The state is fighting to get 15 acres of central Kapolei land that it says was promised by Campbell Estate in the late 1980s.

Without the parcels, Hawai'i taxpayers could end up paying millions of dollars for land to build public facilities or face the suspension of further moves of state offices to Kapolei.

As part of a 1988 agreement, the private trust was supposed to provide 40 acres of land for state government facilities.

In exchange, the state reclassified 890 acres of agricultural land to urban use, allowing Campbell Estate to develop the Island's "second city" on prime agricultural lands where sugar cane fields once flourished.

But a successor of the estate, which terminated at the beginning of the year, maintains it no longer must give up 15 acres which the state has yet to use.

The state is using the other acres for the Kapolei Library, a state office building and the Family Court courthouse and juvenile detention facility.

The James Campbell Co. LLC, successor to the estate, says it's no longer obligated to turn over the remaining 15 acres because the state didn't comply with a 1989 order by the Hawai'i Land Use Commission.

That order said the state must have construction contracts in place for the 15 acres by Dec. 31, 2006, or lose the land.

No contracts had been signed by the deadline, and on Friday the Land Use Commission rejected the state's request to void the 1989 order.

Attorney General Mark Bennett argued the 1989 order was not valid, and the James Campbell Co. owes the state the land.

Bennett is considering whether to appeal the Land Use Commission decision to state courts.

The commission's action on Friday "reaffirms our position," said David Rae, senior vice president for development for Kapolei Property Development LLC, an affiliate of the James Campbell Co.

If the state doesn't get the 15 acres and wants to continue to build in Kapolei, it may be forced to pay market prices for what has become expensive central Kapolei land.

Kapolei Property Development declined to say how much the 15 acres are worth "for business reasons."

VALUED AT $15 MILLION?

A rough estimate based on surrounding property suggests that the land in dispute could be worth in the neighborhood of $15 million.

One nearby 12-acre parcel zoned only for business use was bought by a developer in October for $11.4 million, according to property records.

Also, the 12-acre site under Home Depot nearby — bought in 2003 for $4.7 million — is valued at $9.3 million by the city for property tax purposes.

City and state property adjacent to the disputed 15 acres have city-assessed values of $4.5 million for five acres under the city office building, and $5.4 million for seven acres under the state office building.

The 1988 reclassification of the Kapolei land came at a time when it was controversial whether urban and residential development should extend to the sugar cane lands in Central O'ahu.

The state initially balked at approving the dramatic change, but went along with the reclassification in 1988 after the estate promised 40 acres for government offices and facilities.

ORDER CHALLENGED

In 1989, the estate asked the Land Use Commission to issue an order stating that land wouldn't have to be transferred until contracts were in place for the construction of the buildings.

In the state's challenge, Bennett argued that the 1989 order is "null and void."

He said the reclassification of James Campbell's 890 acres was worth "perhaps hundreds of millions of dollars." He argued the commission did not have the authority to issue the 1989 order that changed the estate's "unconditional obligation" to the "possibility of nothing" with little public input.

Bennett urged the commission to at least keep his challenge alive to hold hearings to determine what led to the 1989 order.

Katherine Leonard, Kapolei Property Development's lawyer, argued that Bennett was trying to "second guess" the judgment of state agencies as well as the then-attorney general, all of whom went along with the 1989 order.

She disputed what she said was a suggestion by Bennett that "the wool was pulled over people's eyes or worse."

"He has absolutely no factual basis for impugning the character of these men," she told the commissioners Friday.

Also pending is a Circuit Court lawsuit filed by Kapolei Property Development that asks for a declaration that the company does not have to transfer the 15 acres to the state. The case was put on hold until September.

Theresia C. McMurdo, vice president of public affairs for Kapolei Property Development, said the company's plans for the 15 acres will be to build a "major job center" that will allow residents to work where they live.

Reach Ken Kobayashi at kkobayashi@honoluluadvertiser.com.