Life after sugar a year later | News, Sports, Jobs

Hawaiian Commercial & Sugar Co. workers gather for a group photo at Puunene Mill on March 1, 2016, the day the final harvest of sugar cane began. - The Maui News / MATTHEW THAYER photo

HAWAIIAN COMMERCIAL & SUGAR CO. – THE LAST HARVEST

As waves of workers began to lose their jobs with the closure of Maui’s last sugar plantation, county Office of Economic Development Director Teena Rasmussen braced herself for the rise in unemployment that was sure to come.

But throughout 2016, Maui’s unemployment rate stayed steady at around 3 percent. And, despite the closure of Hawaiian Commercial & Sugar Co. and the Makena Beach and Golf Resort last year, the island’s unemployment rate is now below 2 percent.

“It’s really rather phenomenal that we were able to weather the loss of all those jobs and come out of it at the end of the year with such a low unemployment rate,” Rasmussen said. “From my perspective, we’re so lucky it happened the year it did and not during the depths of the recession, because if it had happened in 2008, that would’ve been a complete and total disaster.”

It’s been one year since HC&S brought its final harvest of cane to the Puunene Mill, ceasing sugar cultivation on 36,000 acres and laying off 660 workers.

Smoke and steam rise from the Puunene Mill’s smokestacks in September 2016. Now, much of the mill equipment has been sold at auctions. A&B plans to sell remaining equipment and repurpose or disassemble the remaining structures. - The Maui News / MATTHEW THAYER photo

Maui continues to shape a life after sugar, from HC&S parent company Alexander & Baldwin, which is transitioning to ranching and diversified agriculture, to the businesses, farmers and county officials who are looking for new economic opportunities, and to the environmental groups seeking to restore East Maui streams and keep the old sugar cane fields in agriculture.

“Life on Maui has gone on pretty much normally,” said Albert Perez, executive director of the Maui Tomorrow Foundation. “There were some visual changes, especially after the harvested fields were not replanted, and you could see really far across the island, but predictions of a dust bowl did not come to pass.”

But Perez said there’s still concern over A&B’s commercial and agricultural plans, and as the company gets further away from sugar, many are watching closely to see where it heads next.

Growing interest

A&B announced the closure of the state’s last sugar plantation on Jan. 6, 2016, with its agribusiness sector facing $30 million in losses. From then until the final load of sugar cane was delivered to the mill on Dec. 12, 2016, one of the most pressing questions on the minds of residents and the company was: What would happen to all that land?

The last load of sugar cane to be processed is shown being trucked into the Puunene Mill on Dec. 13, 2016, as current and former employees gather to watch. - The Maui News / MATTHEW THAYER photo

For now, A&B has 4,500 acres in active ranching and farming, said Jerrod Schreck, director of renewable energy and land stewardship for A&B. Crops include pongamia, sweet potato and biogas feedstock crops for a Maui County renewable energy project.

An additional 15,000 acres are under active negotiations, with possibilities including non-GMO sorghum for energy and animal feed, coffee and some food crops that local farmers want to grow.

Schreck said that since the plantation shut down, A&B has heard from more than 200 parties interested in farming on former sugar lands, “with concepts ranging from hens to coffee to algae.”

“Those discussions plus some additional field research helped us identify crops that may be suited for the varied lands, soils and climates across former sugar footprint,” Schreck said. “We also tested and evaluated new agronomic practices, such as block rotation of crops to determine actual costs, yields and water requirements. The goal is to reduce overall water consumption.”

Ideas include growing crops that require less irrigation in areas with higher rainfall and planning energy crops for flatter, drier areas, which enable mechanical harvesting, Schreck said.

In May, A&B formed Kulolio Ranch, a wholly owned subsidiary that collaborates with the six ranches of Maui Cattle Co. to raise calves on-island. The ranchers provide the calves while retaining ownership; Kulolio Ranch raises them to maturity and market weight.

A&B has about 900 animals in its cattle ranching operation, Schreck said.

Meanwhile, leftover cane and weeds have been sprouting up in some of the “inactive” fields around Maui. Rick Volner, general manager of diversified agriculture for A&B, said the company is managing plant growth on these lands through mowing and other means.

“We are not burning any material, nor are we broadly applying herbicides, but we do need to manage some of the growth to avoid any fire hazards,” Volner said. “We’re actively working with the Maui Fire Department on that.”

But he said there are some benefits to the plant growth.

“It is good for soil health,” Volner said. “It prevents erosion and dust, and helps builds up organic matter and micronutrients. When the fields are ready to be brought back into active production, the standing material will be chopped and plowed back into the soil, further increasing organic content.”

As for the mill, Volner said much of its equipment has been sold through auctions. A&B is looking to sell the remaining equipment and repurpose or disassemble the remaining structures, he added.

A dozen of the former HC&S employees remain, and that “the biggest change has been the expansion of responsibilities” in terms of overseeing the land and infrastructure, Volner said.

While Volner said the company’s agricultural ventures aren’t turning a profit yet, Schreck said A&B is looking forward “to putting more of the land back into active use in 2018.”

“The findings are far from conclusive and the work continues, but we’re encouraged by the results to date, and from the expressions of interest from farmers of all types,” Schreck said.

A post-sugar economy

According to A&B, 326 former HC&S workers have found new jobs, 125 have retired and 19 have relocated off island as of the end of June, when the company completed its transition services for employees. Forty-eight workers were in training programs and three had started new businesses.

Rasmussen said she thinks the reason unemployment rates didn’t jump significantly during and after the layoffs was because Maui had enough jobs to absorb the former sugar workers.

Around the time the plantation closed for good, Maui County saw a net gain of 1,800 jobs in the fourth quarter of 2016, which was a 2.4 percent increase over the same time in 2015. That was followed by a net gain of 1,000 jobs in the first quarter of 2017, which was a 1.3 percent increase over the same time in 2016, according to the state’s quarterly statistical and economic report.

As of October, the unemployment rate on Maui was 1.9 percent. But that’s both a blessing and a curse.

“Diversifying our economy is so difficult,” Rasmussen said. “First of all, we are at an extremely low unemployment rate, which means there aren’t really any workers free for new industries or new businesses.”

That’s left Maui to rely even more on its visitor industry. The island might just be “the most dependent on tourism,” Rasmussen said. It’s the second-most visited island after Oahu, which has the advantage of being the state’s financial hub and is home to the headquarters of many companies that help diversify its economy.

“We’re becoming more and more dependent as we keep losing these other industries,” Rasmussen said of Maui. “For those of us in economic development, that’s the holy grail, is trying to find the next industry that will help us diversify.”

Rasmussen is hopeful about the opportunities for agriculture on Maui. The county has its sights on expanding the Kula Agricultural Park by leasing and eventually purchasing 869 acres of former sugar cane lane from A&B. The current park spans 445 acres and supports 26 farmers, according to the county website.

Small farmers as well as businesses like Ocean Vodka and Maui Grown Coffee have expressed interest in farming within the expanded park, Rasmussen said, adding that the current administration hopes to send a proposal to purchase the land to the County Council before Mayor Alan Arakawa’s term finishes next year.

However, the county can’t purchase the land until A&B knows how much water it’s going to get.

“The biggest issue is the fact that their water allotment is not settled yet,” Rasmussen said. “So virtually all of the diversified farming, everything is kind of in limbo because the water allocation is not determined. And so we’re all waiting for that.”

Unfinished business

Maui County, A&B and local activist groups are all waiting for word on how much water A&B will be allotted after decades of diverting East Maui streams for sugar cane production. The state Commission on Water Resource Management is still deliberating on in-stream flow standards and A&B’s allotment.

In November, the Board of Land and Natural Resources voted to allow A&B to continue diverting 80 million gallons a day for the next year, though the board said it would revisit its decision once the commission makes its ruling.

A year after the plantation closure, Perez said it’s “an opportunity to reset the old assumption that East Maui stream water was primarily for A&B.” Maui Tomorrow and the East Maui group Na Moku Aupuni O Ko’olau Hui are parties in the contested case hearing to restore flow to 27 East Maui streams.

“Now that sugar is gone, A&B wants to keep most of the water anyway, even though they are not actually farming much of anything, and are now a real estate company,” Perez said. “Their speculative sketch of potential crops does not justify the continued diversion of water at the expense of kalo farmers and native stream life.”

Since the closure, Perez said the air in South and Central Maui has been “much cleaner, and smoke complaints have stopped.”

But there are loose ends he wants to see tied up for environmental reasons — like the pile of coal by the smokestacks and the old transformers and derelict equipment sitting around the Puunene Mill.

Perez also said he thinks it’s “time to stop thinking of Alexander & Baldwin as an agricultural company.” He pointed out that now that A&B has sold its farming equipment, laid off most of its agricultural workers and converted to a real estate investment trust, the focus has shifted even more to development.

In July, A&B President and Chief Executive Officer Chris Benjamin said that the majority of the company’s income stems from its commercial real estate business, though the company has reiterated its desire to continue farming on former sugar cane lands, 27,000 acres of which carry the state designation of important agricultural lands.

“We’re curious to see how all of this promised agriculture can persist over the long term, given A&B’s recent conversion to a (real estate investment trust), which must derive at least 95 percent of its income from dividends, interest and property income,” Perez said. “This could explain why the company is now focused on leasing (which qualifies as a real estate transaction) rather than actual farming. It will be interesting to see if these agricultural leases are short-term, which would facilitate quick conversion of lands for real estate development.”

A&B spokesman Darren Pai said that “leasing land to experienced farmers is a central part of our plan, primarily because we don’t have expertise in all the types of crop production that are being considered.”

“In some cases, such as Kulolio Ranch, we will operate these businesses ourselves,” Pai said. “Although we are a REIT, all of our agriculture initiatives are part of a taxable subsidiary. It was important to us to have this structure because it allows us to maintain our focus on restoring agriculture in Central Maui.”

* Colleen Uechi can be reached at cuechi@mauinews.com.

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