Wai Now: Public forum sparks debate on Upcountry water well development

On Wednesday night, members of the Upcountry community gathered to discuss a possible public-private partnership aimed at incrementally building one to four water wells in Kula, Maui.

According to a proposed agreement, Chicago-based developer Free Market Ventures, LLC intends to build one to four water wells, each associated with drilling, pump, piping, and power infrastructure. As part of the project, the private company would also be granted permission to construct 21 homes on the real estate to be acquired.

Jack Buck, founder of Free Market Ventures, LLC, said they gained control of the project on Feb. 21, 2024, when it secured rights to purchase the 272-acre parcel commonly known as “Kula Ridge Mauka,” which includes the Kula Community Center.

Its previous owner, Kula Ridge Mauka LLC, had bought the parcels from Von Tempsky FP in 2006 in an attempt to develop wells and affordable housing. Then-owner Kula Ridge built a test borehole on one of the parcels in 2018 but defaulted on payments and was foreclosed on, leaving the aquifer project unfinished. The land was reacquired by Von Tempsky in a public foreclosure sale in 2024. On Feb. 21, Free Market Ventures, LLC offered over $15 million for the rights to the Von Tempsky properties, said Buck.

Michael Smith, a partner in Free Market Ventures, LLC, says that a report showed the aquifer has “clean water”, referring to a report that’s not currently available to the public.

The company, shortly after securing rights to the property, proposed an agreement with the County of Maui Department of Water Supply (DWS) to drill into the aquifer.

If accepted, this agreement permits Free Market Ventures, LLC to move forward in a process to drill one well in Kula, with the possibility of drilling three more later. The option to drill future wells would be at the discretion of the County. The termination date would be set 30 years from the completion of the well package for well one, with a County option to buy out the system at any time at a price established by a third party.

“The County has all of the control in my opinion,” said DWS Director John Stufflebean. “If wells are built, the County will pay for the water.”

According to Stufflebean, the Lower Kula system has enough demand to take all of the water from well one. The second or third well would need to be piped in a different direction, which Stufflebean said is “quite feasible and certainly within the timeframe.”

Kula Community Association (KCA) president Bobbie Patnode found out about the project on Feb. 29, 2024, and has since met with executives of Free Market Ventures and conducted a KCA Board meeting to discuss the proposed agreement at length. Her and other members of KCA joined the community meeting on Wednesday.

“The board ended up taking a position that we are in favor of a well that helps solve the Upcountry water meter list, but we have a lot about this contract with Free Market Ventures and the cost of the contract,” said Patnode at the community meeting.

Patnode says another KCA Board meeting will determine its final stance on the matter.

The fate of the agreement will come down to the decision of Maui County council members on April 5, 2024.

Perceived cost of the wells

Until this year, all Maui County Department of Water Supply funding came from water users, which was just enough money to cover its operations, said DWS Director John Stufflebean.

Since then, the department has added approximately $19 million ($10 million in “carry-over” funds, plus $9 million in subsidizes related to wildfire relief), as well as funds from general excise taxes. All of this combined, Stufflebean said, is likely not enough to justify County-built wells in Kula.

Stufflebean said that DWS doesn’t want to take the risk of drilling the wells itself, and even if they did, it ties up millions needed for other capital projects. One well costs $30 million, approximated Stufflebean, while DWS has a budget of roughly $10 million this year.

“We need storage Upcountry anyway,” Stufflebean said. “I consider that to be a sunk cost.”

Stufflebean shared three ways the County would save money on future projects if the agreement passes: One would be not having to spend money on infrastructure to transport water, such as pipelines. Secondly, the proposed well(s) enables Upcountry to “not have a shortage” in drought seasons, something Stufflebean said is an urgent need for the community. Thirdly, he said the wells would work down the water meter list.

Today, the Upcountry water meter list stretches 1,428-names long, per its most recent update on Jan. 1, 2022.

Stufflebean added that Upcountry reservoirs nearly ran dry last year during the month of October. He estimated that Upcountry residents and farmers need two to three times the current reliable supply.

Ultimately, Stufflebean said he believes the agreement would save the DWS money on much needed projects.

Independent cost estimates

In an independent analysis showing perceived costs of the project, Dick Mayer of the KCA compared real costs water consumers pay to the costs proposed to the County in the potential water purchase agreement.

Along with his work with the KCA, Mayer is a retired University of Hawaiʻi economics professor and an upcountry resident of 54 years with decades of planning experience.

Mayer showed that the agreement proposes the DWS pay $5.95/1,000 gallon in the first year, 2027, which compared to resident-rates in East Maui, $0.06/1,000 gallons, is nearly 100 times more expensive. Mayer said he expects the Upcountry water rate will rise in the near future but maintained that the proposed agreement would still heftily outpace those adjusted rates.

Mayer also calculated the power-purchase agreement part of the water agreement, showing how energy costs of the project will add on to water costs at a rate of $0.33/kwh as a result of the project’s intended use of a proprietary Micro-Grid (solar).

Altogether, Mayer assessed that the DWS would pay $5.6 million in total, or about $12.87/1,000 gallons in its first year, with the cost of water and electricity rising +3% or the Consumer Price Index every year for 30 years.

“In every case, at least $4.75 would be lost on every thousand gallons [of water] that the County sells,” said Mayer.

This mirrored a testimony written by PUC-consultant Carl Freedman, which stated that energy and water charges alone would total more than $10 per thousand gallons Upcountry, about two times the present Upcountry average.

In addition, the agreement states that DWS would be required to share with the private company all source fees of water meters associated with the project.

The DWS did not provide a detailed cost analysis at Wednesday’s community meeting; however, one was requested this Tuesday by Council Member Yuki Lei Sugimura, who chairs the Budget, Finance and Economic Development Committee.

Response to letter of testimony

In response to Carl Freedman’s testimony and critiques by some KCA members, Free Market Ventures, LLC sent a letter to the DWS on March 15, 2024, explaining various revisions it made to the proposed agreement. This occurred before Wednesday’s community meeting.

One such revision eliminated an “Exclusivity Charge,” meaning the agreement no longer would require DWS to pay the developers $5 million at the commencement of each well development.

Also included in the letter was a commitment to accelerate the donation of the Kula Community Center to the completion date of the second well (projected to occur between 2027 and 2029). It also included that the County would have the option to purchase it at any time until 2031 for $720k plus interest at 7%.

“I think we’ve accommodated all of their concerns,” said Stufflebean, in regard to the changes made to the agreement, an agreement which he called “very close to final.”

Concerns and public input

While efforts were made to appeal to some of the concerns brought up by Freedman and KCA members, many residents (including KCA members) raised persisting concerns about the agreement and its language on Wednesday night.

Why now?

In February, Chicago-based developer Free Market Ventures, LLC secured the rights to 272-acres of Von Tempsky land on Maui. After April, they may have a multi-million-dollar agreement with Maui County that extends 30 years.

“My son will be 33 years old when this contract is up,” said a resident of Pukalani, who held her three-year-old son during the testimony she gave on Wednesday night. “I am myself 33 years old. You’re talking about my entire lifetime, and yet, no one has asked the question: ‘Why is this being rushed?'”

Mayer also posited that not enough time has been allotted to explore other options. He urged council members to take more time to discuss the matter.

“I would urge caution,” Mayer said. “If this is a good deal, it can wait a little while until we get answers to these types of questions. I hope that the Council will listen and do that kind of thing.”

Maui Now reached out to Free Market Ventures for clarity on the timetable of its real-estate agreement but did not receive a response in time for publication.

Buck said going forward with the land acquisition is dependent on whether or not its agreement with the County passes. When asked what would happen if the agreement fails, Buck said this land would be up for grabs again, saying that the land would likely be bought by a housing developer. His opinion was opposed by Mayer’s, who said that it would take an immense capital investment to create a housing development there, since it’s not yet connected to an Upcountry water system.

RFP not conducted, no competitive bids

There were no competitive bids solicited on the project, as a Request for Proposal (RFP) was not conducted by the County.

While Stufflebean said the DWS is open to hearing out other proposals, several Upcountry residents spoke out that they were not pleased that a RFP process did not take place.

DWS Deputy Corporation Counsel Caleb Rowe explained that a RFP was not necessary because this project was “not intiated by the County and is not on County property.”

“We don’t believe that this is required to go through the normal RFP process,” continued Rowe. “This is what would be considered a sole source, meaning that there’s basically one person making an offer to us. That’s how we’re proceeding with it.”

Out-of-state, lack of expertise

Bill Pyle, a former 57-year ag engineer of HC&S on Maui, said he doubts that the company can get fresh water from Haleakalā wells, calling it a “gamble.”

“This island is so porous that you get high tide and low tide with salt water in the middle of the valley…Haleakalā is geologically so young, the rock structure is such that the water drains quickly to sea level,” Pyle said. “There may be a few spots that catch water, and if you happen to hit one, yes, you can get fresh water. There’s a few like that around there, but it’s less than 1% of the potable water on this island.”

One of Mayer’s concerns is that Free Market Ventures, LLC is not a registered business in Hawaiʻi.

“Millions of dollars would be flowing out from Maui to the mainland,” said Mayer. “As opposed to let’s say having Haleakalā Ranch having done this. It doesn’t have to be an outside private company; it could be a local private company. They have a large amount of land. They could be doing it, and all of the money would stay on the island. By keeping it on the island, it multiplies through our Maui economy.”

Mayer said alternative water sources, such as reservoirs, lower elevation wells and East Maui Water Authority, have not been adequately compared.

Rowe of the DWS added that East Maui Water Authority has been formed but still needs to obtain its lease from the Board of Land and Natural Resources (BLNR), before it can be considered in the Upcountry water system.

Remarks by council members

The last speaker at the meeting was Council Member Tom Cook, Chair of the Water and Infrastructure Committee, who leaned in favor of drilling wells Upcountry, while commiserating community concerns.

“We have challenges, but we have an opportunity for our community to come together and agree that we want to improve the water supply, that we want to improve the infrastructure,” Cook said.

Cook pointed out that the other counties in the state primarily utilize aquifers. On Maui, all populated areas except Upcountry utilize groundwater from aquifers.

“Correct me if I’m wrong, but I think Maui County is the only county [statewide] that has surface water,” Cook said. Stufflebean returned a nod to Cook, who continued, “Okay. So, Honolulu–aquifers. Big Island–aquifers. Kauaʻi–aquifers…”

While a decision has not yet been made, council members will conduct their final reading to consider passage a water purchase agreement between Free Market Ventures, LLC and the County of Maui Department of Water Supply on April 5, 2024.

Community members are encouraged to email their input, questions or concerns to Council Member Yuki Lei Sugimura at YukiLei.Sugimura@MauiCounty.us.