HILO, Hawai'i — A pending settlement in the lawsuit that halted the Hokuli'a luxury home development is similar to an offer made last year by the developer that included a pledge of up to 168 affordable homes, according to sources familiar with the negotiations.

The 2005 offer by 1250 Oceanside Partners also included a pledge of $2 million over five years to a nonprofit community foundation and the promise of a connector road to be built by the developer that would allow Kona commuters to use a nearly completed portion of a new highway to ease some of the area's traffic congestion, the sources said.

The developer was required to build the two-lane, 5.5-mile bypass highway between Napo'opo'o and Keauhou as a condition of rezoning for Hokuli'a.

Parties familiar with the settlement talks, who asked not to be identified for fear of interfering with the pending agreement, confirmed the negotiations were revived largely because the state Legislature appears poised to pass a bill declaring the Hokuli'a project legal.

"I greatly suspect the amount of attention it's getting at the Legislature forced the issue," said state Rep. Josh Green, D-6th (Kailua, Keauhou), who is pushing for the bill.

Of the settlement talks, Green said: "They are at third base and are on their way home."

Two key lawmakers yesterday said even with a pending settlement they still plan to push legislation forward to resolve issues of housing on agricultural lands.

"I think the legislation is still very important," said Russell Kokubun, D-2nd (S. Hilo, Puna, Ka'u), chairman of the Senate Committee on Water, Land and Agriculture. "With the settlement of Hokuli'a, all that really does is address one project. And what we've been saying all along is that we need to provide more clarity moving forward in terms of what constitutes a dwelling on agricultural lands.

"And we also need to take a look retrospectively and say that all the previous developments allowed on agricultural land, if they did not have that agricultural component to it should be righted."

House Majority Leader Marcus Oshiro agreed.

"The bill has been always about the thousands of home owners and lot owners who face legal challenges, and the Legislature should address this issue as soon as possible," said Oshiro, D-39th (Wahiawa). "Settlement of Hokuli'a makes it easier to discuss and resolve this important issue facing many, many local home owners."

On Wednesday, Hawai'i County Corporation Counsel Lincoln Ashida briefed the County Council on the pending settlement in a closed-door session. He declined to publicly discuss specifics, but said the council voted "to concur with our recommendations" on how to proceed in the case. The county is a defendant in the lawsuit.

The lawsuit was filed by the Protect Keopuka 'Ohana and four area residents. Kona Circuit Judge Ronald Ibarra ordered construction halted on the 1,550-acre project in 2003 after ruling Hokuli'a was actually an urban-type development being illegally constructed on agricultural lands.

Ibarra said 1250 Oceanside Partners should have asked the state Land Use Commission to reclassify the land for urban development before work began. He ordered that all work stop until the LUC either reclassified the land or declared Hokuli'a to be a legal use of agricultural lands.

1250 Oceanside Partners has appealed Ibarra's ruling to the state Supreme Court, but the project has been stalled for 30 months. The developer said it already invested $350 million in the project and had begun selling lots when construction was halted.

Critics of Ibarra's ruling claim that if allowed to stand, the decision would render illegal many thousands of homes across the state that counties allowed to be built on agricultural lands without requiring the owners to do any farming.

The state House Finance Committee on Wednesday approved House Bill 1368 HD1, which would declare houses already built on the poorest four classifications of agricultural lands to be legal.

The measure also would declare legal projects on agricultural lands that already have been approved by county zoning ordinances or given partial subdivision approval. Also included would be developments in which construction has started and lots have been sold.

The bill, which will be put to a vote of the full House, would effectively make the Hokuli'a project legal and allow the project to resume. Environmentalists oppose the legislation, saying it is meant specifically to overturn Ibarra's ruling.

Staff writers Lynda Arakawa and Derrick DePledge contributed to this report.

Reach Kevin Dayton at kdayton@honoluluadvertiser.com.