, filed a federal lawsuit in February 2002, claiming they were denied their rights to move into their beachfront home, which was all but completed. Construction on the other two lots also had begun.

A $4.58 million settlement with the Hollands was announced last August, with the county's insurance company paying $2 million of that amount. The agreement requires that the property be used solely for public purposes.

A lawsuit filed by Michael Weidner, owner of the second lot, was settled when the county agreed to pay $1.8 million for the parcel.

An appraisal a year ago found that the Holland property had a market value of nearly $7.5 million and that Weidner's was valued at $4 million, county officials said.

Deputy Corporation Counsel Madelyn D'Enbeau said negotiations continue on the fate of the remaining lot still in private hands. At a minimum, the county is hoping to preserve public access along the makai edge of the property for an uninterrupted trail between Pa'ia and Baldwin beaches.

Reach Christie Wilson at cwilson@honoluluadvertiser.com.