Aloha Tower for much of its 82-year history served as a welcome sign for shipboard tourists, but in the last 30 years the historic Honolulu Harbor clock tower has been more like what an open flame is to moths for developers seeking to build in the area.

A half dozen or so developers have run into trouble after launching plans to revitalize state land adjacent to the tower.

Ken Hughes of Dallas-based Hughes Development LP is the latest to have ambitious visions dashed after working with the area's gatekeeper, the Aloha Tower Development Corp.

Hughes spent the past five years crafting and revising conceptual plans tentatively accepted by the 27-year-old agency to attract private development to the site.

Dubbed Pacific Quay, the $300 million Hughes project called for a complex of 300 condominiums, retail and a waterfront pedestrian promenade at piers 5 and 6.

But disagreements late last year over issues that include ground rent and providing parking for nearby Aloha Tower Marketplace tripped up a final agreement.

Now, some observers looking at the ATDC's history question whether private redevelopment of the area can ever be accomplished.

"Perhaps the state should cut its losses (and) forget about building condominiums and offices," said former Gov. Ben Cayetano, who was skeptical of the redevelopment notion nearly 30 years ago as a state senator, and later led the state during some of the ATDC's most promising and troublesome years.

State officials at times have pinned big hopes on the area's redevelopment — from making Hawai'i the international business hub of the Pacific to pumping $4 billion into state coffers.

None of those grandiose expectations, however, have come to fruition.

AFTER THREE DECADES

Three decades since some of the earliest visions were floated to replace state warehouses on the waterfront with higher commercial uses, there is only a financially struggling retail marketplace, a paved parking area and old dock buildings from piers 5 to 14.

To be sure, many of the development failures were due to missteps by developers or economic pressures. But much blame — fairly or unfairly — also has been directed at the ATDC.

Last month, more than a dozen state senators called for a legislative audit of the ATDC, citing past troubles between developers and the agency.

Part of Senate Concurrent Resolution 54 reads: "In its 27-year history, the Aloha Tower Development Corporation has only entered into (development agreements) that have stalled, vitiated, or otherwise eviscerated development plans for the area."

Since the ATDC's inception, legislators and others have criticized the agency as being a poor mechanism for fostering private development of state land.

Part of the difficulty, according to critics, is rooted in the ATDC's seven-member board representing the mayor and heads of the state Department of Transportation, state Board of Land and Natural Resources, and state Department of Business, Economic Development and Tourism. Three private-sector members also serve on the board.

The agency was an outgrowth of an idea by Gov. George Ariyoshi, who in 1979 unveiled conceptual plans to revitalize land around the famed Aloha Tower landmark that at one time was the tallest building in Hawai'i.

Ariyoshi's idea was part of a popular movement in many cities at the time to turn parts of urban industrial harborfronts into vibrant commercial attractions for residents and visitors.

Ariyoshi commissioned a detailed scale model for his so-called Aloha Tower Complex with shops, restaurants and park space around a centerpiece international trade center. The governor proposed spending $8.5 million to start what he envisioned as a mostly privately financed project.

Skeptics at the time questioned whether developers would be interested, how maritime needs might clash with the plan and whether the plan was based on sound financial assumptions.

THE ATDC IS BORN

A 1979 legislative audit evaluated Ariyoshi's project and called it financially flawed. The audit also warned such a project could become a money pit for the state.

After lawmakers rejected Ariyoshi's spending proposal in 1979, the ATDC was formed to advance the redevelopment concept.

The agency solicited bids in 1983 based on development framework revised by the Ariyoshi administration that called for a business hotel and office space. From two bids, the ATDC selected a $100 million plan by San Francisco-based Southern Pacific Development Co. for a 411-room hotel, office space, retail, cruise ship terminal facilities and a pedestrian overpass over Nimitz Highway.

But a year later following a corporate merger, Southern Pacific pulled out, citing concern over its projected payoff relative to risk.

New interest by developers was received by the ATDC, which in 1985 tentatively agreed to pursue a $200 million project led by Cordish Embry & Associates, a Baltimore-based firm involved in that city's successful harbor redevelopment.

In 1987, after the Legislature was asked to approve a $200 million bond authorization to finance Cordish Embry's plan, a legislative auditor recommended that the project — and the ATDC — be scrapped. The audit said project financing was "unrealistic and unworkable" and that the plan conflicted with maritime needs.

Gov. John Waihee at the time supported redevelopment around Aloha Tower, but suggested the ATDC be folded into a similar agency fostering redevelopment in Kaka'ako.

The ATDC continued to operate, but couldn't finalize terms with Cordish Embry. The agency ended up suing the developer to terminate its preliminary agreement, and was successful after a failed appeal by Cordish Embry.

Despite the rough going, interest in the project from developers continued to grow, and four parties submitted plans in response to a 1989 bid offering.

Aloha Tower Associates led by local developer U.J. "Rick" Rainalter Jr. was selected and its $750 million plan promised a blockbuster return to the state estimated at $4 billion in ground rent payments over a 65-year lease for 17 acres between piers 5 and 14.

But pieces of the developer's proposal began to unravel after a final development agreement was signed in 1990.

The plan called for a retail marketplace, two condo towers, an office tower, a 109-room business hotel, a cruise terminal, 2,000 underground parking stalls and a Nimitz pedestrian overpass.

The developer said its lenders in Japan cut back financing due to Japan's financial crisis and effects from the Gulf War on Hawai'i's economy that included a weakened condo market.

The financing pullback forced the developer to proceed only with a retail phase adjacent to Aloha Tower, and renege on a promise to pay the state a $60 million lease down payment.

Then the developer said its planned underground parking garage wasn't feasible because of cost and engineering issues. The developer also said a soft harbor bottom at piers 5 and 6 made its plan for cruise terminal facilities and an office tower questionable.

PARKING WOES

Construction of a scaled-back Aloha Tower Marketplace went ahead, and the $100 million retail complex opened in 1994. But because it was built with inadequate parking, many retailers and restaurants have avoided leasing space at the center, while others have closed or struggled.

Dan Orodenker, the ATDC's executive director who sealed the Aloha Tower Associates agreement, said global influences derailed what appeared to be a home-run for the state.

"The original concept in 1989-'90 was a good one," he said. "Unfortunately, the economics went the wrong way."

Orodenker, who left the ATDC in 1995 but rejoined the agency from 2001 to 2005, said the partially completed development plan has made development of surrounding parcels intensely complicated.

"The parking is the albatross around everybody's neck right now," he said.

The marketplace was forced into bankruptcy in 1997, and a year later new investors acquired the project and surrounding development rights with an aim to complete the area's long-envisioned revitalization.

But the buyer, a partnership involving Trinity Investment Trust LLP, didn't fare much better than the original developer.

Over several years, Trinity proposed five parking solutions to the ATDC, including a floating garage, but was rejected each time for reasons over obstructing things like views, Irwin Park and maritime operations.

One ATDC board member at the time, who asked not to be named for fear of reprisals, summed up several years of service on the board as a waste of time.

"Every time we got close to a parking resolution, we would get stymied, in particular due to having too many lawyers involved," the board member said.

The Trinity partnership in 2001 sued the ATDC to recover more than $10 million in alleged losses that it claimed were caused by the agency's unwillingness to allow the addition of parking that the developer is actually required to add under its lease with the state.

Negotiations to resolve the suit are still ongoing. Complicating matters was the Trinity partnership filing for Chapter 11 bankruptcy reorganization in 2002 with other investors later replacing Trinity.

The former Trinity partnership, now referred to as AHI Aloha, lost the development rights for undeveloped land flanking Aloha Tower Marketplace in 2000.

The ATDC reclaimed the development rights, but the move obligated the agency to pay the state Department of Transportation around $1.5 million a year to make up for revenue lost by the department by committing its land to redevelopment.

Through June 2005, the ATDC owed the DOT $8.3 million. After years of trying to renegotiate its obligation, the ATDC reached an agreement to pay DOT $225,000 in annual rent plus half of any net income from existing or future development deals.

DEBT AT $7.7 MILLION

As of June 2007, the ATDC had reduced its DOT debt to $7.7 million. According to the ATDC's latest annual report for the fiscal year ending June 2006, the agency took in revenue of $1.4 million mostly from Aloha Tower Marketplace rent, and spent almost $1.2 million.

Sandy Pfund, who has served as ATDC's executive director since 2005, said the agency has had an unfortunate history that makes it unfair to criticize present staff and board members for their effort to advance a mission that has become mired in issues linked to the past such as the lawsuit, parking dilemma and DOT debt.

Pfund said part of the agency's troubles at times stemmed from a lack of staffing or poor morale brought on by proposals to do away with the agency.

For instance, when Pfund joined the ATDC in 2004, Orodenker was the sole staff member and had trouble composing minutes of public meetings. Today the agency has a staff of four, including two project managers and a secretary.

"We're just trying to move forward," Pfund said. "There's a lot that could be done if done right."

Hughes was seen by many as the ticket to redemption for the Aloha Tower Complex vision. The accomplished developer was one of two bidders in 2003 responding to an offer to develop piers 5 and 6.

Hughes proposed developing areas beyond ATDC's request, including replacing an adjacent Hawaiian Electric Co. power plant with a park, and building a 2-mile Downtown streetcar system. The developer also proposed a Downtown bypass tunnel under Nimitz, and transforming piers 10 and 11 into a new cruise ship terminal topped by a hotel.

After being scaled back to piers 5 and 6, the tentative plan by Hughes unraveled over an expectation by the ATDC for him to provide parking for Aloha Tower Marketplace and a $47.5 million difference between what Hughes and the agency proposed as ground rent for piers 5 and 6 land.

The developer sought to resolve differences through arbitration, which is proceeding, though the agency board last month voted to terminate its work with Hughes.

Jeff Portnoy, a local attorney representing Hughes, said the developer intends to seek damages for money Hughes spent and stood to gain by the project. Portnoy added that even if Hughes is later allowed to proceed with Pacific Quay, it may no longer be feasible given the delay and a loss of financing.

"The (agency) is a failure," he said. "I think that the way they treated Ken Hughes is an outrage. ... It has added a tremendous black eye to an already bruised face of doing business in Hawai'i."

ATDC directors said Hughes was asking for unreasonable terms that would be unfair to taxpayers. "We feel that the deal he's proposed now is a bad deal," Pfund said.

Board members have formed a subcommittee to explore new development opportunities.