Land Use in Hawaii
Price of Paradise · Hawaii Public Radio · aired 1994-01-01
Guests: Peter Garrod (Professor of Agricultural and Resource Economics, University of Hawaii); Francis Oda (CEO, Group 70 International)
Duration: 0:29:47

[00:00:06] Randall Roth: Good morning. I'm Randy Roth, host of the Price of Paradise radio show. My guests this week are Francis Oda, Chairman and Chief Executive Officer of Group 70 International, and Peter Garrod, Professor of Agricultural and Resource Economics at the University of Hawaii. Peter co-authored a chapter in volume two of the Price of Paradise, in which he explained the 177,000 acres have been or soon will be taken out of sugar and pineapple cultivation. He then described 177,000 acres as the equivalent of a strip of land, two football fields wide, that runs from Honolulu to San Francisco. That, my friends, is a lot of land.
[00:00:44] Randall Roth: Francis wrote a separate chapter in which he suggested the 177,000 acres may be just the beginning, that a million acres of land in Hawaii may eventually lose market viability. He then invited readers to close their eyes and try to picture that land in 20 years. According to Francis, that picture may be bleak, but it doesn't have to be. Now Peter, I know you're here as an individual. You're not speaking on behalf of the University of Hawaii and as an administrator there, that's very important for you to state upfront. Can you tell us just a little bit about sugar in Hawaii? Is it really on the decline? That's that's the impression I have.
[00:01:22] Peter Garrod: Yes, it really is.
[00:01:24] Randall Roth: Why? Why is it on the decline?
[00:01:26] Peter Garrod: Well, the price of sugar is controlled by the federal government. It's been constant are very low, recently and they're losing money.
[00:01:33] Randall Roth: But is it a temporary thing? Is there the possibility that that price will go back up and it'll be business viable again?
[00:01:40] Peter Garrod: Well, Franly Morgan thought so and he bought Hamakua sugar and Hamakua sugar is going out of business.
[00:01:46] Randall Roth: So, you're suggesting that there aren't any investors that are willing to put the money up to to gamble that the price of sugar is going to go up.
[00:01:53] Peter Garrod: If they ask my advice, they sure wouldn't.
[00:01:56] Randall Roth: I see. What about pineapple? Is it's future is bleak as what sugar seems to be?
[00:02:02] Peter Garrod: I don't think so. Pineapple is entirely private. They got a good product, they got a good product name. It's identified with Hawaii, and they're benefiting from some very efficient transportation systems generally to support tourism, but it definitely helps out pineapple and other diversified ag as well.
[00:02:20] Randall Roth: Gee, what are the chances that pineapple will expand and use all of the land that we think will be coming out of sugar production?
[00:02:28] Peter Garrod: Essentially, zero.
[00:02:29] Randall Roth: Wow.
[00:02:31] Peter Garrod: Well, currently we have about 26,000 acres of pineapple and 145,000 acres of sugar. If pineapple doubled, I don't think it will, it still wouldn't come close to using 177,000 acres.
[00:02:44] Randall Roth: What about diversified agriculture? Coffee, macadamia nuts, orchids, things like that? Could they maybe pick up the slack of that 145,000 acres?
[00:02:54] Peter Garrod: 177,000. Uh no. Now, let me define diversified ag. This is a very strange term and they exist only in Hawaii. Diversified ag is all agriculture except for livestock, sugar, and pineapple. And it's a very strange definition. The question really should be, can agriculture expand to use more of the land? Now, diversified ag is growing and it's growing fast in terms of value also, but we just don't have the market locally to support that large of a diversified ag sector. And because of our distance from the other markets in the world, the West Coast, United States, the East Coast, Asia, because we're a high-cost producing region, in terms of one land cost, but also labor and water and very importantly, because of our pest infestations, which keep us essentially barred from many of the markets, it's very hard for that sector to expand. Now we've been trying. The history of macadamia nuts, coffee, papaya, these are all export crops. Now, ginger and floriculture. Of course, floriculture is very valuable but doesn't use a lot of land.
[00:04:09] Randall Roth: Yeah. None of them look to be the next sugar in terms of using lots of land.
[00:04:13] Peter Garrod: Not even close.
[00:04:16] Randall Roth: What about, um, golf courses? Francis, is that an agricultural use?
[00:04:21] Francis Oda: As far as I'm concerned, it's an agricultural use.
[00:04:23] Randall Roth: Is it a good agricultural use?
[00:04:24] Francis Oda: I think it's a good agricultural use. And and I don't even play golf. Why, why is that? Well, it is a a use of land where a lot of the people who are actually, you know, having jobs on that land, are have the agricultural jobs. I mean you have a golf pro, you have some people really related to golf, but the maintenance of the course, the way you maintain the car, course, the philosophy of maintenance of the course are really agricultural concepts.
[00:04:55] Randall Roth: Well Peter, would you agree is it an agricultural use?
[00:04:58] Peter Garrod: Yeah, my only caveat is it makes more money than ag. Yeah, it's much more profitable on a per-acre basis than farming.
[00:05:04] Randall Roth: Why, why don't we have more golf courses? I mean, we've got quite a few, but to listen to you describe it, it's pretty attractive way to use that land.
[00:05:13] Peter Garrod: Well, I think public opinion has a very negative image and Francis can probably answer that question better than I can.
[00:05:19] Randall Roth: Well Francis, why is that public opinion so negative?
[00:05:23] Francis Oda: Well, Peter and I were just talking about that and probably some of it was that it replaced agriculture, and and brought along with it some housing, and so people thought of golf courses related to replacing agriculture.
[00:05:36] Randall Roth: As if it had pushed agriculture off.
[00:05:38] Francis Oda: Pushed agriculture off. But in fact, it's just another agricultural use, very much like Peter described, a long history of changing agricultural uses in Hawaii. But if if the golf course isn't going to replace sugar, and if sugar is on the way out, what's going to happen to that land, Peter?
[00:05:56] Peter Garrod: Well, if you examine history, what has happened to land in the past? Some of the land went into housing, 10 about 10,000 acres over the past 15 or 20 years. About 3,000 acres went went into golf courses, and about 20,000 went into diversified ag. The rest is either lying fallow, that is not being farmed, not being used for anything, or is being used by for grazing by livestock industry.
[00:06:25] Randall Roth: Well, why wouldn't grazing be considered an agricultural use, Francis?
[00:06:30] Francis Oda: It is considered an agricultural use.
[00:06:33] Randall Roth: Well, is is that good? Isn't that a good use of the land?
[00:06:35] Francis Oda: Well, it's a a maintenance use of the land because my understanding is that um, grazing or uh livestock production is not really viable here in Hawaii. The people who do it maybe make a marginal uh profit out of it because most of it goes to, well, almost all of it goes to either Canada or some parts of the US for feedlot um uh purposes, and the profit is really there. It's also a tax way of handling large pieces of land uh at agricultural tax rates.
[00:07:09] Randall Roth: So it's they're just in a holding pattern.
[00:07:11] Francis Oda: It's a holding pattern.
[00:07:12] Randall Roth: Peter, you agree?
[00:07:14] Peter Garrod: Well, yes and no. It's a holding pattern that holds the land, I agree. It's it's an agricultural use, but it's a low intense. It's it's not an intense agriculture. It doesn't return a lot of money per acre. Uh, could you afford to buy land now to raise cows on it? The answer is no. Can you use the land to raise cattle? The answer is probably yes. We import 90% of our beef, close to 100% now. And yes, we are sending our our young animals to the mainland to be fattened. They're slaughtered there and essentially that beef, other beef is shipped back. Well this will continue to be profitable in the future, we don't know yet.
[00:07:55] Randall Roth: Why is the land so expensive if if cattle grazing is marginally profitable if that and if there really isn't anything else standing in line to use that land, why would it be so expensive?
[00:08:10] Peter Garrod: Well, I think it's a reflection of the recent history of land sales. Land sales the past I guess since World War II have essentially been for urban development. So we have as an urban land market. The perception of land is that urban use is the highest and best use and sets the price. Even when it's being sold for agricultural uses, there's a speculative component in that price. People think that someday they're going to be able to develop it and that jacks the price up. If the land was being sold if we had a zoning law that said this is agricultural land, is always going to be agricultural land, the value of the land would drop dramatically.
[00:08:54] Randall Roth: You're listening to the Price of Paradise radio show. I'm Randy Roth, and my guests this week are Francis Oda, Chairman and CEO of Group 70 International, and Peter Garrod, Professor of Agricultural and Resource Economics at the University of Hawaii. Well Francis, in your chapter, you invited people to close their eyes and picture this land that's been in sugar production uh in recent years to picture it in 20 years. Uh, what do you see?
[00:09:22] Francis Oda: Well, what most excuse me, what most people see is this sea of um roads because that's been our experience. But what I see is a possibility of combining housing, agriculture, and tourism in a way to use not all of the land, but a good part portion of the land, reinstituted a kind of Hawaiian lifestyle that many really still remember.
[00:09:48] Randall Roth: And when you say Hawaiian lifestyle, you're talking about little villages like a plantation village?
[00:09:54] Francis Oda: Like a plantation village tied to the land in some meaningful way.
[00:09:58] Randall Roth: How would that actually be accomplished?
[00:10:01] Francis Oda: Well, one way to do it is to create these agricultural parcels of land, um and develop villages within these agricultural parcels of land defining the future use of this land for agriculture, but 10% of it would be for um housing use, let's say and some commercial uses.
[00:10:23] Randall Roth: So basically agricultural land, but 10% would be used for housing or other urban uses.
[00:10:29] Francis Oda: That's right. Dedicated to agricultural uses.
[00:10:32] Randall Roth: And that would be done through zoning laws?
[00:10:34] Francis Oda: Yes.
[00:10:35] Randall Roth: Okay. Now, how's that going to to solve urban sprawl?
[00:10:40] Francis Oda: One of the problems in terms of this small scale agriculture is just getting land. And so this would provide land that would be almost zero value to the urban dwellers who have paid for the land, who would then turn it over to agricultural interests uh for use.
[00:10:59] Randall Roth: And it has zero value, as I understand it, because they're prohibited from using it for anything but agricultural use?
[00:11:05] Francis Oda: Exactly. But even with free land, uh small scale agriculture is not that viable because they can't afford the roads, the water, things that they need the infrastructure.
[00:11:14] Randall Roth: Right. Well, isn't there some sort of prohibition against the government zoning land in such a way that it has practically no value? Doesn't the government have to allow the owner of land to to use that in a reasonably productible way?
[00:11:29] Francis Oda: They have. They have, by providing that um housing use on that land. Otherwise, the land would be totally really with uh very little market value.
[00:11:41] Randall Roth: So it's a package deal. The people who are benefiting from the urban zoning are the same people who are going to have the rest of their land uh zoned in a way that the value would be low.
[00:11:52] Francis Oda: Exactly. And in fact in one of the projects we're working on uh that land would be dedicated to a trust in perpetuity.
[00:12:00] Randall Roth: Okay. So no individual could change his mind.
[00:12:03] Francis Oda: No individual, no developer, not even the people who live in that uh village.
[00:12:07] Randall Roth: Couldn't say we were we were crossing our fingers. We didn't really mean it.
[00:12:10] Francis Oda: Can't change your mind, no.
[00:12:11] Randall Roth: Peter, you're an economist. Uh does this make sense? Dollars and cents to you?
[00:12:15] Peter Garrod: Well, I like Francis's dream, but I do think it's somewhat of a dream.
[00:12:20] Randall Roth: Why?
[00:12:21] Peter Garrod: In terms of agriculture, the problem is not the availability of land. There are problems in getting land, and I agree with Francis, but that isn't the only problem. The basic problem is we just don't have a viable market for the products we can produce.
[00:12:37] Randall Roth: But as I understand, Francis, this zoning would work in such a way that that the land would would almost be uh free to the farmers, that it would have very little value and so all they would be incurring are are the costs of of the farming itself.
[00:12:53] Peter Garrod: But it isn't the cost of land that is holding back diversified ag per se.
[00:12:59] Randall Roth: So even if the land is free, diversified ag is not going to grow a great deal?
[00:13:04] Peter Garrod: It will grow. I mean it will increase. That's obvious. I think we can probably increase the order of say 5,000 to 10,000 acres.
[00:13:12] Randall Roth: Which is a spit in the bucket compared to 177,000 acres. Francis, what do you say?
[00:13:17] Francis Oda: Well, I I think in general, that's true. However, the uses we're looking at here are uh forestry uses, which can take a lot of land, we feel. Uh in fact one of the uses we uh have projected on another project uh similar concept is grazing, but more in a ranch configuration. And with that ranch is a guest ranch concept. That's where the tourism overlay is because grazing does not do it, but has many of the uh ranches in Montana, Wyoming, places like that found out decades ago, that when you put in the tourism component, they become viable family businesses.
[00:13:57] Randall Roth: Are we talking about high-rise hotels out next to these villages?
[00:14:01] Francis Oda: No, these are like a little ranches, a bread and breakfast places that you can stay at.
[00:14:06] Randall Roth: Sounds good to me.
[00:14:09] Peter Garrod: Well, it sounds good. The question of scale and how much we can use comes into this. Uh, I'd like to go back to the mention of forestry. It's a simple, and I believe in, but right now, the economics of planting the trees, fencing them, they have to be fenced because young trees and cattle, wild pigs, don't get along, and then getting a marketable product in uh 25 to 50 years, it's a marginal operation. It's not something I would in good conscience advise anybody to do. Even with free land. It's just the costs and the values given current prices don't work out right. Now if the government want to subsidize it, different question.
[00:15:00] Francis Oda: I think that's a possibility, but another possibility uh and you would be the expert on uh expert on this is to biotech the native um hardwoods in such a way to increase the yield and uh cause faster maturity because I don't think there's one agricultural product that we produce here in Hawaii that is not biotech and has not been. Is that possible, Peter?
[00:15:19] Peter Garrod: Possible, yes. Can we do it now? Not yet.
[00:15:23] Randall Roth: Is that the sort of thing you work on at the University of Hawaii?
[00:15:26] Peter Garrod: Absolutely.
[00:15:29] Randall Roth: Francis, what else? Tell us about this tourism overlay. Why would that add value to this uh approach?
[00:15:35] Francis Oda: Well, just as Peter says, you know, free land, almost free infrastructure, still doesn't do it. There needs to be something else. And um for a lot of people, this might be uh this tourism overlay. We're talking a lot about eco-cultural tourism in Hawaii. Now, when we go somewhere, um, wouldn't we love to stay at a guest ranch or a flower farm rather than a high-rise hotel? I think most people do. In New Zealand, they have this down pat. They've been doing this now for a long time, where you go there and you can actually have a stay in a farm.
[00:16:13] Francis Oda: And um, in fact my family and I have for now 6 or 7 years done this every year in um Wyoming. We go to a ranch that started off as an agricultural thing, raising cattle, could not was not viable that way, and something like 40 years ago shifted to this model, and is continuing on and is a viable business right now.
[00:16:39] Randall Roth: Peter, I was listening to uh Ken Tucker, who's the Matson Distinguished Visiting Professor at the Tim School at the University of Hawaii the other day, and he was commenting on the importance to tourism of having uh the land alive, growing crops, even if it's not making any money, and I think his comment was, we simply can't allow that land to go out of production. Um, do you agree with that?
[00:17:03] Peter Garrod: I agree that's important. Uh, I think we have to find alternative uses for the land so it's still green, so it's still pretty. Uh, going back to Francis's point, recreation pays more per acre than growing crops, golf courses pay more per acre, and the more we can incorporate these things into agriculture, the healthier the economy will be.
[00:17:27] Randall Roth: So when you say recreation, you're saying the same thing that we were describing as tourism a little bit ago.
[00:17:33] Peter Garrod: Well, yeah.
[00:17:35] Francis Oda: That's right. And you know the the funny thing is that right now our laws really don't allow any of this stuff. Anything what what we're talking about right now, the development of these villages within agricultural areas, the overlay of tourism, all of this is prohibited in our law because in the past, we've always thought of tourism, housing, and agriculture as competing interests, and we have never tried to figure out how they have potentially a symbiotic relationship. I guess my feeling is that it's only through that relationship will they truly survive and flourish.
[00:18:13] Randall Roth: Are we talking about state law or county law?
[00:18:16] Peter Garrod: Both.
[00:18:18] Randall Roth: Who should be taking the step here? Should the community be saying to its elected officials, uh take a look at this and don't just prohibit it, encourage or maybe even mandate this village approach?
[00:18:31] Francis Oda: I think it's a responsibility of the people, uh the legislators, um the university, the media. We really have to change our point of view because we're heading down a path that does not have a very optimistic uh outcome.
[00:18:49] Randall Roth: And is that because the quality of life is going to come down or is it because the uh economy is going to dry up or or why is it that the future is bleak if we don't change? All of them both. And I think most of us sitting around this table right now have seen that happen in the last 20 years, 30 years. You're listening to the Price of Paradise radio show. I'm Randy Roth and my guests this week are Francis Oda, chairman and CEO of Group 70 International, and Peter Garrod, professor of Agricultural and Resource Economics at the University of Hawaii.
[00:19:22] Randall Roth: Well, Peter, what are the lawmakers going to say about this? Uh are they going to be concerned about its economic viability? And if so, what would it take to convince them that this is more than just a dream?
[00:19:35] Peter Garrod: I have never been able to guess what lawmakers are going to do with any degree of accuracy.
[00:19:40] Randall Roth: Well, what vested interests are going to resist this?
[00:19:47] Peter Garrod: The current situation keeps the value of the current land in urban uses high. If we change how we zone land or how we use land, there's a potential of lowering the value of the land that's already in urban uses. So all of us that own urban property are in principle or have in principle something to lose if we change this.
[00:20:10] Randall Roth: You mean I'm one of the bad guys? I'm a vested interest?
[00:20:13] Peter Garrod: Definitely.
[00:20:15] Randall Roth: Oh boy. Um Mayor Fasi has talked on occasion about uh the the monopoly or oligopoly of of landowners. Does that come into play? The fact that we have relatively few landowners so far as the open spaces are concerned?
[00:20:30] Peter Garrod: Okay, I'm interpreting your question to mean is the reason we have a limited supply of land for urban uses a result of having a very few number of large landowners.
[00:20:41] Randall Roth: You should be the host of this show, Peter. You're doing a very good job asking yourself that question. That's good.
[00:20:46] Peter Garrod: I've been asking myself that question for a long time. What's the answer? As an economist, you know, I first arrived to the, of course, we have oligopoly. They're controlling the supply of land. I don't think it's that simple. I think in Hawaii, the term land and power are synonymous. It doesn't mean that the landowners have the power. It means that people who have power, those that control the land. And I don't think it's just the landowners. I think we're talking about the politicians. You can read the book Land and Power and get an impression. To give you an example, what as an economist I expect to see around Honolulu, are lots of small farms.
[00:21:27] Peter Garrod: Every major urban center in the world has lots of small farms surrounding truck crops supplying the market. Where are our truck crops come from? Well, some come from Oahu, a lot come from Molokai, some come from Maui, some come from the Big Island. Why? A point Francis mentioned earlier. We have an official land use policy that makes it very difficult to even lease land to small farmers. It's an urban land use policy to lease a small parcel of land you put a hard surface road in, buried water lines, power the whole thing. Small farms don't need that.
[00:22:03] Randall Roth: Francis, who do you see as being the opposition in trying to make what Peter describes as your dream, a reality?
[00:22:13] Francis Oda: Well, I think I agree with what Peter's saying and I think historically what has happened is we've all accepted this point of view that these are competing interests. So when people have talked about housing, people other interests that support agriculture, say, have resisted it. And those people who have talked about tourism are resisted by just about everybody. We keep thinking in terms of a limited resource. The reality is that we have a resource here, uses of which we just cannot even imagine today. I mean, there's not enough use here. And use translates to aesthetic issues, you know, about just having the land beautiful, but also jobs.
[00:22:59] Randall Roth: Now when you say not enough uses, you're saying, we it's not that we have too little land, we have too much land.
[00:23:04] Francis Oda: We have too much land. Well, too much land without a vision as to how to use that land.
[00:23:10] Randall Roth: I see. And so, whether we're talking about golf courses, or we're talking about diversified ag, or what have you, people who see that as competing with another use, uh maybe ought to understand that um that it's not necessarily uh competing.
[00:23:26] Francis Oda: That's right. In fact, as I um said a little earlier, probably the future, a good future, would be where there are uh they help each other. These uses really have a symbiotic relationship that help maintain their viability and growth in the future. This competition attitude is really going to uh cause us great problems. It already has. The high price of land, as Peter described, is a direct result of this attitude.
[00:23:56] Randall Roth: Do you think the the big landowners would be receptive to what you're describing?
[00:24:02] Francis Oda: I absolutely. And in fact, these projects that I'm talking about are using the land of these so-called big land owners.
[00:24:10] Randall Roth: So it's not the big landowners um but maybe the politicians for one reason or another, the land and power concern that Peter mentioned, or us, the home owners who are a little bit concerned that it will adversely affect our equity?
[00:24:25] Francis Oda: I think it's more lack of knowledge and certain fears because when we've sat with politicians, for example, um in fact, we haven't had one really oppose this idea. And I'm talking real life situations right now. Um it's there might be opposition from the community, but generally speaking, once we talk about it out in the community, people understand. So I think it's sort of being trapped in our own um prejudices and our uh lack or a lack of willingness to think in new ways. But there's a great necessity to do that.
[00:25:04] Randall Roth: You're saying we have to. We have no choice.
[00:25:06] Francis Oda: We Well, we have a choice which is to not do it and just sort of you know crash as a community.
[00:25:15] Randall Roth: Right. We're we're the plane is headed to the ground and we have a choice of pulling up or letting it continue on down.
[00:25:23] Francis Oda: That's what it seems to me to be.
[00:25:25] Randall Roth: Peter, any parting thoughts? We've got less than a minute.
[00:25:29] Peter Garrod: Well, right now to take land from agriculture use and convert to urban is an expensive process. We're talking environmental impact statements. We're talking county land use hearings, we're talking state land use hearings. The process right now is set up to make it difficult and expensive. And when you make it expensive, it comes back to the price of land.
[00:25:56] Randall Roth: So you would say we not only need to change the the zoning laws, the land use laws, but the process, if you will, going through all of that.
[00:26:05] Peter Garrod: Well, in my in my dream world, we have a plan, and it's a functional plan. And that's always been a dream. I don't think it's ever been an actual fact.
[00:26:15] Randall Roth: Francis, any parting thoughts from you?
[00:26:17] Francis Oda: Yes, I would say that functional plan, the state functional plan, needs to be turned inside out and upside down. We need to move forward into the future with a brand new vision.
[00:26:28] Randall Roth: Sounds good. My guests this week were Francis Oda, chairman and CEO of Group 70 International, and Peter Garrod, professor of Agricultural and Resource Economics at the University of Hawaii.
[00:26:39] Speaker 2: This week's show was produced by Jill Center with technical assistance from Jeff Ilardi.
[00:26:39] Randall Roth: This week's show was produced by Jill Center with technical assistance from Jeff Ildi. You've been listening to the Price of Paradise Radio show. I'm Randy Roth. Aloha.
[00:26:44] Speaker 2: You've been listening to the Price of Paradise Radio show. I'm Randy Roth. Aloha.