May 22, 2015

How red tape tied up a Maui business

As a company that was ready to grow, officials from Maui Brewing Co. say they were working to make it happen two years ago.

They had acquired the five acres needed to construct their planned 42,000-square-foot production facility in the Maui Research and Technology Park and secured a business loan from Bank of Hawaii to subsidize about $20 million in construction costs.

But things took a turn just before the loan was slated to close, when the federal government shutdown caused a snag in how the company’s loan, and others like it in Hawaii, were being processed by the U.S. Small Business Administration.

“At that point, we were so far into the project because we already had the bank’s commitment based on the Small Business Administration’s approval, and we had received approval,” founder Garrett Marrero told PBN. “They just couldn’t give us the final loan documents.”

Those problems stemmed from the legal interpretation of a federal law, called the Anti-Deficiency Act, which prevents federal employees from entering the federal government into obligations that are not specifically funded.

It’s a problem unique to Hawaii because of the Land Court, a 113-year-old system under which the ownership of property titles trace backward through multiple owners and zoning and use changes.

As a result, SBA administrators charged with the legal review of loan documents were concerned that past owners of Hawaii properties could declare liens against them, since liability is passed on with ownership.

But getting the proper indemnification needed to move the loan forward wasn’t an option, Marrero said, since there were only two other owners before him:Haleakala Ranch Co. and the Kingdom of Hawaii.

“Literally, the king himself would have to rise from the dead and sign off to get this thing done, which was really ironic, so obviously, that wasn’t going to happen,” Marrero said. “For us, it caused a significant delay that led to the delay of hiring the additional 30 or 40 employees that we added down in Kihei, so not only did it delay our project, but I know of others as well.”

That’s when Marrero said he began making phone calls “to everyone under the sun that I could think of” before reaching the office of U.S. Sen. Mazie Hirono, D-Hawaii, in Washington, D.C.

“I was trying to shine a light on something that certainly created a problem for us and countless others, I’m sure, but given at the time that we were the largest private project, it presented a huge challenge,” Marrero said. “I’m obviously an advocate for Hawaii and manufacturing, but I’m also not shy, so that helps.”

For the next year, Hirono said she worked with Small Business Administration officials and other federal lawmakers, including U.S. Sen. Brian Schatz, D-Hawaii, to turn things around.

Read the entire piece at: http://www.bizjournals.com/pacific/print-edition/2015/05/22/how-red-tape-tied-up-a-maui-business.html


By:  Darin Moriki
Source: Pacific Business News