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Unite Here! Local 5 v. Department of Planning and Permitting

Supreme Court of Hawaii

December 13, 2019

UNITE HERE! LOCAL 5, Appellant-Appellant,
v.
DEPARTMENT OF PLANNING AND PERMITTING/ZONING BOARD OF APPEALS, CITY AND COUNTY OF HONOLULU; LYLE ISHIDA, in his official capacity as Chairperson of the Zoning Board of Appeals, Appellees-Appellees, and PACREP 2, Intervenor-Appellee.

          APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT (CAAP-17-0000823; CIV. NO. 15-1-2253)

          Gregory W. Kugle, Loren A.Seehase, and Joanna C.Zeigler for appellant-appellant

          Brad T. Saito, for appelleeappellee City and County of Honolulu Department of Planning and Permitting

          Terence J. O'Toole, Sharon V.Lovejoy and Maile S. Millerfor Intervenor-AppelleePACREP 2 LLC

          RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.

          OPINION

          NAKAYAMA, J.

         This case involves Appellee-Appellee City and County of Honolulu Department of Planning and Permitting's (DPP) approval of two Waiklkl Special District (WSD) permits for Intervenor- Appellee PACREP 2 and its affiliate PACREP, to develop a condo-hotel at 2121 Kuhio Avenue and 2139 Kuhio Avenue.[1]

         When the Director of the DPP approved PACREP's application for a WSD permit at 2121 Kuhio Avenue (2121 Kuhio Permit) in March 2013, he included several restrictive covenant conditions in the permit to ensure compliance with the Land Use Ordinance (LUO) should any hotel unit be converted to a residential unit. The Director placed these conditions in the 2121 Kuhio Permit at the behest of Appellant-Appellant Unite Here! Local 5 (Local 5), a union representing hotel and restaurant employees, which had raised several concerns regarding the use of the condo-hotel. Neither PACREP nor Local 5 appealed the 2121 Kuhio Permit.

         In 2014, PACREP 2 applied for a WSD permit for the second phase of the condo-hotel project at 2139 Kuhio Avenue. The Director approved the permit (2139 Kuhio Permit) in July 2014, but did not include the same restrictive covenant conditions that had previously been placed in the 2121 Kuhio Permit.

         Local 5 appealed the 2139 Kuhio Permit to the Zoning Board of Appeals (ZBA), and argued that the Director abused his discretion when he approved the 2139 Kuhio Permit without these conditions. In response, the DPP stated that on a request from PACREP, the Director removed the restrictive covenant conditions from that permit in September 2013, prior to the approval of the 2139 Kuhio Permit in July 2014.

         The ZBA concluded that (1) it did not have jurisdiction to address any "modification" of the 2121 Kuhio Permit in Local 5's appeal of the 2139 Kuhio Permit, and (2) the Director's decision to approve the 2139 Kuhio Permit was not an abuse of discretion. On appeal, the Circuit Court of the First Circuit (circuit court) affirmed the ZBA's decision. Local 5 filed a secondary appeal to the Intermediate Court of Appeals (ICA), and this court granted Local 5's subsequent application for transfer.

         When the Director removed certain conditions from the 2121 Kuhio Permit, conditions that he knew Local 5 had advocated for, Local 5 should have had an opportunity to challenge the removal of those conditions from the permit. However, Local 5 did not receive notice that the Director had removed these conditions. Under these circumstances, we conclude that Local 5's right to due process was violated, and pursuant to Hawai'i Revised Statutes (HRS) § 91-14(g), we remand the Director's decision to remove these conditions from the 2121 Kuhio Permit to the ZBA so that Local 5 may challenge this decision.

         Finally, because the 2139 Kuhio project is fully integrated with the 2121 Kuhio project and the decision to approve the 2139 Kuhio Permit rested in part on the then-existing 2121 Kuhio Permit, we also vacate the ZBA's decision to approve the Director's approval of the 2139 Kuhio Permit, and remand to the ZBA to decide whether the Director's decision to approve that permit without the restrictive covenant conditions was an abuse of discretion.

         I. BACKGROUND

         A. The Director Approves the 2121 Kuhio Permit

         Because of its significance as "a recognized symbol of Hawaii," the LUO designates Waikiki as a "special district" and sets forth specific objectives and design controls "to guide carefully Waikiki's future and protect its unique Hawaiian identity." Revised Ordinances of the City and County of Honolulu (ROH) § 21-9.80 et. seg. (1999); see also Surfrider Found, v. Zoning Bd. of Appeals, 136 Hawai'i 95, 98, 358 P.3d 664, 667 (2015). Any planned development project in the Waikiki Special District must go through a "major permit" permitting process as described in the LUO. See ROH Table 21-9 (C) (2003) and § 21-2.40-2 (1999).

         Pursuant to the LUO's "major permit" permitting provisions, in 2012, PACREP, a principal of PACREP 2, requested a WSD (Major) permit for a thirty-seven story, 350-foot-high condo-hotel at 2121 Kuhio Avenue in Waikiki.

         On February 11, 2013, Local 5 submitted written testimony to the DPP objecting to its consideration of PACREP's WSD permit. Therein, Local 5 contended that PACREP had not taken measures to ensure the building would be used solely for hotel accommodations and had not ensured adequate parking on the premises for guests and workers. Additionally, Local 5 argued that because the project's draft Environmental Assessment was currently being challenged, issuance of a WSD permit was premature.[2]

         On March 19, 2013, the Director approved PACREP's application and issued the 2121 Kuhio Permit. Therein, the Director noted that at the public hearing on PACREP's application, twenty-three people testified in opposition to the project. The Director also noted that a Local 5 representative "commented on the discrepancies in the number of parking spaces, job estimates, and unit types (hotel versus residence) represented in the Final [environmental assessment] and the [WSD permit] application." Pursuant to the Director's findings of fact and conclusions of law, the Director approved the PACREP's application for a WSD permit, "subject to [certain] conditions."

         Two conditions placed restrictive covenants on the project to ensure compliance with the LUO should any of the hotel units be converted to residential units. As the Director explained,

For purposes of establishing off-street parking (and park dedication) requirements, a declaration of restrictive covenant ("Declaration") indicating the number of units to be placed in a hotel pool should be required as a condition of approval, and should be filed prior to the issuance of any building permits.[3] Subsequent to the construction of the Project, if any hotel unit is converted to a residential unit, then one parking space must be provided for each residential unit. While this is an LUO requirement, it should also be enforced as a condition of approval through the Declaration.

         The Director therefore imposed two conditions, Conditions C and G, which provided:

C. Prior to the issuance of any building permits:
1. A declaration of restrictive covenant (Declaration) indicating the (dwelling and/or lodging) units to be placed in a hotel pool for the Project shall be submitted to the DPP for its review and approval. Once approved, the Declaration shall be filed at the State Bureau of Conveyances; and, a certified copy of the Declaration shall be submitted to the DPP. For each unit that is designated as a residential unit:
(a) One parking space per residential unit shall be provided; and
(b) Compliance with park dedication shall be required.
G. Prior to the conversion of any hotel (dwelling and/or lodging) unit to a residential (multi-family dwelling) unit, the owner of the unit shall provide to the DPP documentation of ownership of one parking space that is compliant with all relevant Land Use Ordinance (LUO) requirements, and shall comply with any park dedication requirements.

         As Local 5 argues, these conditions were important to ensuring that any conversion of units from hotel use to residential use comply with the LUO. The LUO prescribes different requirements for developments described as "multi-family dwellings" and developments described as "hotels."[4] For example, in the Waikiki Special District, hotels are only required to provide one parking space for every four dwelling or lodging units, while multi-family dwellings require one parking space for every dwelling unit. See ROH Ch. 21 Table 21-6.3 (2003) .

         Additionally, ROH chapter 22 article 7 requires that every developer, as a condition precedent to issuance of a building permit for a multi-family development, "shall provide land in perpetuity or dedicate land for park and playground purposes, for the joint use by the occupants of lots or units in subdivisions as well as by the public." ROH § 22-7.3(a) (1996). This park dedication requirement applies "to any conversion in use of any existing non-dwelling unit to dwelling units, and such conversion shall not be undertaken unless the provisions of this article have been met." ROH § 22-7.3(i). However, under the LUO, a "hotel" is excluded from the definition of "multi-family development." ROH § 22-7.2 (1983) . Therefore, hotels need not comply with the park dedication requirements of ROH chapter 22 article 7. Conditions C and G of the 2121 Kuhio Permit addressed the possible conversion of hotel units to multi-family dwelling units to ensure that these converted units adhered to LUO requirements.

         The 2121 Kuhio Permit also contained the following general conditions regarding any modification of the permit:

A. Except as may otherwise be required by these conditions of approval, the operation and development of the site shall be in conformance with the approved Project, as described herein and shown on plans and drawings attached hereto . . . and comprehensively contained in the SDP application "Waikiki Special District Permit, Major 2121 Kuhio," dated December 2012, on file at the DPP. Any modification to the Project and/or approved plans, design concept, and/or the environmental character of the Project shall be subject to the prior review of and approval by the Director of the DPP. Minor modifications shall be processed in accordance with Land Use Ordinance (LUO) Section 21-2.20(k). [5] Major modifications shall require a new SDP (Major).
L. The Director may modify the conditions of this permit by imposing additional conditions, modifying existing conditions, or deleting conditions deemed satisfied upon a finding that circumstances related to the approved Project have significantly changed so as to warrant a modification to the conditions of approval.

         While Local 5 was not copied on the Director's letter to PACREP approving the 2121 Kuhio Permit, Local 5 was aware that the Director had approved the 2121 Kuhio Permit with Conditions C and G. Local 5 did not appeal the Director's approval of the 2121 Kuhio Permit.

         B. The Director Removes Conditions from the 2121 Kuhio Permit

         Some time after the Director approved the 2121 Kuhio Permit, PACREP verbally requested that Conditions C and G, the restrictive covenant conditions, be waived. In a letter sent to PACREP on September 6, 2013 (September 6 Letter), the Director removed the restrictive covenant conditions. He concluded, "[b]ecause we agree that the project qualifies as a condo-hotel, submission of declarations of restrictive covenants regarding this issue will not be required."

         Local 5 was not aware of the existence of the Director's September 6 Letter removing 2121 Conditions C and G until the ZBA held a contested case hearing on its appeal of the 2139 Kuhio Permit in 2015. Accordingly, Local 5 contends that it did not appeal the Director's "modification" to the ZBA within thirty days as required by ROH § 21-1.40 because it was not notified, [6] nor did it file a complaint for declaratory or injunctive relief in the circuit court as provided by HRS § 632- l.[7]

         C. The Director Approves the 2139 Kuhio Permit

         On April 1, 2014, PACREP 2 submitted an application for a WSD (Major) permit for a 350-foot tall, 39-story condo-hotel at 2139 Kuhio Avenue. In its permit application, PACREP 2 stated that the proposed tower would be connected to the previously approved development at 2121 Kuhio Avenue, and "share common amenities, including vehicle access . . . and off-street parking, within the connected 8-story building podium."

         On July 14, 2014, the Director approved PACREP 2's WSD permit application and issued the 2139 Kuhio Permit. In the permit, the Director noted that at the public hearing on PACREP 2's application, a Local 5 representative commented that

there were no guarantees from the Applicant that the condo-hotel would not be converted into a multi-family dwelling or not operate as a hotel. With the concept of condo-hotels there is no guarantee that many of the hotel employees will have job security or if there will be enough off-street parking stalls.

         The Director also examined the Project's off-street parking spaces, and concluded that

there may not be adequate off-street parking to support partial multi-family (condominium) uses provided by the Project. Therefore, the permit approval should be based on the use of both the 2121 Kuhio and 2139 Kuhio developments to hotel use. In the event that use of the site, or portions of the site are changed to multi-family dwellings, then the residential (dwelling or lodging) units will have to comply with residential parking requirements.

         The Director also required that in the event that any portion of the development is converted to a multi-family dwelling, "then the residential (dwelling or lodging) units will have to comply with park dedication requirements."

         The Director then placed several conditions in the 2139 Kuhio Permit. However, the conditions imposed did not include the restrictive covenant conditions regarding off-street parking stalls or park dedication that had been in the 2121 Kuhio Permit, i.e. 2121 Conditions C and G. In other words, there was no condition that required residential or multi-family units to be placed in a hotel pool, no condition that the developer provide one parking space per residential unit, and no condition that the developer comply with park dedication requirements.

         Instead, the Director imposed Condition I, which stated:

         I. Upon issuance of a COO [Certificate of Occupancy], the

Project shall institute and make available:
1. Valet service for at least 80 percent of the total required off-street parking.
2. All units shall receive full hospitality, housekeeping, building maintenance, and room services.
3. A centralized mail and phone service for all units.
Furthermore, these requirements shall be extended as conditions of approval to all units in the 2121 Kuhio development, authorized by SDP No. 2012-SDD-73.

         Local 5 was copied on the Director's letter approving the 2139 Kuhio Permit, and thus received notice that the Director had approved the 2139 Kuhio Permit.

         D. Appeal to the Zoning Board of Appeals

         On August 13, 2014, Local 5 timely appealed the Director's decision to approve the 2139 Kuhio Permit to the ZBA pursuant to ROH § 21-1.40. Local 5 explained that its appeal was narrow in scope:

Local 5 objects to the lack of conditions reasonably necessary to insure that the project being approved as a hotel is in fact used as a hotel and that the individual buyers of each unit do not convert to a multi-family dwelling without satisfying the more stringent LUO multi-family requirements, such as 1:1 parking and park dedication. The Director imposed such conditions on the sister tower located at 2121 Kuhio - including the requirement that units be placed into the hotel rental pool and any units removed from hotel use demonstrate compliance with LUO requirements for parking and park dedication - and the failure to impose similar conditions is arbitrary, capricious and an abuse of discretion.

(Emphasis in original.)

         Local 5 alleged that the Director's decision to issue the 2139 Kuhio Permit was an abuse of discretion in two ways: that (1) 2139 Condition I was vague and ambiguous; and (2) there was no condition in the 2139 Kuhio Permit comparable to the condition in the 2121 Kuhio Permit which imposed parking and park dedication requirements. Local 5 explained that in the 2121 Kuhio Permit, the Director concluded that restrictive covenants should be required as a condition of approval for purposes of establishing off-street parking and park dedication ...


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