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The Honolulu Advertiser
Posted on: Saturday, March 6, 2010

Maui County to enter settlement talks with Molokai Properties

The Maui News

WAILUKU, Maui - Saying Maui County has an "advantageous position" in its lawsuit against Molokai Properties Ltd., the county's lead civil attorney asked for and received permission on Friday from Maui County Council members to enter into settlement negotiations.

The company, which was formerly Molokai Ranch, is eager to end the Maui County suit as well as five other ongoing legal proceedings with the county and state, said the county's special counsel and former state Attorney General Margery Bronster.

And when a judge caught wind of it this week, he ordered the county to enter into settlement discussions with the company, Bronster said.

"We can't read too much into this, except we've received an overture," Deputy Corporation Counsel Jane Lovell said. "It's nice to see they suddenly want to make nice; and we are willing to consider reasonable solutions, if we hear any."

She said the county is not at liberty to discuss what an outcome may look like. The negotiation process is just in its infancy, anyway, Lovell said.

For almost two years now, Maui County has sought a court order that will require the MPL's three utilities to continue to provide water and wastewater services to residents in the central and west Molokai communities. The ranch had developed the towns years ago and wanted to force the county to take over the utilities soon after its bid to develop luxury homes on Laau Point stalled back in 2007.

On Friday, the council unanimously approved a resolution initiated by Bronster. She was hired by the county Department of the Corporation Counsel to handle the complicated Molokai case.

A trial is scheduled to begin June 14 before 2nd Circuit Judge Joel August in Wailuku. With that date looming - and a number of rulings going against the company so far - MPL attorneys reached out to Bronster to help forge a settlement, Bronster said.

"She noted that time is of the essence, as trial preparation will need to commence well before the trial date," according to the resolution presented by Lovell to council members.

Bronster said Molokai Properties Ltd.'s attorneys indicated that the company wants "a settlement of all pending matters." That would include lawsuits, appeals and price-hike applications with the state Health Department and Hawaii Public Utilities Commission.

The last time MPL appeared in court was Tuesday, when the judge ordered the company to produce numerous documents requested by Maui County - as well as MPL Chief Executive Officer Peter Nicholas for a deposition. August also ordered the sides to enter into nonbinding mediation.

"So we will be going forward and pursuing our rights," Bronster said. "If we can resolve it in a way that makes sense, we will do so. But if they don't make an offer that will work, we are ready to move to trial."

Back in October of 2008, August also declined a request by the company to dismiss the county's lawsuit. And in December 2009, he sided with the county and said that the state Department of Health does not have the authority, as Gov. Linda Lingle had indicated, to compel the county to take over the private utilities, Bronster said.

In addition to the county lawsuit, everyone involved is also waiting on a decision from the Public Utilities Commission regarding proposed rate hikes. On Friday, the commission set evidentiary hearings for the rate increase proposals for May 11 to 13 in Honolulu, Lovell said.

Molokai Public Utilities' attorney Michael Lau notified the PUC on Thursday that the company had initiated talks with the county to, hopefully, reach a settlement of all the pending actions.

The PUC has yet to make a ruling on requests by two of the three utilities, Molokai Public Utilities and Waiola O Molokai, to increase rates by 60 and 74 percent, respectively.

That's on top of temporary hikes already imposed by the PUC. The commission accepted testimony from upset residents on Molokai in September.

If the higher rates were approved, a typical Waiola O Molokai customer's monthly bill would jump from about $41 before the August 2008 temporary hike to $197 - for the foreseeable future.

MPL attorney Andrew Beaman has said the company would continue to provide utilities while it seeks the rate increases. The company also would continue to run the utilities until the county lawsuit ends, he said.

Efforts by The Maui News to reach Beaman and MPL General Manager Daniel Orodenker on Friday afternoon were unsuccessful.

In order to prepare for the trial, county officials and Bronster have said they would pursue case discovery, including an audit of the services and details on the relationship between MPL and the three utility companies. The third utility is Mosco, which operates a sewage treatment plant.

The county lawsuit began in May 2008 after MPL claimed it is not responsible for the operation of the water and wastewater companies that were set up to provide the utility service for the towns of Kualapuu and Maunaloa and the now-closed Kaluakoi Resort and Molokai Ranch.

However, Maui County said the original zoning agreements clearly spell out that the companies are obligated to provide utility services to the homes and businesses that the ranch developed as part of the land-use permitting processes done across three decades.

MPL shut down the ranch and related businesses in April 2008 after its proposal to develop a 600-acre, rural-residential subdivision overlooking Laau stalled before the state Land Use Commission.

In exchange for the development, the company had pledged to return almost one-third of the island it owns back to the public, as well as invest millions into providing new jobs and various town improvements.

Soon after the deal fell apart, though, Nicholas, told the PUC that the utilities would be shut down by the end of summer in 2008 if no other company could be found to take them over. The company said an adequate buyer never came forward.

Nicholas said the company had covered $1.2 million in losses in the utility operations. He said that MPL was not obligated to subsidize the utility operations.