Recognizing that 68 percent of its intended beneficiaries live in West O'ahu, the Department of Hawaiian Home Lands will put its new headquarters smack in the middle of its largest housing development in Kapolei.

When DHHL moves its 100 O'ahu employees into a two-story building with about 50,000 square feet of office space late next year, it will mark the first time a state agency has moved the bulk of its resources into O'ahu's planned Second City.

The department broke ground on the 97-acre East Kapolei I subdivision yesterday. Besides the new DHHL headquarters, planned are 403 single-family homes, two commercial sites and a 4.4-acre park. Acreage is also set aside for the offices of other Hawaiian agencies.

The $31.7 million in roads, drainage, sewer, water and electrical work DHHL is undertaking does not include $19.6 million in planned off-site improvements. Those plans include a 4 million- gallon water reservoir and an extension of Kapolei Parkway that would connect with the much-anticipated North-South Road, which is expected to provide some relief to motorists seeking a new route to the H-1.

The improvements are to help bolster development around East Kapolei I, including the University of Hawai'i's West O'ahu campus and the Kroc Community Center.

Micah Kane, chairman of the Hawaiian Homes Commission, said the move from DHHL's Alakea Street offices comes with challenges. "The difficulty is the day-to-day logistics ... you just feel like you need to be close to Downtown Honolulu because all of your consultants are there, all of your sister agencies are there," Kane said. "We're going to have to figure out new guidelines, policies and procedures that will allow us to function here for the betterment of our community and the community at-large."

Despite such difficulties, relocating to Kapolei "is critical because we need to be accessible to our beneficiaries," Kane said. "This is where our largest homestead community is going to be."

Other state agencies, including the Department of Education and Department of Land and Natural Resources, have moved sections of their operations into the Kakuhihewa Building in Kapolei. Also, the State Historic Preservation Division operates out of Kapolei. Department heads of several major city agencies, including parks and recreation, facility maintenance and environmental services, have moved to Kapolei Hale but still maintain some presence in the Fasi Municipal Building in Honolulu.

Maeda Timson, chairwoman of the Makakilo/Kapolei/Ho-nokai Hale Neighborhood Board, said she and other community leaders are pleased that DHHL "put their money where their mouth is" by moving. In addition to the planned infrastructure that will benefit the community, she hopes the agency will be a more forceful ally in lobbying for more funds for the area.

Robin Danner, president and chief executive officer for the Council for Native Hawaiian Advancement, described DHHL's move to Kapolei as a bold one. "This is exactly the kind of leadership through project development that Hawaiian communities can make for everybody."

Selection for leases of the homestead lots will be made Oct. 22.

Reach Gordon Y.K. Pang at gpang@honoluluadvertiser.com.