A troubled $74 million project that would triple the number of dormitory beds at the University of Hawai'i-Hilo has stalled for the second time in a year and may be in jeopardy.

Development of the dorm and retail facility, which would be across the street from UH-Hilo, is sorely needed on what is one of the fastest-growing campuses in the UH system, Hilo officials say.

The student population — currently 3,400 — has nearly doubled over the past 17 years, but few, if any, additions have been made to UH-Hilo's 600-bed inventory.

University officials estimate that UH-Hilo's student population could reach 5,000 by 2010, and the dorm project is considered critical to accommodate that growth.

Already, hundreds of students are turned away each year from on-campus housing.

"We have a severe housing shortage. We just don't have enough beds for all the students who need them," said Miles Nagata, director of housing and student services at UH-Hilo.

But questions about a guarantee offered to the developer by UH-Hilo officials, and the legality of the public-private partnership developed to build the project prompted the Board of Regents to place the project on hold at its July meeting.

The development is the latest friction point between campus officials frustrated that they can't move faster to maximize the potential of UH-Hilo and the Board of Regents, which says it must consider the needs of the entire 10-campus UH system.

The developer warns that the target opening date — now fall 2007 — could be pushed back again if the project is delayed much longer. The completion date previously had been pushed back a year, from fall 2006.

But Board of Regents Chairwoman Kitty Lagareta thinks the problems may run deeper than that. She said the project was "doomed from the start."

The go-ahead was given in 2003, with the UH Board of Regents voting to allow UH-Hilo to enter into a public-private partnership with Geo International Corp.

The contract gives the developer permission to develop a hotel, retail space and a cultural center on 36 acres of state land in exchange for building dormitories for UH-Hilo students. The project would add 1,400 beds to the campus and cost $74 million for its first phase.

The developer bears the cost of construction and recoups the investment and makes its profit from the hotel and retail space.

But in 2005, Geo International failed to meet deadlines and it became apparent that the company did not have the organization to develop such a massive project, Lagareta said.

LEGALITY QUESTIONED

In stepped the current developer, California-based Bridgecreek International, which took control of the project and all aspects of Geo's business.

But now the regents question whether it was legal for Bridgecreek to take over the project without going through the university's bid/qualification process.

"We don't have an agreement with this specific company, so there are some serious legal questions we're trying to sort through," Lagareta said.

Regents also question whether the private developer "has the university's best interest in mind," Lagareta said.

Concerns over the project came to a head at the July Board of Regents meeting concerning a letter of intent dated June 1 from a UH-Hilo official to Bridgecreek International.

The letter from Bill Chen, interim vice chancellor for administrative affairs at UH-Hilo, was intended to get the project moving again.

But Lagareta said she was concerned because the letter included a guarantee of money from UH-Hilo to Bridgecreek that was on top of allowing the developer to build a hotel and retail facility on state property.

"Here's UH-Hilo sending a letter guaranteeing something they don't have the authority to guarantee. We don't even know if constitutionally we could even guarantee this," Lagareta said.

However, Gerald De Mello, UH-Hilo spokesman, said it was simply a letter of intent and not a binding agreement.

"The language, toward the end (of the letter), said that everything has to go through the approval of the university system," he said.

The letter guaranteed that 60 percent of the dorm units in the new complex would be occupied by UH-Hilo students based on the hundreds of students on the housing waiting list, De Mello said.

GUARANTEE NEEDED

John Carlson, CEO of Bridgecreek International, said the university needed to make that guarantee so the developer's bank could assess whether the project was feasible.

"Essentially we're being asked to build affordable, rent-controlled housing ... and the lender doesn't like to loan on things like that," Carlson said.

He said the university's guarantee of occupancy basically tells the lender that the building would not sit vacant and would be profitable.

However, regents were concerned that if the university cannot meet the occupancy guarantee, it would be stuck paying back a construction loan, Lagareta said.

De Mello said that wouldn't be a problem based on the sheer number of students on the housing waiting list.

"We know that as it stands right now, we turn away students from UH-Hilo because we can't guarantee them housing," he said. "We know the numbers are there."

But Lagareta said the deal is already a good one for the developer.

"The board doesn't want to guarantee this, believe me. We think this deal is pretty rich without this guarantee," she said. "What complicates this is UH-Hilo is trying to make commitments we don't know we can make."

Despite the legal questions, UH-Hilo officials and students stress that there is an urgent need for housing on their campus.

Ginger Takeshita, a student and resident adviser at UH-Hilo, said she is embarrassed to show prospective students and parents the Hilo housing facilities.

"The school has wonderful programs, but the facilities really leave something to be desired," Takeshita told the UH Board of Regents at its July meeting.

Nagata said the student resident halls are "structurally sound, but they need sprucing up."

The existing dorms are "as old as 1962 and as new as 1989," he said. "They need painting, they need work, but we don't have any problems filling up our facilities."

HOUSING 'SHANTIES'

The waiting list to get into housing at UH-Hilo has been estimated to be nearly 500 students a semester, he said. There also are "a number of students who don't even bother applying" because of the shortage, he said.

Carlson said that on a visit to UH-Hilo, he heard students complain about the conditions of current housing accommodations — some compared them to "shanties."

"There are linoleum tiles on the floor that are partly torn off, lighting is poor, some of the students told us there are rats in the facilities," he said.

Hawai'i County Council Chairman Stacy Higa said the proposed dorm development would not only help the university but would help tourism and the tight rental market in Hilo.

"If we had more dorms, more on-campus housing, it would take students out of the rental market and provide incentives for property owners to renovate their property," he said.

With students staying long-term in hotel rooms and apartments, he said, there is less space for visitors, people on business or residents looking for rental units.

State Rep. Clifton Tsuji, D-3rd (Hilo, Kea'au, Mountain View), said there is a "dire need" for dorms in Hilo.

"Already in Hilo there is a shortage of hotel rooms," he said.

Many Hilo hotels, such as the former Naniloa Hotel, provide off-campus housing for students. But that takes rooms away from visitors, Tsuji said.

"Those hotels that dedicate a portion (of rooms) to students are just trying to be a good neighbor to the university," he said.

HIGHER STUDENT COSTS

Regents are also concerned that the prices students would pay to live in the new dorms would be too high, Lagareta said.

Students can expect to pay as much as $6,000 more a year to live in the new dorms.

"It's (the Board of Regents') fiduciary responsibility to make sure ... this project gets done in the best interest of the UH-Hilo, and we have real concerns that that's not happening," Lagareta said.

Students at UH-Manoa have raised similar concerns about new dorms that will replace the old Frear Hall. Students have said that the cost to live in the new dorms will be substantially more than that of other Manoa dorms.

Students can expect to pay $4,250 to $6,990 per year for the new dorm space, according to developer American Campus Communities. At present, dorm students pay $2,817 to $5,427 a year for housing, according to the UH-Manoa Web site.

Construction on that project is expected to begin in February 2007.

In the case of UH-Hilo, Carlson said his company relied on the university and students to determine what reasonable rates are. He said the prices are below what students would pay in the regular rental market.

Sam Callejo, UH vice president for administration, said for now the project must remain on hold as university attorneys attempt to figure out the legal issues involved in this deal.

Hilo officials hope the wait won't be too long.

"The longer we have to wait, the longer that this new housing takes to come online, the more severe our housing problem will become," Nagata said. "Our fear is after a while, students will get the idea that there is no chance of getting to Hilo, so why even bother."

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