Alexander & Baldwin Inc. said yesterday it plans to drop its controversial proposal to build high-rise condominiums on state land along the Kaka'ako waterfront.

The move was prompted by a near-unanimous vote by the Legislature Tuesday in favor of a bill to prohibit residential use on the Kaka'ako Peninsula.

"The Legislature has now spoken," said Stanley Kuriyama, CEO of A&B Properties, in a written statement. "If there is no residential component, the current (plan) for Kaka'ako Makai is not something A&B can pursue."

Just one lawmaker from either the House or Senate, Rep. Joe Souki, D-8th (Wailuku, Waiehu), voted against House Bill 2555. Only a two-thirds majority would be needed to override a veto if Gov. Linda Lingle tried to block the bill from becoming law.

Michelle Matson, an opponent of the A&B project, hailed the developments as a victory by members of the Save Our Kaka'ako grassroots community group who testified, printed shirts, carried signs and organized rallies to derail the redevelopment plan.

"This landmark legislation is the result of many, many people (and) much hard work over the last six months," she said.

Meanwhile, the state agency overseeing redevelopment of the Kaka'ako waterfront started exploring options to shape a new plan for the land between Ala Moana Beach Park and Fort Armstrong makai of Ala Moana.

The property has been the subject of a variety of failed development efforts over the past few decades under the Hawai'i Community Development Authority.

A&B's proposal was to remake 36.5 acres of largely inaccessible state-owned industrial parcels surrounding Kewalo Harbor with three 20-story condo towers, a Kaka'ako Waterfront Park extension, public hula amphitheater, waterfront promenade, farmers market, shops, restaurants and a pedestrian bridge over Kewalo Harbor channel.

The state agency in September tentatively selected A&B's plan as the best response to an agency request for proposals in January 2005.

A&B offered to buy about 7 acres of slightly inland property on which to build the condos, and lease the rest of the land under an agreement that would earn the state revenue.

In response to community concerns, A&B eliminated the pedestrian bridge and one condo tower, but said the remaining roughly 630 residential units were needed to fund the public improvements without adding to the burden of taxpayers.

However, the condos, 20 percent of which had to be sold to buyers with moderate incomes under agency rules, still drew heated opposition from some community members.

With a restriction on residences, the agency will need to come up with a vision that is different from its current goal to create a "live, work, learn and play" community.

Housing on the Kaka'ako Peninsula over the past several decades has flipped several times between being allowed and prohibited. In recent years, the agency has viewed homes as a necessary element to infuse the area with vibrancy.

Gov. Linda Lingle has been supportive of the agency's vision, and also felt the bill banning residential use of the land would undermine state efforts to partner with private businesses on projects.

Russell Pang, a spokesman for Lingle, yesterday declined to say whether the governor intends to let the bill that derailed the project become law without her signature or challenge it with a veto. A veto could be overridden by a two-thirds majority in the House and Senate.

The Hawai'i Community Development Authority has yet to cancel its tentative development agreement with A&B. But at a public meeting yesterday, the agency floated a proposal to form an advisory committee to help determine the best future use of the waterfront area.

Teney Takahashi, agency director of planning and development, presented a conceptual idea to form a panel of 10 to 15 people drawn from Kaka'ako community groups, area landowners, professional organizations, environmental groups and agency directors. Elected government officials, such as state lawmakers, also could be represented on the unpaid panel, which would ideally have a paid professional facilitator to guide the group's effort.

Included among the advisory panel's duties would be operating under the agency's mission mandated by the Legislature, holding community meetings, considering development plans and making recommendations to the agency board, which would have final approval of any redevelopment initiatives.

Ala Moana resident Nancy Hedlund applauded the agency for the advisory panel idea, and stressed the need for "everyday people" without commercial interests to be part of the planning process. "It's a wonderful beginning," she said. "I think you've really gotten off to a good start."

Ron Iwami, a Honolulu Fire Department captain who lives in Manoa, also endorsed the panel plan, and pledged support from his group, Friends of Kewalo Basin Park Association. "I commend you for the start," he said.

Agency directors, who were only briefed on the advisory panel idea yesterday, could vote in the next couple of months to adopt the proposal.

The agency previously has been criticized for not fully engaging the public in the planning process, which included soliciting development proposals from the private sector and then keeping responses confidential until agency directors tentatively selected a preferred plan.

Other criticism involved the agency's January 2005 suggestion that development proposals include residential use, which the agency had long studied and anticipated allowing pending a public hearing.

At a public hearing in September to consider allowing housing on the Kaka'ako Peninsula, testimony was about evenly split, but some opponents of the idea said it appeared their input didn't matter because the agency was predisposed to its vision that included homes.

The agency board voted to allow housing in the area, and a week later selected A&B's plan over three others that also included condos.

Other major property owners that would have benefitted from allowing residential use in Kaka'ako Makai include Kamehameha Schools. An emergency homeless shelter that the state opened earlier this week in the area would not be affected, because people technically will not be living at the facility that is open from 5 p.m. to 8:30 a.m.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.