County Of Maui Sues Molokai Properties

County to seek pledge of commitment and cost reimbursement.

By Catherine Cluett

Last Friday the County of Maui filed suit against Molokai Properties, Ltd. (MPL) to insure that “the company continues to meet its obligations to operate and maintain its water and wastewater systems in West Molokai.” Margery Bronster, a lawyer with the Hololulu based firm Bronster Hochibatain, announced the suit in a press release on the same day.

Word from the Ranch
On August 14, the Public Utilities Commission (PUC) approved water utility rate increases requested by the MPL that will go into effect on Sept. 1. These rates were increased from the PUC rates by as much as 178%. Before the rate approval, MPL had issued a statement of intention to terminate water utility services on August 31.

Last Thursday, the day before the suit was filed, MPL director Peter Nicholas confirmed that MPL has agreed to continue services past August 31. There was no indication of long-term commitment, however.

“How long the temporary rate increase will be sufficient for the utilities to be able to continue to operate depends on future fuel, power and labor cost increases,” Nicholas stated in a letter to Carl Caliboso, chairman of the Public Utilities Commission (PUC).

While no lasting or reliable solution has yet been proposed for operation of MPL’s water systems, Governor Linda Lingle remained positive. “The temporary rate increases will allow Moloka‘i Properties to continue to provide water service until another entity can take over the operation.”

Mahina Martin, Communications Director for the County, confirmed last Saturday that the county’s emergency response plan was completed to meet the Department of Health (DOH) deadline, and will go into effect should MPL cease water utilities. Until then, emergency measures will remain on hold.

Commitment Sought
In a phone interview with Bronster, she explained that the goal of the suit is two-fold. The first concerns the contractual agreements entered into with the County of Maui. “When Molokai Ranch and its predecessors sought to develop the property, it agreed to build, operate and maintain water and wastewater systems in West Molokai,” reads the complaint filed by the county.

Thirty-one contracts have been uncovered, some dating as far back as 1978, that bind MPL to continue operating these utilities, among other agreements, according to the county’s complaint against MPL. If they terminate water services on August 31 as they had previously informed the county, they would be breaking legal and binding contracts.

Reimbursement Requested
The second goal of the suit is to “ask the MPL to pay for costs and expenses the county has incurred to prepare for this emergency situation,” says Bronster.
Martin confirms that the prospect of Molokai residents left without water is a great concern to the county, and that the office has put other issues on hold to give precedence to the situation. The county has a budget of $1,260,000 to cover emergency operations for ninety days, and has spent a tremendous amount of time planning for the possible outcomes due to the Ranch’s lack of communication, according to Martin.

Communication on the part of the Ranch is another frustration of the county, according to Bronster. “The Ranch has been less than forthcoming in answering the question as to what their plans are,” she says. “We’ve asked repeatedly that they comply with the orders, and we have not gotten a response.”

Accountability
“By filing suit, the County is going to hold Molokai Properties, Ltd. accountable. Molokai Properties, Ltd. cannot hide behind its subsidiaries and affiliates in an effort to avoid its clear obligations,” Bronster stated in a press conference.

MPL has been called the “alter ego” of its subsidiary water utility companies, Molokai Public Utilities, Inc. (MPU) and Wai`ola o Molokai, Inc. (Wai`ola), and the wastewater utility Mosco, Inc. MPL shares such assets as employees, funds, office spaces and supervisors with these companies. Although the county is suing the parent company MPL and each of its subsidiaries separately, it plans to hold MPL in sole responsibility because the water agreements with the county were entered into with MPL directly.

Background
MPL owns 70, 000 acres of land on Molokai, and a termination of water utilities controlled by MPL would result in a loss of water utilities to as many as 1,200 users.

MPL is a subsidiary of GuocoLeisure Limited, an international investment company based in Singapore. Since January 2006, “MPL continued to remain cash flow positive,” according to GuocoLeisure financial reports. Yet in March 2008, the company approved shutdown of Molokai Ranch operations. Their termination plan included unloading all major expenses such company employees and operational costs of running the company’s utilities. The county has a different take on the situation, however, pointing to the contracts that bind MPL to maintain and operate water services.

“The agreement says [MPL] won’t ask us to pay, or to run the water systems, and that’s precisely what they’ve done,” says Bronster. “So hopefully MPL will come out of the weeds and into the courtroom to give us some straight answers.”