By Valerie Monson, Staff Writer, The Maui News

KIHEI - The developers of agricultural subdivisions in West Maui and the Native Hawaiian families living on adjoining kuleana lots were sent back to mediation Thursday by the state Land Use Commission.

The decision drew sighs of frustration from family members who said commissioners were missing the main point: the gradual transformation of former Pioneer Mill lands into expensive residential lots on which genuine farming will become impossible because of skyrocketing sales prices.

"They're forgetting the reason we came before them," said Ke'eaumoku Kapu, a leader of the families that have banded together in the organization Kuleana Ku'ikahi. "Mediation didn't work. The developers are just trying to stall while the development continues."

The families wanted to resume a contested case hearing before the commission while the developers asked to resume talks. To make sure mediation wasn't simply a stalling mechanism, Big Island Commissioner Isaac Fiesta asked for a status report in 90 days.

Peter Martin, who heads the four investment hui that are in the midst of carving up 4,500 acres around Launiupoko and at Olowalu, did not attend the meeting at the Maui Coast Hotel, but attorney Benjamin Kubo insisted that developers were sincere about wanting to settle the thorny issues that have resulted in a series of lawsuits, stop-work orders, temporary restraining orders and bad blood for more than four years.

"My client is very, very willing to come to the table and resolve this matter," said Kubo. "We'd like to see at least a last try."

Almost a year ago, commissioners recommended the parties attempt mediation to hopefully resolve the dispute in which Kuleana Ku'ikahi is asking for a declaratory ruling that the ag lots being developed could not be used for anything other than farming unless the land were reclassified. Martin and his partners say the parcels of two acres or more were being sold with the hope the new owners would attempt to farm on the land.

For a while, it appeared that mediation - followed by the creation of a joint working group - was making progress as developers provided an access road and water to the kuleana lands of the Hawaiian families. But because of a major dispute over title to the Kapu property, which is less than an acre, the tenuous relations began to unravel. The mediation effort broke down when one of the Martin partnerships was part of a development group planning a 254-lot residential project on a 52-acre site in a Pu'unoa subdivision. The latter subdivision was under a state law allowing the project to bypass normal land-use procedures for affordable housing. The Pu'unoa housing project was rejected in December by the Maui County Council, but the developer, Smith Development, has revived the concept with a series of community meetings held over the past two months in West Maui.

Richard McCarty, representing Kuleana Ku'ikahi, said the families were outraged when they learned that the Pu'unoa residential project was being designed and proposed while the contested case hearing was being held, in which Martin's investment group was insisting their plans were for agricultural use of the lands.

"Even as they drew up (the Pu'unoa plans), they were pledging only ag use," said McCarty. "That put a chilling effect" on future negotiations.

Kudo said he was not involved with Pu'unoa, which was approved by a state housing agency but turned down by the council. Had the project gotten the council's blessing, however, developers had every intention of seeking reclassification for the parcel from the LUC, Kudo added.

Although McCarty said Kuleana Ku'ikahi was not informed about Pu'unoa until developers were already seeking approvals, Kudo said the project had been discussed last April and again during a meeting of the working group. Members of the families have disputed that.

While discussing the statewide issue of transforming ag lands into luxury estates, commissioners were told that Maui County was now requiring owners to submit farm plans before they can obtain a building permit. Half of the property must be in a type of ag use approved by the Planning Department.

The new policy, however, doesn't guarantee a mountainside of fields.

"We're frankly having mixed success," acknowledged Planning Director Mike Foley. "Some people are doing legitimate farming and others are not."

As they filed out of the conference room, members of Kuleana Ku'ikahi produced a real estate flier that advertised a one-bedroom home in the Makila Plantation subdivision above Launiupoko for $1.4 million, which they said was hardly a price that will encourage farming.

If mediation fails again and the contested case hearing is resumed, commissioners might hear a different position from the Office of State Planning. After the meeting, Deputy Attorney General John Chang said he believed the state would support the position of the families that ag lots must be used for agriculture, not as residential estates, unless reclassified to urban use.

That was the opinion issued by state attorneys under Gov. Ben Cayetano, but the administration of Gov. Linda Lingle changed that to no position. Chang said the neutral stand was adopted because Lingle's team had just come into office and hadn't had time to review the case. The office has since researched the matter and was now prepared to weigh in.

"It appears we'll take our former position, although we don't have a set position," said Chang. "At this point, we're just hoping mediation works out."