KUALAPU'U, Moloka'i — The Friendly Isle lived up to its nickname yesterday as hundreds of people turned out for a public hearing to testify — sometimes passionately but respectfully — on both sides of a land proposal that has split the community and stands to profoundly reshape life on Moloka'i.

The private owner of one-third of the island, Moloka'i Ranch, wants to develop 200 luxury coastal house lots at La'au Point — the divisive financial linchpin to a package that also includes perpetually protecting 50,000 acres from development, preserving jobs at the struggling ranch and reopening the shuttered Kaluako'i Hotel.

Yesterday's hearing was the first chance for the rural community to speak directly to the state Land Use Commission about the plan. Although the hearing was to address only whether Moloka'i Ranch has adequately studied and documented the environmental issues, many residents spoke directly about the project.

"I feel Moloka'i should be kept the way it is and not be developed," testified Tracy Lishman, a fifth-generation Moloka'i resident and Hawaiian homesteader.

Edwin "Oboy" Pedro, a lifetime Moloka'i resident who raises cattle, told commissioners that he supports the plan. "To me, it seems reasonable, fair and feasible for the island and (Moloka'i Ranch)," he said.

Typically, applause from the audience followed testimony, and it often came from people holding the opposite view to that of the testifier, giving the hearing a calm essence despite strong views that the plan either will threaten or preserve Moloka'i's distinction as "the last Hawaiian Island."

The peacefulness contrasted with instances in Moloka'i's history of more forceful expressions over development plans, and reflected the deep respect people had for others — some family, some friends, some neighbors — holding opposing views.

"We all know each other," said Crissy Hanohano, a cook at the Kualapuu Cook House. "It splits the community."

The public hearing yesterday, which was scheduled to last 12 hours and will continue today, follows nearly three years of community-based planned efforts by Moloka'i Ranch and stakeholders that have included about 120 meetings involving 1,000 people.

Some of the Island's most ardent preservationists, like hunter and Hawaiian homesteader Walter Ritte Jr., say they cannot accept development at La'au despite what the other benefits are.

"They are just asking too much," he said in an interview. "You cannot go (develop) a pristine area that has no infrastructure. It's the heart of who we are — the icebox we use to feed our families. We cannot give that up. There's some good stuff in the plan, but not so good to give up your heart."

But some key community leaders historically opposed to Moloka'i Ranch believe the tradeoff is necessary for a greater good.

COMMUNITY LAND TRUST

Under the proposal, the ranch would convey 50,000 acres to a community land trust. About half would be owned outright, giving the trust about $250,000 in annual income from leases on the land plus property tax responsibility. The trust would own an easement covering the other half, giving it permanent rights to control land use. Income for the trust, which also would include a cut of La'au lot sales, would help manage the land and pay for initiatives such as subsistence hunting programs, affordable housing and education.

The community land trust, supplemented with grants and fundraising, could also conceivably purchase additional property on Moloka'i that might otherwise be attractive to investors with development interests.

Moloka'i Ranch said it is gifting land and income streams valued at $50 million, and protecting land from other development that could yield $25 million for the company.

"In the long run, this is our only hope," Stacy Helm Crivello, a retired Verizon Hawaii employee who was born and raised on Moloka'i, said in an interview.

Helm Crivello is board president of Moloka'i Enterprise Community, the nonprofit volunteer organization that for nearly two years has spearheaded the community compromise effort with Moloka'i Ranch, and she believes the tradeoff is a good one. "We become the largest landowner," she said. "This is our dangling carrot."

Like Helm Crivello, other somewhat reluctant supporters of the plan like the bigger benefit — albeit at a price — of reducing future potential development opportunities on the rural Island with unspoiled coastlines, no traffic signals and a large population of farmers, ranchers and Native Hawaiians living a subsistence lifestyle of fishing and hunting.

These supporters see a growing urgency to preserve land in the face of wealthy real estate investors offering eye-popping prices for attractive home sites that sometimes include entire ahupua'a, or upland-to-sea tracts of land.

The trading of real estate and construction of luxury homes increasingly threatens the ability of more and more residents — many living below the poverty line — to afford rising property taxes as land values rise with purchases of luxury homes or home lots.

"I'll be the first to say I'm having my struggles in the house lot development for La'au," Helm Crivello said. "But when you look at what's happening with real estate, what we don't want is to lose control of our resources and destiny as an Island.

"Some people say, 'What they doing jumping in bed with the ranch?' If we walk off the table, there are the buyers out there willing to sit down with the ranch, and then will we have a say? No," she said. "If you leave the land to a private entity who knows what will happen in 10, 20 or 30 years."

SENSIBLE COMPROMISE

Colette Machado, a Moloka'i resident and Office of Hawaiian Affairs trustee who has protested former development plans, said in an interview that the compromise makes sense.

"We can't keep going at it for the rest of our lives," she said.

But others, who like Machado protested previous development plans for the Island, believe Moloka'i Ranch's proposal is another plan that should be rejected. "When our day is done and we look back at our mo'opuna (grandchildren), what will we have left for them?" testified state Sen. Clayton Hee, who protested Moloka'i development plans in the 1970s and previously represented Moloka'i residents in the House of Representatives in the 1980s.

Much of yesterday's testimony focused on the Island's water and what effect the proposed La'au development would have on the island's limited supply.

Alton Arakaki, an extension agent with the University of Hawai'i College of Tropical Agriculture and Human Resources, testified that he believes Moloka'i Ranch has underestimated how much water the project will use.

Moloka'i Ranch proposes to supply La'au with 1 million gallons a day using an existing but contested water allocation from the Kualapu'u Aquifer and a mountain water system. The diverted water, necessary for agricultural uses, would be replaced by drawing from a previously unused well containing nonpotable water.

Glenn Teves, a Moloka'i homesteader who works for the College of Tropical Agriculture, said Moloka'i Ranch's environmental impact statement doesn't account for future water needs such as planned affordable housing development and growth in Hawaiian homestead communities.

"Where will this water come from?" he said. "The numbers don't add up, and are estimated to sell the project. For (Moloka'i Ranch), water is money. For Moloka'i, water is life. Which is more important?"

The state Department of Hawaiian Home Lands has a priority right to two-thirds of the water from the Moloka'i Irrigation System owned and operated by the state Department of Agriculture, but other homesteaders fear the water plan for La'au will take away a resource needed to support future expansion of agriculture and residential subdivisions on DHHL land.

Moloka'i Ranch said that based on supply and DHHL development plans, there is more than enough water for all proposed uses. The company also said desalinization of brackish well water or seawater, as well as treating reclaimed water from a shrimp farm, exist as alternate sources for irrigation water.

Another water concern of some residents is that pumping more water from the ground will reduce levels of fresh water flowing from artesian springs into coastal ocean sites where such water is critical for limu and fish growth and helps support the subsistence living lifestyle for many residents.

Moloka'i Ranch said it believes it has adequately addressed all environmental concerns, but also said if the plan fails it could be forced to sell off land in pieces to others who could propose greater development under existing land use rules.

The ranch, owned by a subsidiary of Hong Kong-based GuocoLeisure Group, formerly known as BIL or Brierly International, said financial losses pressured the company to offer the land development and preservation plan.

The company, Moloka'i's largest private employer with about 140 employees, runs a 22-room upscale lodge, a 40-tent platform beach village, outdoor tourism activities, a small industrial park and 500 cattle. Moloka'i Ranch real estate also includes land leased to farmers, Kaluako'i resort's shuttered 152-room hotel, house lots and an 18-hole golf course.

In the past seven years, the ranch said cumulative operating losses totaled about $40 million, offset by $25 million in Kaluako'i house lot sales that helped keep the company afloat.

Peter Nicholas, Moloka'i Ranch chief executive, said in an interview that there is little viable prospect to reverse losses and stay in business without the master plan that includes developing La'au.

Tourism is chronically slow on the island. The golf course, which Moloka'i Ranch reopened on a shoestring, loses about $400,000 annually and needs significant irrigation upgrades. A strategy to expand cattle operations from 3,000 to 5,000 animals from 1996 to 2000 resulted in losses and a severe cutback.

Nicholas said Moloka'i Ranch bought the Kaluako'i resort in 2001, after it was closed by a previous owner, primarily for its golf course as an amenity for lodge guests. Restored, the hotel could employ 130 people. But Nicholas projects that it would take $35 million to nearly $40 million to cover renovation, operation and ownership expenses before occupancy could reach a break-even point.

"I don't want to pour money down the drain," Nicholas said. "I don't know any company that would do it without having the money coming from somewhere else."

In its La'au plan, the ranch would retain 13,880 acres, including the Lodge at Maunaloa, the Beach Village at Kaupoa campsites and Kaluako'i resort. The company also would retain other property for housing expansion.

'PROTECTED FOREVER'

On the 1,432 acres at La'au, the ranch proposes developing about 200 1-acre lots over about 400 acres, leaving 1,000 acres for protected archaeological and cultural sites, flood zones and steep slopes. Two public shoreline parks are also part of the plan for the property, which in the past was used for agriculture.

A portion of La'au lot sales, including subsequent resales, would go to the trust as income to help pay for land management and other programs.

The share is proposed at 5 percent of first-time lot sales. Based on Moloka'i Ranch's estimated $1 million average lot price, trust proceeds would be $10 million. Proceeds from future resales of La'au property would be 0.5 percent.

"You get 55,000 acres protected forever, ever, ever," Nicholas said. "I don't know any other way really that you can protect Moloka'i."

Moloka'i Ranch estimates that La'au development, if approved, would cost $88 million and happen over 15 years with lots completed by 2012 or 2014 and all sales and residential home construction completed by 2023.

If the Land Use Commission rules that Moloka'i Ranch's environmental impact statement is complete, future hearings would be held on the merit of reclassifying the La'au land from agricultural use to residential use. Other state and county approvals such as zoning would also be needed, making it conceivable that it could be years before a final decision on La'au is made.

"I think this could be the most important thing at least in my lifetime for Moloka'i," said Rikki Cooke, a 60-something-year-old descendent of the family that sold Moloka'i Ranch and its 64,000 acres of property covering about 35 percent of the Island to the foreign investment firm in 1989.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.