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The ABCs of A&B

by Rob Parsons

April 17, 2008

They are too much vested here. They have too many thousands of acres.
-County Council Chair G. Riki Hokama

It's uncommon in regional governance that one corporate landowner wields as much political influence as that enjoyed by the company begun nearly 150 years ago by Maui sugar planters Samuel T. Alexander and Henry P. Baldwin.

One of Hawai'i's notorious "Big Five" sugar plantation corporations of the last century, Alexander & Baldwin, Inc. remains powerful today, having diversified into ocean transportation (Matson Navigation) and property development and management. While other Big Five corporate holdings, including C. Brewer, Amfac and Theo Davies have largely been bought out or sold off, A&B still retains 90,000 acres statewide (69,000 on Maui). Equally important, they control the water necessary to make those acres profitable.

East Maui Irrigation (EMI), a subsidiary of A&B, supplies from 160 to 450 million gallons per day of surface water for sugar cultivation and processing, with a small portion treated for the Upcountry domestic water supply. The most significant diversion in Hawai'i, 75 percent of the water comes from state-ceded lands, with EMI paying less than one cent per thousand gallons of water.

In recent months, contested case hearings over water tenure on Maui have challenged the century-old stream diversion systems for agricultural usage. Lawyers from Earthjustice, representing Hui O Na Wai Eha and Maui Tomorrow Foundation, addressed the state Commission for Water Resource Management over returning stream flows to four major watercourses in the central Maui portion of the West Maui Mountains. Yet Mayor Charmaine Tavares has announced that a major component of seeking new water source development is a proposed nine million gallon surface water treatment plant, to be constructed on A&B land outside Wailuku, with A&B receiving half the allocation.

According to Stan Kuriyama, A&B Properties, Inc.'s chief executive officer, the Waiale Treatment Facility would provide a supply of water for the 179-acre expansion of Maui Business Park, Phase II in Kahului, which faces second and final reading for its approval on Friday, April 18. The change in zoning from agricultural to urban usage will move the project-worth hundreds of millions of dollars-forward. County Council members were content to approve the project at first reading with promises of A&B's "contributions" of 70 acres of land for affordable housing, a community center, park and the possible relocation of the Kahului wastewater treatment facility.

The County Department of Planning's Long Range Division required no such contributions when it issued recommendations for the General Plan Advisory Committee's review of future urban growth boundaries and planned growth areas. The two largest new growth areas-524 acres at the Waiale/Waiko Road area and 947 acres at Kihei Mauka, north of the Piilani Highway-were high on A&B's wish list, and their inclusion in the new General Plan should bring about jubilation in their corporate boardroom.

A&B, Inc. has come a long way since 1869, when Sam Alexander and Henry P. Baldwin purchased their first 12 acres of land in Central Maui. The following year they bought another 559 acres, establishing their own plantation. During the Civil War, sugar prices rose dramatically, and they were among many Hawai'i entrepreneurs who saw dollar signs in the rich volcanic soil.

They undertook a gigantic engineering project to bring water from the rain forest terrain of Haleakala's north-facing slopes to the cane fields of Maui's isthmus. In 1878, they finished the Hamakua ditch, capable of carrying 60 million gallons of water daily.

They incorporated the Alexander and Baldwin partnership in 1883 under the name Paia Plantation. Soon after Alexander resigned as manager of the neighboring Haiku Sugar Company and moved to California, leaving Baldwin to manage both operations.

By the end of the 19th century, A&B controlled the Paia and Haiku plantations, the Hawaiian Sugar Company and the Hawaiian Commercial & Sugar Company (HC&S), as well as its subsidiary, the Kahului Railroad Company. Soon after the company formed a new corporation, known as Alexander & Baldwin, Ltd., based in Honolulu.

Soon after A&B went into the shipping business, mostly so it wouldn't have to rely on others to move its sugar. In 1909, the company bought a stake in Matson Navigation Company. A&B continued to invest in Matson, until the shipping firm became a wholly owned subsidiary in 1969.

Imported laborers were the backbone of the sugar plantations, as the population of native Hawaiians was dramatically reduced, largely due to introduced diseases. Labor disputes rocked sugar plantations in 1909, 1924 and 1946, a year after the International Longshore and Warehouse Union succeeded in organizing sugar workers.

After World War II, A&B got into real estate development. That's when Kahului Development Co., Ltd.-a subsidiary of HC&S-opened. "In response to the complaints of plantation employees regarding the inadequate housing available to them, Kahului Development built a new residential community, which was opened in 1950 and became known as Dream City," state's A&B's official company history. "This development gradually evolved into the city of Kahului, Maui's most populous community."

In the past few decades, A&B Properties has gradually converted plantation acreage to urban uses, while re-investing in Mainland commercial and retail ventures in several states. Property holdings throughout Hawai'i, California, Arizona, Nevada, Texas, Utah, Washington and elsewhere total more than six million square feet of improved commercial properties.

A&B also partnered in the Central Maui Joint Venture, which supplied a 36-inch pipe of water from the 'Iao aquifer in Central Maui to Kihei, Wailea and Makena in South Maui. They developed Wailea Resort in the 1970's and 1980's, sold it, then bought it back five years ago.

Through it all, plantation owners have had great influence with political leaders, always seeking to protect their business interests. The sugar planters' need for a reciprocity treaty to sell their sugar factored heavily into the Bayonet Constitution of 1887, the overthrow of the Hawaiian Monarchy in 1893 and annexation by the U.S. in 1898.

"During the pre-tourist years," an online history of Hawai'i states, "sugar planters and pineapple growers ran the islands with impunity, and prospered."

In recent years, A&B has kept its close association with government affairs, most apparent when a senior executive, Hannibal Tavares, won a 1979 special election for mayor. Hannibal is the father of current Mayor Charmaine Tavares.

"Tavares' win," wrote Gavan Daws and George Cooper in Land and Power in Hawaii, "meant that for the first time on Maui since the start of the Democratic years, a man closely affiliated with the big Five was running the administration."

Their book also notes that Tavares fought hard for approval of the Maui Lani project in Central Maui, and endorsed A&B's desire to retake lands from Maui Land & Pineapple, a long-time subsidiary that gained its independence in 1969.

"This all meant that Maui now had a mayor who, together with A&B, was willing to defy the ILWU on major land issues in ways that, for three decades on Maui, would have been unthinkable," wrote Daws and Cooper.

A&B's Political Action Committee is also a major campaign donor to politicians at the federal, state and county levels. Their influence is undeniable, extending even to appointments to prominent government boards and commissions.

As recently as three years ago, A&B officials made headlines when news broke that they hosted five of the nine County Council members for dinner at the pricey North Shore eatery Mama's Fish House.

In 2002, Meredith Ching, A&B Inc. Vice President of Government and Community Relations, was appointed to the state Water Commission, above numerous objections. One of those objecting was William Tam, a Honolulu lawyer who wrote the state water code when he was the deputy attorney general assigned to the commission. He called the appointment an "irreconcilable conflict" that puts authorities in "very difficult circumstances."

Attorney Alan Murakami, Litigation Director with the Native Hawaiian Legal Corporation (NHLC), said the state Commission for Water Resource Management's record of stream protection "has been atrocious and needs serious reform." Murakami was among a hundred citizens present at the Haiku Community Center last week, providing testimony to the water commission on a petition to return East Maui stream flows, now managed by A&B's subsidiary, East Maui Irrigation.

Taro farmers spoke of "cultural genocide," expressing their anger and frustration at EMI's water diversions from 33,000 acres of ceded state lands, and the commission's foot-dragging without reaching a decision on water allocation and stream restoration, now having languished for seven years.

Many Maui residents have also vented their displeasure with A&B's Hawaiian Commercial & Sugar's (HC&S) continuing practice of cane burning. Recently, a national environmental organization announced their upcoming lawsuit with the Environmental Protection Agency to challenge their rulemaking on the Clean Air Act to exempt air quality violations caused by agricultural burning.

The County Council is poised to give final approval to the 179-acre Kahului expansion, sure to increase the gridlock in the Dairy Road area despite claims that a new airport access road will funnel traffic elsewhere. They also added a condition that the zoning should not permit any mixture of residential units within the development. Two weeks earlier, in their approval of South Maui's Wailea 670 project, they insisted that a third of affordable housing rental units be constructed in a light-industrial zoned site in North Kihei. Go figure.

One thing you can figure is that Alexander & Baldwin Inc. will continue to be very prominent in designing the future of Maui. Anyone who recalls playing the board game Monopoly knows that acquiring the most properties is likely to put a player in better position to win. The question remains, is it a win-win?

A&B Foundation provided $2.2 million to local charities in 2007, $480,000 of that on Maui. At the same time, A&B, Inc.'s CEO Allen Doane received cash compensations of $8.55 million, according to Forbes, with stock options pushing his income to $11.75 million.

Now there's a sweet deal.