In an unusual reversal, the state House of Representatives yesterday killed a $50 million tax credit for a new motorsports complex at Kalaeloa after the Big Island lawmaker who sponsored the credit privately informed his colleagues he had a potential conflict of interest.

State Rep. Jerry Chang, D-2nd (Hilo), is a director and has a 25 percent ownership interest in ABSC Development Co., which offered to exchange land in Hilo with the state Department of Hawaiian Home Lands for a parcel in Kalaeloa being sought for a new racetrack.

If the department had accepted the idea of a land swap, Chang said, the company would have sold the Hilo land to Mike Oakland, the president of the Hawai'i Motorsports Center and the main advocate of the tax credit. Oakland would then have been able to complete the swap and take control of the Kalaeloa parcel.

The House had planned to pass the tax credit bill yesterday and move it to conference committee with the state Senate, which approved it last session. But after The Advertiser raised questions about Chang's potential conflict, he spoke with House leaders, who quickly decided in a closed-door caucus to table the bill rather than risk embarrassment.

In a brief statement on the House floor, Chang said the bill was being pulled because of unresolved issues within the racing community, which has been divided over the tax credit and how to save racing on O'ahu after Hawai'i Raceway Park closed this month. But Chang later explained to reporters that it was because of the possible conflict.

"The perception is everything," Chang acknowledged.

But Chang, who sells real estate and has served in the House since 1989, could not explain why he did not disclose a potential conflict earlier. Chang, who has worked closely with Oakland on the tax credit, signed and helped collect signatures from other lawmakers on a letter supporting the credit that was instrumental in the House Finance Committee reviving the bill last week. The letter was written by state Sen. Suzanne Chun Oakland, D-13th (Kalihi, Nu'uanu), Oakland's daughter-in-law, who chose not to sign it because she did not want the appearance of a conflict of interest.

There are no conflict-of-interest rules for lawmakers in state ethics law. The law prohibits lawmakers from using their offices to give unwarranted privileges but work on bills, resolutions or other official duties is exempt. The House does have a code of conduct that cautions lawmakers against using the prestige of their offices to advance the private interests of themselves or others.

State House Majority Leader Marcus Oshiro, D-39th (Wahiawa), said he had heard rumors of Chang's possible financial interest in the racetrack deal Monday night but did not know for sure until Chang spoke with House leaders yesterday.

"For Representative Chang's reputation and for the institution of the Legislature, we thought that it would be best to nip it in the bud and table the measure," Oshiro said.

Oakland said he wanted to talk with Chang before he commented but then could not be reached again last night. Oakland has said he would not move ahead with the new racetrack without the tax credit, which would be used to attract investors.

Several dozen racing fans had come to the state Capitol yesterday for the expected House vote, but word that the credit was being killed leaked early, and many had left the House gallery before Chang made the announcement.

Dirt track racers, who have broken with Oakland over the tax credit and instead want to restore Hawai'i Raceway Park, said they would now try to work with the state and city on condemning the land and purchasing it for local racers. The land is being sold by Campbell Estate to what David Rae, the estate's vice president for public affairs, has described as an affiliate of Oakland's.

George Grace III, a dirt track supporter, said saving Hawai'i Raceway Park will be difficult. But he said people also had doubts about whether they could block the tax credit. "Everybody said this would be a difficult process, but we succeeded. We won't know anything unless we try," he said. "We're at the city and the state's mercy right now. And I believe it can be done."

The dirt track racers split with Oakland over his refusal to guarantee that a new motorsports complex would have a dirt track. Fans of drag, drift, sports car and motorcycle racing had mostly backed Oakland on the need for a more modern racetrack.

"One thing I can promise you is that it doesn't end here," said Michael Kitchens, a racing fan who was disappointed that dirt track racers fought the tax credit. "The motorsports community is huge and we're going to push for a place to race. So this isn't the end of it."

The tax credit had been expected to reach conference committee, but its future was murky. In the Senate, state Senate Majority Leader Colleen Hanabusa, D-21st (Nanakuli, Makaha), has been advising dirt track racers and was prepared to use her influence to stop the bill. Several House lawmakers have also wanted more details from Oakland about his financial and land acquisition plans.

Oakland has been publicly vague about his investors and partners. But he did confirm to The Advertiser last week that he was looking at land on the Big Island to swap with the Department of Hawaiian Home Lands for the Kalaeloa parcel he believes would be ideal for a new racetrack. It could not be verified last night whether Oakland was referring to the land partially owned by Chang.

Chang said he and state Rep. Ezra Kanoho, D-15th (Lihu'e, Koloa), had mentioned the Hilo land as a possibility to the department about two weeks ago. He said he wanted to see if the department was serious about negotiating a swap for the Kalaeloa parcel.

Lloyd Yonenaka, an information officer for the department, said the department had been offered the Hilo land in the past but had not been interested. Department officials were monitoring the progress of the tax credit at the Legislature but had made no commitments regarding the Kalaeloa parcel.

Chang said he called the department yesterday afternoon to withdraw the offer. He also told his colleagues in caucus that he would have asked to be excused from any vote.

Chang, asked what he would have done differently in hindsight, said he would not have floated the land swap. "I wouldn't have even mentioned that," he said. "I don't really want to sell it to DHHL, actually. I just wanted to see how serious they are."

Reach Derrick DePledge at ddepledge@honoluluadvertiser.com.