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                                                              Electronically Filed
                                                              Supreme Court
                                                              SCAP-13-0005781
                                                              23-SEP-2015
                                                              09:22 AM




           IN THE SUPREME COURT OF THE STATE OF HAWAIʻI

                                ---o0o---


              SURFRIDER FOUNDATION; HAWAII’S THOUSAND
            FRIENDS; KA IWI COALITION; and KAHEA – THE
                  HAWAIIAN-ENVIRONMENTAL ALLIANCE,
                 Petitioners/Plaintiffs-Appellants,

                                    vs.

       ZONING BOARD OF APPEALS, CITY & COUNTY OF HONOLULU;
             DIRECTOR OF THE DEPARTMENT OF PLANNING &
          PERMITTING, CITY & COUNTY OF HONOLULU; KYO-YA
        HOTELS & RESORTS LP; AND 20,000 FRIENDS OF LABOR,
                 Respondents/Defendants-Appellees.


                            SCAP-13-0005781

       APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT
            (CAAP-13-0005781; CIV. NO. 13-1-0874-03)

                           September 23, 2015

           NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.,
          WITH RECKTENWALD, C.J., CONCURRING SEPARATELY

                OPINION OF THE COURT BY POLLACK, J.

                              I. INTRODUCTION

          In 1976, the Honolulu City Council established the

Waikiki Special Design District in response “to the rapid
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development of the 1960s and 1970s, and the changes produced by

that development.”    The City Council found that “[t]o the world,

Waikiki is a recognized symbol of Hawaii [] and the allure of

Waikiki continues, serving as the anchor for the state’s tourist

industry.”    The Council concluded that while “Waikiki needs to

maintain its place as one of the world’s premier resorts in an

international market [], the sense of place that makes Waikiki

unique needs to be retained and enhanced.”         Accordingly, the

City Council developed specific requirements and design controls

“to guide carefully Waikiki’s future and protect its unique

Hawaiian identity.”

          Among the provisions enacted to protect Waikiki’s

Hawaiian identity is a limitation on development next to the

shoreline.    The Council established a coastal height setback

requirement because of the “need to step back tall buildings

from the shoreline to maximize public safety and the sense of

open space and public enjoyment associated with coastal

resources.”    The Council also provided for a variance process

when compliance with the Land Use Ordinance would result in

unnecessary hardship.

          In this case, we are called upon to determine whether

a variance granted for a proposed 26-story hotel and residential



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tower that permitted a 74 percent encroachment into the coastal

height setback along the Waikiki shoreline was properly issued. 1

                              II.   BACKGROUND

                   A.    The Waikiki Special District

            The Land Use Ordinance of the City and County of

Honolulu (LUO) designates “certain areas in the community in

need of restoration, preservation, redevelopment or

rejuvenation” as special districts.         Revised Ordinances of the

City and County of Honolulu (ROH) § 21-9.20 (1990).            For each

special district, the LUO sets forth objectives, identifies

prominent view corridors and historic properties, and outlines

requirements and design controls to guide development to

“protect [and] enhance the physical and visual aspects of [the

district] for the benefit of the community as a whole.”             ROH §

21-9.20-1.

            The Honolulu City Council (City Council) designated

the Waikiki Special District 2 “to guide carefully Waikiki’s

future and protect its unique Hawaiian identity.”            ROH § 21-
      1
            The quoted passages in the Introduction are from provisions of
the Land Use Ordinance of the City and County of Honolulu that will be
discussed later in this Opinion.
      2
            The Waikiki Special Design District was renamed the Waikiki
Special District. The boundaries of the WSD are defined by a map accessible
at: http://www.honolulu.gov/rep/site/ocs/roh/ROH_Chapter_21_Exh9.1-
9.18_art10__.pdf.pdf (last visited September 2, 2015). The WSD is bounded on
the north and west by Ala Wai Blvd. (including the piers in the Ala Wai Yacht
Harbor), on the south by the Pacific Ocean, and on the west by Kapahulu Ave.



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9.80.     Within the Waikiki Special District (WSD), the City

Council recognized the need to step back buildings from the

shoreline in order to optimize “the sense of open space and

public enjoyment along the beach.”          ROH § 21-9.80-4(g)(2).        To

accomplish this objective, the City Council established the

following minimum setbacks that “apply to all zoning lots along

the shoreline” within the WSD:

             (A)   There shall be a building height setback of 100 feet in
                   which no structure shall be permitted. This setback shall
                   be measured from the certified shoreline;[ 3] and

             (B)   Beyond the 100-foot line there shall be a building height
                   setback of 1:1 (45 degrees) measured from the certified
                   shoreline.

ROH § 21-9.80-4(g)(2) (Coastal Height Setback).

             The WSD requirements and design controls set forth in

the LUO are “supplemented by a design guidebook” (WSD Design

Guidebook) that “shall be used as a principal tool by the

director to express those . . . elements which demonstrate

consistency with the intent, objectives, guidelines, and

      3
            The certified shoreline is depicted in ROH Exhibit 21-1.15, and
defined within the Hawaii Administrative Rules § 13-222-2 (adopted December
13, 2002), as “a signed statement by the chairperson of the board of land and
natural resources that the shoreline is as located and shown on the map as of
a certain date.” “Shoreline” is defined as:

             the upper reaches of the wash of the waves, other than
             storm or seismic waves, at high tide during the season of
             the year in which the highest wash of the waves occurs,
             usually evidenced by the edge of vegetation growth, or the
             upper limit of debris left by the wash of the waves.

Id.



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standards of the [WSD].”       ROH § 21-9.80-4.     With respect to the

Coastal Height Setback, the WSD Design Guidebook provides, “A

setback from the shoreline is required to maximize public

safety, the sense of open space, lateral access along the beach,

and the public enjoyment associated with our coastal resources.” 4

Additionally, the Coastal Height Setback is designed to

“contribute to a Hawaiian sense of place” by “reduc[ing] the

perception of crowding, enhanc[ing] the aesthetics of Waikiki

and impart[ing] a greater sense of Hawaiiana in the built

environment.”     WSD Design Guidebook at 25.

            Although the City Council enacted the LUO to “provide

reasonable development and design standards for the location,

height, bulk and size of structures,” a party may apply for a

variance on the basis of unnecessary hardship by submitting an

application to the Honolulu Department of Planning and

Permitting.    Revised Charter of the City and County of Honolulu

(RCCCH) § 6-1517 (2000 Edition, 2003 Supp.).           In order to

establish unnecessary hardship, the applicant must demonstrate

that the following three requirements as prescribed in the City

Charter have all been met:


      4
            Dep’t of Planning and Permitting, City and Cnty. of Honolulu, WSD
Design Guidebook (May 2002), http://www.honoluludpp.org/Portals/0/pdfs/zoning
/WSD.pdf (last visited September 2, 2015); ROH § 21-9.80-4(g)(2).



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            (1) the applicant would be deprived of the reasonable use
            of such land or building if the provisions of the zoning
            code were strictly applicable;

            (2) the request of the applicant is due to unique
            circumstances and not the general conditions in the
            neighborhood, so that the reasonableness of the
            neighborhood zoning is not drawn into question; and

            (3) the request, if approved, will not alter the essential
            character of the neighborhood nor be contrary to the intent
            and purpose of the zoning ordinance.

Id.   Upon receipt of a variance application, the Director of the

Department of Planning and Permitting must hold a public

hearing.    Id.   If the variance application is granted, the

Director, in its decision, “shall specify the particular

evidence which supports granting of [the] variance.”              Id.

 B.    Kyo-ya’s Variance Application to Encroach into the Coastal
                           Height Setback

            Kyo-ya Hotels & Resorts LP (Kyo-ya) is the fee-simple

owner of the Moana Surfrider hotel complex, which contains three

hotel buildings--the Surfrider Tower, the Banyan Wing, and the

Diamond Head Tower (DHT)--on a combined zoning lot located on

Kalākaua Avenue along the Waikiki shoreline.            In 2010, Kyo-ya

submitted a land use permit to redevelop the existing 8-story

DHT with a 26-story, 282 foot hotel and residential tower (the

Project).     Due to the Project’s size, location, and design, the

Project required several permits and approvals, including a

variance to allow the Project to encroach into the Coastal

Height Setback.


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            On March 19, 2010, Kyo-ya submitted variance

application No. 2010/VAR-9 (variance application) to the

Department of Planning and Permitting requesting that the

Project be allowed to encroach into the Coastal Height Setback.

As proposed, the Project would encroach about 40 feet into the

100-foot coastal setback at the building’s ewa corner 5 and about

60 feet at the Diamond Head corner.         Additionally, a significant

portion of the building up to the 16th floor would encroach into

the 1:1 height setback measured from the certified shoreline,

and “from the 17th floor, the entire building encroaches into

the coastal height setback.”        In total, “about 74.3 percent of

the building encroaches into the Coastal Height Setback”;

“Conversely, only 25.7 percent of the building complies with the

coastal height setback.”

            In its variance application, Kyo-ya maintained that

although the Project was “unable to comply with the strict

requirements of [the Coastal Height Setback],” the Project

satisfied the three requirements for issuance of a variance.




      5
            “Ewa” is defined as a “[p]lace name west of Honolulu, used as a
directional term.” M. Pukui & S. Elbert, Hawaiian Dictionary 42 (rev. ed.
1986).



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      i. First Requirement: Deprived of the Reasonable Use of the
                        Applicant’s Land or Building

            Kyo-ya argued it would be deprived of the reasonable

use of its land if the LUO was strictly applied because the

ordinance would “reduce the buildable portion of the property to

roughly 11,283 square feet, or approximately 33% of the whole

lot area.”     If the LUO “were strictly followed,” Kyo-ya

contended that it “would not even be able to rebuild the

existing [DHT].” 6

             Kyo-ya maintained that the State of Hawaii entered

into an agreement in 1965 with the owners of certain beach front

parcels under which the State committed to expand the beach and

“[p]rotect and preserve all existing beach” in a designated area

(1965 Beach Agreement). 7      Although the contemplated beach

      6
            As discussed infra, the LUO allows for the renovation or
reconstruction of nonconforming uses and structures, subject to certain
conditions and approvals. See ROH § 21-9.80-4(e).
      7
             In the 1965 Beach Agreement, Line B represents the makai
property line and Line A designates the current certified shoreline. The
text of the agreement states, in part, as follows:

             1. The State will use its best efforts to construct the
                beach seaward of Line B in the Surfrider-Royal Hawaiian
                Sector substantially in accordance with the Cooperative
                Project.

                . . .

             3. The Owners will release and quitclaim to the State
                forever all of their respective estate, right, title and
                interest . . . in and to the Surfrider-Royal Hawaiian
                Sector of Waikiki Beach now or from time to time
                hereafter existing seaward of Line B, whether created by

                                                              (continued . . .)
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expansion was never completed, Kyo-ya asserted that had “the

beach been constructed by the State” pursuant to the 1965 Beach

Agreement, “it is likely that the beach fronting the [DHT] site

would be approximately 180 feet wider than it is today” and the

shoreline would have been recertified to reflect the increased

width.   Additionally, if the beach had been extended, Kyo-ya

submitted that “almost no portion of the [Project] would

encroach into the coastal height setback.”

              ii. Second Requirement: Unique Circumstances

            Kyo-ya contended that the reasonableness of the

neighborhood zoning was not drawn into question by its variance

request because it was “forced” to apply for a variance due to

unique circumstances, rather than as a result of general

conditions in the neighborhood.        For example, the Project site

(continued . . .)

               construction or otherwise, reserving to the Owners . . .
               full and free access between their respective abutting
               lands and the sea across said beach and to use said
               beach for a bathing beach and foot passage.

               . . .

            5. The State will release and quitclaim to the respective
               Owners . . . severally in proportion to their respective
               frontages along Line A . . . contemporaneously with the
               Owners’ conveyance to the State . . . all the land of
               the Surfrider-Royal Hawaiian Sector of Waikiki Beach
               between Lines A and B . . . PROVIDED, HOWEVER, that said
               land between lines A and B shall remain subject to the
               public easement . . . until a beach at least seventy-
               five (75) feet wide shall have been created seaward of
               Line B.



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“is bounded on the Ewa side by the historic Banyan Wing,” which

is listed on the National and State Register of Historic Places.

Kyo-ya argued that it had foregone considerable financial gain

by choosing not to redevelop the Banyan Wing and that “[i]f Kyo-

ya chose to redevelop this portion of the complex, it could

develop a hotel or residential tower that meets all LUO, WSD and

[Planned Development-Resort (PD-R)] requirements.”

          Additionally, Kyo-ya contended the Project site “is

among the narrowest parcels of land along Waikiki Beach” that is

subject to the Coastal Height Setback.”         The narrowness of the

Project site “is exacerbated,” Kyo-ya argued, “by the absence of

the substantial beach which was to have been built by the State

per the 1965 Beach Agreement” in addition to the presence of the

historic Banyan Wing.     Kyo-ya further argued that the parcel’s

“unique size and shape” caused the impact of the Coastal Height

Setback to be “greater than on any other parcel along Waikiki

Beach.”

  iii. Third Requirement: Essential Character of the Neighborhood
                  and Intent and Purpose of the Ordinance

          With respect to the third requirement, Kyo-ya

submitted that the variance “will not alter the essential

character of the locality nor be contrary to the intent and

purpose of the zoning code.”      Kyo-ya characterized Waikiki as “a

densely developed, urbanized area, filled with large hotels,

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condominiums, and mixed-use projects which push (and in many

cases exceed) the limits of permitted heights, densities, and

other zoning and building regulations.”         Kyo-ya argued that many

of the “existing hotels along Waikiki Beach already encroach

into the coastal height setback” and that allowing the Project

to similarly encroach would not alter the essential character of

Waikiki.   Kyo-ya contended the Project’s “mauka-makai

orientation, increased public open space, improved beach access

and addition of surfboard racks should go a long way toward

restoring the character of Waikiki.”

           Additionally, Kyo-ya asserted the Project was

consistent with WSD objectives to “[p]rovide for the ability to

renovate and redevelop existing structures which might otherwise

experience deterioration” and allow for “creative development

capable of substantially contributing to rejuvenation and

revitalization of the [WSD].”       Kyo-ya maintained that the

Project was consistent with the WSD objective to “improve where

possible mauka views . . . and a visual relationship with the

ocean” and the objective to “[p]rovide people-oriented,

interactive, landscaped open spaces to offset the high-density

urban ambience.”

           Finally, Kyo-ya argued that the impact of the

encroachment into the Coastal Height Setback would be mitigated


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by the State of Hawaii’s planned Waikiki Beach Maintenance

Project (Beach Maintenance Project) that is “expected to add

roughly forty-feet (40’) of dry beach to the beach fronting the

[DHT].”

                        C.    Director’s Decision

           The Director held a public hearing on Kyo-ya’s

variance application and subsequently issued Findings of Fact,

Conclusions of Law, and Decision and Order (Director’s Decision

or Decision) granting “Partial Approval” of Kyo-ya’s variance

application.

           In his Decision, the Director described the variance

application as a request to allow the Project to encroach

approximately 74 percent into the Coastal Height Setback.              The

Director noted that in addition to the variance request from the

Coastal Height Setback, the Project required additional

approvals and permits, including a Planned Development-Resort

(PD-R) Permit. 8

      8
           The purpose of a PD-R permit is described within the LUO as
follows:

           [T]o provide opportunities for creative redevelopment not
           possible under a strict adherence to the development
           standards of the special district. Flexibility may be
           provided for project density, height, precinct transitional
           height setbacks, yards, open space and landscaping when
           timely, demonstrable contributions benefiting the community
           and the stability, function, and overall ambiance and
           appearance of Waikiki are produced.


                                                             (continued . . .)
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            The Director then set forth his analysis of the City

Charter variance test.      As to the first requirement--that the

strict application of the zoning code would deprive Kyo-ya of

the reasonable use of its land or building--the Director noted

that Kyo-ya had argued the existing DHT is “extremely outdated”

and if not allowed to be redeveloped, it “would contribute to

the decline of the already aging structure.”           Consequently, the

Director found that “the proposal is necessary to maintain

economic viability.”      The Director also found that the proposal

was consistent with the WSD objectives “to provide opportunities

for creative development that contribute to the rejuvenation and

revitalization of the special district,” “to provide the ability

to renovate and redevelop existing structures which otherwise

might experience deterioration,” and “to facilitate the desired

character of Waikiki for areas susceptible to change.”

            The Director noted Kyo-ya had indicated that if it

complied with all “required yard, height, and transitional


(continued . . .)

            Reflective of the significance of the flexibility
            represented by this option, it is appropriate to approve
            projects conceptually by legislative review and approval
            prior to more detailed review and approval by the
            department.

ROH § 21-9.80-4(d). Kyo-ya’s PD-R application requested flexibility in
WSD standards to allow the Project to have greater density, increased
height, and less open space than otherwise would be required.



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height setbacks,” 9 the “building would have to take the form of a

massive monolithic wall.”       The Director concluded that in

comparison, the Project “offers some important design advantages

that are more conducive to the WSD design objectives, but that

can only be accomplished by a trade-off in terms of coastal

setback encroachments.”

            The Director addressed the physical constraints of the

site that restrict development along the shoreline.            The

Director found that if the zoning code was strictly applied, the

buildable area of the DHT Lot “would be reduced to less than 35

percent” with a maximum height limit of about 170 feet.

Consequently, the Director found that if Kyo-ya were not granted

the requested variance, Kyo-ya “would not be able to develop in

accordance with the [PD-R] permit.”

            Next, the Director found that the extent of Kyo-ya’s

requested 74 percent encroachment into the Coastal Height

Setback would have been significantly reduced “[i]f the beach

      9
            “Precinct transitional height setbacks” is a distinct requirement
under the LUO and separate from the Coastal Height Setback at issue in this
appeal. As set forth in ROH Table 21-9.6(B) and ROH § 21-9.80-6(c)(2),
precinct transitional height setbacks are as follows:

            Transitional Height Setbacks. For any portion of a
            structure above 40 feet in height, additional front, side
            and rear height setbacks equal to one foot for each 10 feet
            in height, or fraction thereof, shall be provided. Within
            the height setback, buildings with graduated, stepped forms
            shall be encouraged (see Figure 21-9.2).



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had been constructed and/or maintained as agreed to by the State

[under the 1965 Beach Agreement, because] the certified

shoreline would probably be located much farther seaward than

the existing shoreline.”      The Director reasoned, “The proposal,

viewed in [the context of the 1965 Beach Agreement], is not

excessive.”   The Director additionally found that under the

Waikiki Beach Maintenance Project, the beach would be increased

by 40 feet and that the certified shoreline “would likely

reflect the beach expansion.”

          The Director concluded that “[f]or these and other

reasons,” Kyo-ya “would be denied reasonable use of the site if

not allowed to encroach into the present 100-foot coastal

setback and the coastal height setback.”         However, the Director

also concluded that “the proposed setback encroachment exceeds

what would be allowed if the beach width were increased by 180

feet”; therefore, “the height of the [Project] should be reduced

to comply with the . . . coastal height setback as measured from

. . . (the beach width intended in the 1965 [Beach] Agreement).”

          With regard to the second requirement of the variance

test, the Director found Kyo-ya’s application to be “supported

by unique circumstances” including that the Project lot is “one

of the narrowest lots along the shoreline in [the] area except




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for the public beach park lots.” 10       The Director noted that

compliance with the 20-foot front yard setback and the 100-foot

coastal setback effectively reduces the buildable area of the

DHT lot by 33 percent.

            The Director found the shoreline to be another “unique

circumstance [of the site].”        The Director stated that while the

“variance and/or encroachments are based on the existing

[certified] shoreline,” “the shoreline along the site is subject

to drastic change by artificial means, and, in fact, may move

seaward by roughly 40 feet under the planned [Waikiki Beach

Maintenance Project].”      In light of the restoration plan, the

Director concluded, “It would be reasonable to allow full

development to proceed at this time, considering that the

encroachments will be reduced substantially once the beach

restoration is done.”

            As to the third requirement of the variance test, the

Director concluded the Project would not alter the essential

character of the neighborhood.        The Director found the


      10
            The Director noted that Kyo-ya’s Special Management Permit
required Kyo-ya to preserve the historic Banyan Wing for a minimum of 25
years and that “[t]he proposed encroachments would permit [Kyo-ya], in
effect, to transfer some of the development potential from the Banyan Wing
site to the DHT site.” The Director maintained this “transfer” would “be a
fair trade-off, since the proposal would also promote several important WSD
goals and objectives.” However, the Director also noted that Kyo-ya
“indicated that [it has] no intention of removing the historic Banyan Wing.”



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“established character of Waikiki” to be “a densely populated

and highly developed, urbanized area, which includes a wide mix

of land uses.”       Further, the Director noted that “[m]any

existing structures are nonconforming and exceed the height

limit and maximum density [], encroach into required yards and

setbacks, and lack the minimum open space and landscaping.”

             The Director additionally found the Project to be

“consistent with several important WSD objectives.”              The

Director determined that “the new building is necessary to

replace an aging, declining structure with a new, more

attractive and functional structure, which will enhance Waikiki

as a visitor destination”; allow Kyo-ya to preserve the historic

Banyan Wing; and “provide[] public access to the beach, view

channels from Kalākaua Avenue to the ocean, as well as other

significant public benefits.”

             After analyzing the variance test’s three

requirements, the Director made the following Conclusions of

Law:

             1) There is evidence that the Applicant would be deprived
                of a reasonable use of the land or building if the
                provisions of the zoning code were strictly applied.

             2) The request of the applicant is due to unique
                circumstances and not to general neighborhood
                conditions, and it does not question the reasonableness
                of the neighborhood zoning.

             3) The request will not alter the essential character of
                the neighborhood nor be contrary to the intent and
                purpose of the zoning ordinance.

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Accordingly, the Director granted partial approval of Kyo-ya’s

variance application to allow the Project to encroach

approximately 74 percent into the Coastal Height Setback.              The

Director’s partial approval was conditioned on, inter alia,

submission of revised plans “which show the [Project] shall

comply with the 1-to-1 (45-degree angle) coastal height setback

as measured from . . . (the approximate beach width intended in

the [1965 Beach Agreement]).” 11

                        III. Appellate Proceedings

                      A. Zoning Board of Appeals 12

            Surfrider Foundation, Hawaii’s Thousand Friends, Ka

Iwi Coalition, and KAHEA--The Hawaiian Environmental Alliance

(collectively, Surfrider) filed a petition (Petition) to the

Zoning Board of Appeals (ZBA) challenging the Director’s

findings and conclusion that Kyo-ya’s request for a variance

from the Coastal Height Setback met the requirements for

issuance of a variance as set forth by the City Charter. 13            In


      11
            According to Kyo-ya, the Director’s condition effectively reduced
the height of the Project by approximately six floors.
      12
            The ZBA held a hearing to decide motions to intervene filed by
numerous parties at which the ZBA granted intervenor status to Kyo-ya, 20,000
Friends of Labor, Hawaii’s Thousand Friends, Ka Iwi Coalition, Surfrider
Foundation, and KAHEA--The Hawaiian Environmental Alliance.
      13
            Kyo-ya filed a motion to dismiss Surfrider’s appeal, arguing that
Surfrider’s appeal was substantively and procedurally insufficient under
RCCCH § 6-1516.


                                                             (continued . . .)
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its position statement, Surfrider argued that the Director’s

conclusion that the Project satisfied the three requirements of

RCCCH § 6-1517 was based on erroneous findings of material

facts.

            Surfrider maintained that Kyo-ya did not meet the

first requirement for issuance of a variance because “the record

indicates that [Kyo-ya] would not be deprived of reasonable use

of the property if the variance is denied.”             Surfrider contended

that the “property is already occupied by a non-conforming, 8-

story hotel building that can be fully renovated without the

need for a variance under the [LUO],” that Kyo-ya was not

entitled to achieve all of the applicable maximum development

standards in the LUO, and that the 1965 Beach Agreement had not

been realized.


(continued . . .)

      RCCCH § 6-1516 provides, in relevant part, as follows:

            Section 6-1516. Zoning Board of Appeals –

            . . . An appeal shall be sustained only   if the board finds
            that the director’s action was based on   an erroneous
            finding of a material fact, or that the   director had acted
            in an arbitrary or capricious manner or   had manifestly
            abused discretion.

The ZBA granted in part, and denied in part Kyo-ya’s motion. The ZBA found
that Surfrider “asserted in [its] Petition that the Director’s action in
partially approving the Variance Application was based upon one or more
erroneous findings of material fact” but that Surfrider “did not allege or
argue in the Petition that any aspect of the Director’s action . . . was
arbitrary or capricious or a manifest abuse of the Director’s discretion.”



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          Surfrider argued that Kyo-ya failed to meet the second

requirement because the property is not particularly unique and

is typical of the general conditions of ocean-front property in

that part of Waikiki.”     Thus, Surfrider maintained that the

reasonableness of the neighborhood zoning is in fact drawn into

question by the variance request.

          Surfrider argued the third requirement was also not

met because “the request, if approved, will alter the essential

character of the locality and is contrary to the intent and

purpose of the zoning code.”      Surfrider pointed out that the

Director’s findings “did not even address whether the project is

contrary to the intent and purpose of the WSD, whose objectives

center on maintaining Waikiki’s unique Hawaiian identity and

reducing the apparent height of buildings.”

          Kyo-ya, the Director, and 20,000 Friends of Labor

(Friends of Labor) each filed a position statement with the ZBA.

Kyo-ya argued that Surfrider “fail[ed] to allege a single

finding of material fact to have been in error let alone

‘clearly erroneous.’”     Kyo-ya maintained that the Director

specified the particular evidence that supported his granting of

the variance and properly concluded that all three requirements

for a zoning variance had been satisfied.




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          As to the first variance requirement, Kyo-ya contended

that it would be denied reasonable use of its property if it

were not allowed to encroach into the Coastal Height Setback.

Kyo-ya asserted that the 1965 Beach Agreement conferred on it

“rights and expectation granted by the state” that must be

considered in determining what reasonable use it could expect of

its property.   Kyo-ya additionally argued that it “has the right

under the current WSD and its PD-R to construct the

density/floor area it proposes” but that without the variance

the resulting building would be materially inconsistent with the

WSD objectives and guidelines.

          With regard to the second requirement, Kyo-ya asserted

that the Moana Parcel has the greatest width-to-depth ratio of

any parcel along Waikiki Beach and includes a historic

structure.   Thus, Kyo-ya argued the Director properly concluded

that the Moana Parcel has unique circumstances that do not call

into question the general zoning code.

          In addressing the third requirement, Kyo-ya

maintained, “It cannot be disputed that Waikiki is a highly

urbanized area [] with many large and tall buildings in close

proximity to the Moana Parcel.”       Kyo-ya therefore contended the

“essential character of the neighborhood is a dense urban area

full of tall hotel and condo buildings.”


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          The Director in his position statement argued the

record demonstrates that his partial approval of Kyo-ya’s

variance application was based on clearly established facts and

was a reasonable exercise of his discretion.          The Director

restated his findings and analysis as to the requirements of the

variance test from his Decision.         He also reiterated his

conclusion that the Project satisfied the variance test with the

condition that the Project’s height should be reduced to comply

with the 1:1 coastal height setback measured from the beach

width intended by the 1965 Beach Agreement because the agreement

provided a basis to determine the parameters of a reasonable

height limitation.

          The ZBA issued its Findings of Fact, Conclusions of

Law, and Decision and Order (ZBA Order) on February 14, 2013.

The ZBA found Surfrider “offered insufficient competent,

reliable and probative evidence to establish that the Director’s

Decision was clearly erroneous” or that any material fact relied

upon by the Director was clearly erroneous.          The ZBA also found

that Surfrider “offered no competent, reliable and probative

evidence” to demonstrate the following:

          103.   That the 1965 Beach Agreement . . . was without legal
                 effect, had terminated by its terms, or had been
                 terminated by the parties or operation of law, [or]
                 that the Director was precluded from considering, or
                 in error for considering, the 1965 Beach Agreement to
                 aid in his determination of what would be reasonable
                 limits to the extent of the variance.

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            Accordingly, the ZBA denied Surfrider’s appeal of the

Director’s Decision. 14     Surfrider timely filed a notice of appeal

to the Circuit Court of the First Circuit (circuit court) from

the ZBA Order.

                             B. Circuit Court

            In its opening brief, 15 Surfrider argued that the

Director breached his duty to enforce the LUO when he granted

Kyo-ya a partial variance “contingent upon compliance with a

hypothetical certified shoreline 180 feet out to sea from the

current certified shoreline.”        Surfrider contended that

“variances must be based on the current certified shoreline, not

some undetermined future shoreline.”

            Surfrider next addressed the requirements for issuance

of a variance.     As to the first requirement of the variance

test, Surfrider reasserted the following: (1) the Director did

not provide evidentiary support for its conclusion that Kyo-ya

would be deprived of the reasonable use of its land if it was

required to comply with the Coastal Height Setback; (2) the

Director erroneously found that the failure of the State to


      14
            The ZBA additionally noted Surfrider waived any argument that the
Director acted in an arbitrary or capricious manner or had manifestly abused
his discretion.
      15
            In its opening brief, Surfrider presented seventeen points of
error and identified nine erroneous findings with respect to the ZBA Order.



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implement the 1965 Beach Agreement amounts to a deprivation of

reasonable use; and (3) the other findings in the Director’s

analysis are not relevant to whether Kyo-ya would be denied

reasonable use.    Surfrider further argued that reasonable use of

the land, within the meaning of the City Charter does not

necessarily mean “the use most desired by the owner” and the

fact that Kyo-ya might make a greater profit by using its

property in a manner prohibited by the ordinance is irrelevant.

          Next, in regard to the second requirement of the

variance test, Surfrider argued that the Director addressed only

the unique circumstances aspect and did not address whether the

reasonableness of the neighborhood zoning would be drawn into

question “by the granting of a variance of unprecedented

magnitude.”

          With respect to the third requirement, Surfrider

argued that, while the Director addressed the essential

character of the neighborhood in his Decision, he did not

address whether the Project is contrary to the intent and

purpose of the zoning ordinance.         Surfrider conceded the Project

may be in conformity with the non-conforming buildings in the

neighborhood built before the WSD was adopted”; however,

Surfrider argued it is not in conformity with the historic

character of the neighborhood.


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            In his answering brief, the Director restated his

findings of fact and analysis contained within his Decision and

reasserted his conclusions.       The Director contended that,

contrary to Surfrider’s argument, he did not rely upon the 1965

Beach Agreement to determine whether Kyo-ya would be denied

reasonable use under RCCCH § 6-1517, but rather to consider the

reasonableness and impose a limit on the extent of the variance

permitted.

            Kyo-ya and Friends of Labor argued in their respective

answering briefs that none of the alleged erroneous facts

Surfrider identified were actually erroneous or material to the

Director’s Decision. 16     Kyo-ya asserted that contrary to

Surfrider’s contention, the ZBA’s findings of fact were “more

than adequate” to support its conclusion.

            Kyo-ya also contended that Surfrider “misconstrue[d]

the Director’s Decision,” which “did not grant a variance that

is ‘conditioned upon compliance with a hypothetical certified

shoreline.’”    Kyo-ya further argued that Surfrider’s

interpretation of case law as requiring the applicant to prove

that it “would have been denied ‘any reasonable use’ but for”
      16
            In its reply brief to Friends of Labor, Surfrider maintained that
the Director did not evaluate the “economic viability of the proposed
structure as compared to other structural options” but rather based his
decision on “a series of hypothetical scenarios that amount to erroneous
facts.”



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the variance is misleading, would eliminate the Director’s

discretion, and “would bring an end to land use in Hawaii as it

has been practiced since statehood.”

            After a hearing on Surfrider’s appeal, the circuit

court entered its Findings of Fact, Conclusions of Law, and

Decision and Order Affirming the Decision and Order of the ZBA

(circuit court’s Order).       The circuit court concluded that

Surfrider “failed to satisfy [its] burden to demonstrate that

the Director’s action in partially approving the [Zoning]

Variance Application was based on any erroneous findings of

material fact.”

            Surfrider filed a notice of appeal from the circuit

court’s Order affirming the ZBA Order. 17

                            C. Supreme Court 18

            In its opening brief, Surfrider reiterates that it was

Kyo-ya’s burden to prove that its project satisfies all three

requirements of the variance test and that the Director’s

      17
            On April 10, 2014, Surfrider filed an application to transfer its
appeal to this court, which was granted on May 15, 2014.
      18
            Additionally, Surfrider contends the Director failed to
adequately support his findings and that evidence of insufficient material
support for a required factual finding that a variance requirement has been
met is evidence of an erroneous finding, not evidence of abuse of discretion.
Kyo-ya argues that Surfrider’s challenge to the Director’s reliance on the
1965 Beach Agreement, as well as to the Director’s determination of whether
the Project meets the three requirements of the variance test, involves the
Director’s discretion, and was thus waived.



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Decision “plainly indicate[s] that neither [Kyo-ya] nor the

Director met [their] burden.” 19      Surfrider again points out that

the 1965 Beach Agreement “does not provide a legal basis for a

variance” from the LUO “which requires building setbacks to be

measured from the current certified shoreline.”           Surfrider asks

that this court reverse the circuit court’s Order and the

Director’s Decision and deny Kyo-ya’s variance application.

           Kyo-ya responds that the Director did not rely on the

1965 Beach Agreement to justify the variance, but rather looked

to the agreement after the Director determined “a variance was

warranted” to determine the extent of the variance to grant.                In

any event, Kyo-ya argues that “even if Surfrider could somehow

show that consideration of the 1965 Beach Agreement was

improper, this would not be sufficient to reverse the ZBA.”

With respect to finding deprivation of “reasonable use,” Kyo-ya

argues “this was not a situation where Kyo-ya was simply trying

to make a ‘greater profit’; instead, the Director found that the

variance was ‘necessary to maintain economic viability.’”              Kyo-




     19
            Surfrider additionally argues that the Director does not have
discretion to grant variances from “mandatory zoning code requirements.”
Because Surfrider did not previously raise this argument, it is not
considered. Mizoguchi v. State Farm Mut. Auto. Ins. Co., 66 Haw. 373, 383,
663 P.2d 1071, 1077 (1983).



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ya additionally reasserts arguments that it previously made in

prior proceedings. 20

                           IV.   Standards of Review

                        A. Findings and Conclusions

            Review of a decision made by the circuit court upon

its review of an agency’s decision is a secondary appeal.

Korean Buddhist Dae Won Sa Temple of Hawaii v. Sullivan, 87

Hawaii 217, 229, 953 P.2d 1315, 1327 (1998).           The standard of

review is one in which this court must determine whether the

circuit court was right or wrong in its decision, applying the

standards set forth in HRS § 91-14(g) to the agency’s decision.

Id.

            Under HRS § 91-14(g)(5) (1993), findings of fact are

reviewed to determine whether they are “[c]learly erroneous in

view of the reliable, probative, and substantial evidence on the

whole record.”      A finding of fact is clearly erroneous when the

record lacks substantial evidence--i.e., credible evidence of a

sufficient quality and probative value to enable a person of

reasonable caution to support a conclusion--to support the

finding.    Bremer v. Weeks, 104 Hawaii 43, 51, 85 P.3d 150, 158


      20
            The Director and Friends of Labor each filed their respective
answering briefs in which they asserted arguments that were submitted in the
proceedings below or presented by Kyo-ya in its answering brief.



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(2004); McPherson v. Zoning Bd. of Appeals, 67 Haw. 603, 606,

699 P.2d 26, 28 (1985).

           A “[conclusion of law] that presents mixed questions

of fact and law is reviewed under the clearly erroneous standard

because the conclusion is dependent upon the facts and

circumstances of the particular case.”         Price v. Zoning Bd. of

Appeals of City & Cnty. of Honolulu, 77 Hawaii 168, 172, 883

P.2d 629, 633 (1994).     Because the Director’s conclusions of law

in this case presented mixed questions of fact and law, they are

reviewed “under the clearly erroneous standard to determine if

the agency decision was clearly erroneous in view of reliable,

probative, and substantial evidence on the whole record.”             Poe

v. Hawaii Labor Relations Bd., 87 Hawaii 191, 195, 953 P.2d 569,

573 (1998).

                        B. Incompetent Evidence

           “The admission of irrelevant or incompetent matter

before an administrative agency does not constitute reversible

error if there is substantial evidence in the record to sustain

the agency’s determination.”      Shorba v. Bd. of Educ., 59 Haw.

388, 397, 583 P.2d 313, 319 (1979) (quoting Schyman v. Dep’t of

Registration & Educ., 133 N.E.2d 551, 525-26 (Ill. App. Ct.

1956)).   However, if a petitioner can show prejudice resulting

from the admission of irrelevant or incompetent evidence, the

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admission of such evidence may be grounds for reversal.            See

id.; Price, 77 Hawaii at 176, 883 P.2d at 637.          “[P]rejudice

cannot be alleged to the admission of improper evidence unless

it be shown that the [agency] relied on it.”          Shorba, 59 Haw. at

397, 583 P.2d at 319 (quoting Schyman, 133 N.E.2d at 561-562).

      C. Interpretation of a Statute, Ordinance, or Charter

          “The interpretation of a statute, ordinance or charter

is a question of law reviewable de novo.”         Korean Buddhist, 87

Hawaii at 229, 953 P.2d at 1327 (alterations omitted) (quoting

State v. Arceo, 84 Hawaii 1, 10, 928 P.2d 843, 852 (1996))

(internal quotation marks omitted).

                               V. Discussion

          The Director may grant a variance from a provision of

the LUO upon the ground of unnecessary hardship if the three

requirements set forth in RCCCH § 6-1517 have been satisfied:

          (1) the applicant would be deprived of the reasonable use
          of such land or building if the provisions of the zoning
          code were strictly applicable;

          (2) the request of the applicant is due to unique
          circumstances and not the general conditions in the
          neighborhood, so that the reasonableness of the
          neighborhood zoning is not drawn into question; and

          (3) the request, if approved, will not alter the essential
          character of the neighborhood nor be contrary to the intent
          and purpose of the zoning ordinance.

“The burden of establishing the factual foundation for the

foregoing legal preconditions rests with the applicant,” Korean


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Buddhist, 87 Hawaii at 234, 953 P.2d at 1332 (citing McPherson,

67 Haw. at 607, 699 P.2d at 28); however, it is the Director

who, prior to granting a variance, must “specify the particular

evidence which supports the granting of the variance.”             RCCCH §

6-1517. 21     In its appeal, Surfrider argues that the circuit court

erred in affirming the ZBA Order and the Director’s Decision

because the Director’s findings and conclusions did not

demonstrate that Kyo-ya satisfied the three requirements for

issuance of the variance.

           A. Deprived of the Reasonable Use of Land or Building

              To satisfy the first variance requirement, the record

must show that “the applicant would be deprived of the

reasonable use of such land or building if the provisions of the

zoning code were strictly applicable.”          RCCCH § 6-1517.

“Reasonable use,” within the meaning of the charter, “is not

necessarily the use most desired by the property owner”; rather,

to be deprived of the reasonable use of its property, the

property owner must establish an inability to make reasonable


      21
            The role of the Director in evaluating an application for a
variance from a provision of the LUO is greater than that of an impartial
arbiter of fact. “Unlike an ordinary court, the [Director] has the function
of serving as an advocate of the public interest.” Final Report of the
Charter Commission of the City and County of Honolulu 1971-1972 at 34
(citation omitted). The Director “should always place this consideration
foremost, rather than looking upon its duties as that of a simple arbitration
of disputes among private parties.” Id.



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use of its land or building without the variance.           Korean

Buddhist, 87 Hawaii at 234-5, 953 P.2d at 1332-33 (applicant

failed to show that it could not make reasonable use of the land

or its hall without the requested variance); McPherson, 67 Haw.

at 605-06, 699 P.2d at 28 (finding the applicant had not

established deprivation of reasonable use because the record was

“devoid of any evidence that the applicant could not make

reasonable use of the land or buildings in conformity with the

[zoning code] or her pre-existing nonconforming use”); see also

RCCCH § 6-1517 n.30 (“[W]ithin the meaning of the charter,”

“reasonable use” “is not the use most desired by the property

owner; [the] property owner must show inability to make any

reasonable use of his land without the variance.”).

          In this case, the Director concluded “[t]here is

evidence that [Kyo-ya] would be deprived of a reasonable use of

the land or building if the [Coastal Height Setback] was

strictly applied” for the following reasons: the Project is

necessary to maintain economic viability; the zoning code would

reduce the buildable area of the DHT lot; if not allowed the

variance, Kyo-ya would not be able to develop in accordance with

the PD-R permit; the 1965 Beach Agreement would have resulted in

a significantly different buildable area on the site; and the

current beach replenishment project will extend the beach width

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by a minimum of 40 feet and the certified shoreline will likely

reflect the beach expansion. 22

            Surfrider challenges both the Director’s ultimate

conclusion that Kyo-ya satisfied this requirement of the

variance test, as well as several of the underlying findings the

Director based his conclusion upon.         Surfrider specifically

contends that the Director erroneously found that Kyo-ya would

be denied reasonable use based on the 1965 Beach Agreement and

that the Project “is necessary to maintain economic viability.”

Each of the Director’s reasons for concluding that “there is

evidence” that Kyo-ya would be deprived of the reasonable use of

the land is addressed below.

                            i. Economic Viability 23

            The Director based his conclusion that Kyo-ya would be

deprived of a “reasonable use” if the Coastal Height Setback was

strictly applied in part on his finding that the Project “is

      22
            The Director additionally mentioned several WSD objectives in his
discussion of the first requirement of the variance test. For example, the
Director stated that maintaining economic viability is consistent with the
WSD objective to “provide opportunities for creative development that
contribute[s] to the rejuvenation and revitalization of the special
district.” The Director’s discussion of the WSD objectives will be discussed
in relation to the third requirement of the variance test--the intent and
purpose of the LUO--as the objectives do not pertain to whether the record
establishes that Kyo-ya would be denied the reasonable use of its land under
the first requirement of the variance test.
      23
            Because the parties analyze one aspect of reasonable use of the
land or building in terms of economic viability, we apply this measure of
analysis in this case.



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necessary to maintain economic viability.”          Surfrider argues

that the Director’s finding as to economic viability is

erroneous because it is not supported by the record.            Kyo-ya,

the Director, and Friends of Labor argue that the Director

sufficiently found that the Project was necessary for economic

viability and that it was Surfrider’s burden to prove otherwise.

           To reiterate, in order to demonstrate deprivation of

reasonable use within the meaning of the City Charter, the

property owner must establish an inability to make reasonable

use of its land or building without the requested variance.

Korean Buddhist, 87 Hawaii at 234-35, 953 P.2d at 1332-33;

McPherson, 67 Haw. at 605-06, 699 P.2d at 28; see also RCCCH §

6-1517 n.30; Final Report of the Charter Commission of the City

and County of Honolulu 1971-1972 at 33 (citation omitted)

(“[T]he property owner must be able to show, if he complies with

the provisions of the ordinance, that he cannot make any

reasonable use of his property.”). 24



     24
            In Korean Buddhist, the applicant sought a variance after the
fact for its newly constructed temple hall that exceeded the maximum height
allowed under the zoning code. 87 Hawaii at 234-35, 953 P.2d at 1332-33. In
affirming the Director’s denial of the variance, this court held, inter alia,
that “‘reasonable use’ of the land, within the meaning of the City Charter,
is not necessarily the use most desired by the owner.” Id. The court
reasoned that because the applicant failed “to establish that it could make
no reasonable use of the land or its Hall without” the height variance, the
first requirement of the variance test had not been satisfied. Id.


                                                             (continued . . .)
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            Further, “the fact that [an applicant] might make a

greater profit by using his property in a manner prohibited by

the ordinance is considered irrelevant, since almost any

individual applicant could make that same showing.”            Korean

Buddhist, 87 Hawaii at 234-35, 953 P.2d at 1332-33 (quoting

Final Report of the Charter Commission of the City and County of

Honolulu 1971-1972 at 33); see also 3 E.C. Yokley, Zoning Law &

Practice, § 20-7 (4th ed. 1979) (“Under this prong of the test,

the fact that another use would be more profitable to the

property owner is not a sufficient basis for a board to grant a

variance.”); Dep’t of Planning and Permitting, City and Cnty. of

Honolulu, Zoning Variance Guidebook (August 3, 2010),

http://www.honoluludpp.org/Portals/0/pdfs/zoning/zvar2.pdf

(“Variances cannot be given to . . . allow the applicant to save

money or make more money on a proposed project.”).

            As Surfrider argues, although the Director found that

the variance was necessary to “maintain economic viability,”

(continued . . .)

            Similarly, in McPherson, this court found the record to be
“devoid of any evidence that the applicant could not make reasonable use of
the land or buildings in conformity with the [zoning code] or her pre-
existing nonconforming use,” and thus we concluded that the ZBA’s contrary
finding was clearly erroneous. 67 Haw. at 605-06, 699 P.2d at 28. In other
words, because the applicant had not established that she could not make
other reasonable use of the land or buildings but for the variance, the court
held that the applicant failed to satisfy the first requirement of the
variance test. Id.



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there is no financial data 25 in the record to support such a

finding; rather, it appears the Director merely recited

statements Kyo-ya made in its variance application: “[t]he

Applicant indicates” that the “facilities and amenities of the

existing [DHT] are extremely outdated”; if the DHT “is not

allowed to be redeveloped that would contribute to the decline

of the already aging structure”; and “[t]he Applicant suggests”

that an older hotel “cannot compete with other tourist

destinations that offer superior accommodations.” 26           However,

these statements are merely assertions of Kyo-ya unsupported by

the record.    See McPherson, 67 Haw. at 606, 699 P.2d at 29

      25
            Although the Director did not make any economic findings as to
the existing DHT or the proposed Project, he did make findings as to the
economics of the Banyan Wing and a theoretical reconstructed Banyan Wing in
his analysis of the second requirement of the variance test. The Director
found that a reconstructed Banyan Wing may increase in value by 79 percent
compared with the current wing. However, as noted supra, the Banyan Wing is
a historic structure that cannot be redeveloped for a minimum of 25 years.
Additionally, the Director noted that Kyo-ya indicated “that they have no
intention of removing the historic Banyan Wing.” Thus, the economic findings
pertaining to the Banyan Wing are not relevant to whether Kyo-ya would be
denied the reasonable use of the land if not allowed a variance from the
Coastal Height Setback for the Project.
      26
            The entirety of the Director’s analysis pertaining to economic
viability of the DHT tower is as follows:

            The Applicant indicates that the facilities and amenities
            of the existing Diamond Head Tower are extremely outdated.
            If the DHT is not allowed to be redeveloped, that would
            contribute to the decline of the already aging structure.
            The Applicant suggests that older hotels that offer
            substandard visitor accommodations are not attractive to
            the modern visitor and often cannot compete with other
            tourist destinations that offer superior accommodations.
            Thus, the proposal is necessary to maintain economic
            viability.



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(“[T]he Charter limits the power of the [Director] to grant

variances to cases where a rather narrow and somewhat technical

set of facts must be established.”).

            Moreover, even if the record established that the DHT

was “extremely outdated” and would continue to decline if not

allowed to be redeveloped, those “facts” alone would not support

the finding that the Project is necessary to maintain economic

viability because the LUO expressly allows existing

nonconforming buildings within the WSD to be repaired and

renovated as long as the level of nonconformity is not

increased. 27   See ROH § 21-9.80-4(e)(3) (“Nonconforming uses

shall not be limited to ‘ordinary repairs’ or subject to value

limits on repairs or renovation work performed.”).

            Additionally, ROH § 21-9.80-4(e) allows a

nonconforming structure to be replaced by an entirely new

      27
            Other jurisdictions have held that if “the property has a
nonconforming use, there is an additional burden on the applicant to
establish that maintaining the nonconforming use will not allow the applicant
to realize a reasonable return.” 2 Am. Law. Zoning § 13:15 (5th ed.); see
also O’Connor v. Overall Laundry, 183 N.E. 134, 138 (Ind. App. 1932) (“It is
not a hardship or practical difficulty in the meaning of the statute when a
corporation’s business has outgrown its building to refuse to allow them to
add to their present building.”); Crossroads Recreation, Inc. v. Broz, 149
N.E.2d 65, 67-69 (N.Y. 1958) (upholding the denial of a variance to renovate
a nonconforming use, because the owner of a nonconforming gas station failed
to show he could not realize a reasonable return by converting the property
to a use permitted by the zoning ordinances); Goodman v. Zoning Bd. of Review
of Cranston, 254 A.2d 743 (R.I. 1969) (reversing the grant of a variance to
convert a nonconforming nursery into a car dealership because there was
insufficient proof that continued use of the nursery would deprive the owner
of all beneficial use of the land).



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structure, subject to certain conditions.         Accordingly, even

assuming there was evidence in the record that established that

the existing DHT is not economically viable due to its aging

structure and “substandard accommodations,” renovation and or

replacement of a nonconforming building subject to certain

conditions is expressly authorized by the LUO.          For this reason

also, there is insufficient evidence in the record to show that

the Project is necessary to maintain economic viability.            See

ROH § 21-9.80-4(e).

          The Zoning Variance Guidebook (Variance Guidebook)

provides sample cases to illustrate how each requirement of the

variance test may be properly applied.         Zoning Variance

Guidebook, supra.    The Variance Guidebook’s second sample case

provides a particularly relevant example of an applicant who

requested a variance to build an addition to a dwelling that

would encroach into the side yard setback.         The Guidebook notes

in this hypothetical case, “The applicant argue[d] that the

encroachment is necessary because it is the most practical,

cost-effective solution.”      In evaluating the variance request,

the Variance Guidebook notes that the applicant could build a

conforming addition in other locations on the lot.           Id. at 4.

The Guidebook concludes that the “variance cannot be supported,”




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in part, because “the applicant is not deprived of reasonable

use, since alternatives are available.”         Id. at 5.

          The Variance Guidebook’s example is consistent with

the Korean Buddhist decision where this court held that an

applicant who sought a variance to construct a taller building

than that authorized by the ordinance had not demonstrated

deprivation of reasonable use because the record showed that the

applicant could have constructed a shorter, compliant building.

87 Hawaii at 234-35, 953 P.2d at 1332-33.         Thus, the mere fact

that Kyo-ya cannot build the specific building design it desires

is not sufficient to support a finding that Kyo-ya would be

deprived of the reasonable use of its land or building.            See

Singer v. Phila. Zoning Bd. of Adjustment, 29 A.3d 144, 150 (Pa.

Commw. Ct. 2011) (“It is well-settled that in order to establish

unnecessary hardship for a dimensional variance, an applicant

must demonstrate something more than a mere desire to develop a

property as it wishes or that it will be financially burdened if

the variance is not granted.”); Korean Buddhist, 87 Hawaii at

234-35, 953 P.2d at 1332-33.

          As noted, the standard to evaluate deprivation of

reasonable use under the charter is that the property owner must

establish an inability to make reasonable use of its land or

building without the requested variance.         Korean Buddhist, 87

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Hawaii at 234-35, 953 P.2d at 1332-33 (applicant for variance

failed to show that it could not make reasonable use of the land

or its hall); McPherson, 67 Haw. at 605-06, 699 P.2d at 28

(accord).    Kyo-ya apparently disputes the applicability of this

standard, arguing to this court that Surfrider’s interpretation

of Korean Buddhist is misleading and would eliminate the

Director’s discretion.      However, the standard stated in the

Charter’s variance test is clear--an applicant has the burden of

establishing that the applicant would be deprived of the

reasonable use of land or buildings if the provisions of the

zoning code were strictly applicable.         Korean Buddhist, 87

Hawaii at 234, 953 P.2d at 1332 (“The burden of establishing the

factual foundation for [each prong of the variance test] rests

with the applicant.”).      Here, the reliable, probative, and

substantial evidence does not support the conclusion that the

variance is necessary for Kyo-ya to maintain economic viability

of its land or building.

                         ii. PD-R Permit Allowances

            The next reason 28 stated by the Director to show denial

of reasonable use was that Kyo-ya would not be able to develop



      28
            The second reason given by the Director to show denial of
reasonable use merely stated the effect of the zoning code provisions on the
Project: the buildable area of the DHT lot would be reduced to less than 35

                                                             (continued . . .)
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in accordance with its PD-R permit if the variance was not

allowed.    Under a PD-R permit, an applicant can apply to the

City Council and the Director for flexibility from specifically

enumerated provisions of the LUO within the WSD upon showing

that “timely, demonstrable contributions benefiting the

community and the stability, function, and overall ambiance and

appearance of Waikiki are produced.”         ROH § 21-9.80-4(d).       While

a PD-R permit allows an applicant to apply for flexibility from

requirements relating to density, height, precinct transitional

height setbacks, yards, open space, and landscaping, the permit

notably does not allow flexibility with respect to the Coastal

Height Setback provision.

            Therefore, an applicant who wishes to build a denser,

taller building with less open space may apply for a PD-R permit

upon showing that the project will benefit the community and

contribute to the stability and overall ambience of Waikiki.                On

the other hand, an applicant who wishes to build within the

Coastal Height Setback must apply for a variance and satisfy the

three requirements for issuance of a variance.           By excluding the

Coastal Height Setback from the list of provisions that may be


(continued . . .)

percent with a density less than the existing DHT and the Coastal Height
Setback would limit the building to approximately 170 feet.



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given flexibility under a PD-R permit and requiring an applicant

to prove unnecessary hardship as a result of the setback

requirement, the City Council manifestly indicated that the

Coastal Height Setback is of greater significance and requires

greater protection than numerous other provisions in the LUO.

              Here, the Director appears to have sidestepped the

City Council’s intent for an applicant to meet the distinct

three-part hardship test by defining and evaluating the

“reasonable use” of Kyo-ya’s property in terms of the PD-R

permit’s flexible provisions.        Specifically, the Director used

Kyo-ya’s inability to obtain the full benefit from the PD-R

permit as a reason to find that Kyo-ya would be denied

reasonable use of the site if the Coastal Height Setback was

applied. 29    In other words, by obtaining the PD-R permit prior to

seeking the variance, Kyo-ya was able to argue that it was

deprived of the reasonable use of its land by pointing to the

loss of the increased density and height that the PD-R permit

allowed.      Thus, the three requirements that must be satisfied to

obtain a variance from the Coastal Height Setback were




      29
            Kyo-ya’s PD-R permit allowed a 20 percent increase in density, an
increased building height of 308 feet, and a decrease in required open space
from 50 percent to 45 percent.



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subordinated to Kyo-ya achieving the benefits of the PD-R

permit.

            The effect of coordinating the permits in this manner

resulted in the ostensible inclusion of the Coastal Height

Setback as being among the provisions that can be modified under

the PD-R permit.     This is directly contrary to the intention of

the City Council: the Coastal Height Setback stands apart from

the PD-R permit, and an applicant seeking a variance from the

Coastal Height Setback requirements must independently satisfy

the unnecessary hardship test.        Accordingly, the PD-R permit

should not have been considered as a basis for determining

reasonable use in order to satisfy the first requirement of the

variance test, as it enables circumvention of the Coastal Height

Setback.

            Additionally, even if the PD-R permit were relevant to

the determination of “reasonable use,” the Director noted that

there was an alternative building design that would achieve the

increased density authorized by the PD-R permit without

encroaching into the Coastal Height Setback. 30          Thus, the



      30
            The Director found that if Kyo-ya “is not allowed to encroach
into the coastal height setback, the building design would have to be
drastically changed from a relatively tall, slender design to a shorter,
wider building with a larger footprint in order to achieve the density
permitted by the PD-R.” (Emphasis added). The Director disregarded the
alternative design after finding that it would obstruct views from Kalākaua

                                                             (continued . . .)
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Director expressly acknowledged that Kyo-ya could in fact

achieve the full density permitted by its PD-R permit with an

alternative design that would not encroach into the Coastal

Height Setback.

            Additionally, aside from the single “monolithic”

building design hypothesized in the Director’s Decision, the

Director did not discuss any other alternative building designs

that would not require a 74 percent encroachment into the

Coastal Height Setback apparently because there was no evidence

in the record regarding alternatives.         Thus, in effect, the

Director’s Decision presented an artificial “either/or” scenario

where Kyo-ya could only build either the proposed Project or a

“shorter, wider building.”       This scenario resulted from the

absence of evidence regarding other available options, including

the renovation of the existing DHT, the construction of a

compliant building design, or a building design with a greater

degree of compliance with the Coastal Height Setback.

            An applicant for a variance is not deprived of the

reasonable use of its land or buildings simply because the

applicant may not be able to utilize the maximum potential


(continued . . .)

Avenue and thus be contrary to the WSD objectives. We address this finding
with regard to the third requirement of the variance test.



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density of the site.     See Korean Buddhist, 87 Hawaii at 234-35,

953 P.2d at 1332-33; Singer, 29 A.3d at 150.          Accordingly, the

Director’s discussion of the PD-R permit was not relevant to the

analysis of reasonable use under the first requirement of the

unnecessary hardship test.

                        iii. 1965 Beach Agreement

            Next, the Director found that Kyo-ya would be denied

reasonable use of its land because if the State had constructed

the beach as required by the 1965 Beach Agreement, “the size and

configuration of the buildable area of the site would be

significantly different.”

            In 1965, the State and certain shoreline property

owners, including Kyo-ya’s parent company, entered into a

private agreement under which the State agreed to use its best

efforts to extend the beach approximately 180 feet seaward of

the current certified shoreline.         The 1965 Beach Agreement was

not incorporated into the LUO or referenced in the provisions of

the subsequently enacted WSD.       While there have been beach

replenishment projects in the years since the agreement, the

beach width envisioned by the 1965 Beach Agreement was never

realized.    Therefore, the agreement had no effect on the

certified shoreline by which the Coastal Height Setback is




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measured. 31    Kyo-ya, the Director, and Friends of Labor

(collectively, Appellees) cite no authority that would authorize

the 1965 Agreement to have legal effect on a variance

application.

            The Appellees contend that the Director did not rely

on the 1965 Beach Agreement to determine whether Kyo-ya would be

denied reasonable use; however, the plain language of the

Director’s Decision indicates otherwise. 32         In its variance

application, Kyo-ya acknowledged that the shoreline was never

extended pursuant to the terms of the 1965 Beach Agreement yet

contended that if the beach had been extended, “almost no

portion of the [Project] would encroach into the Coastal Height

Setback.”      The Director adopted Kyo-ya’s reasoning in his

decision and concluded the variance, “viewed in [the context of

the 1965 Beach Agreement], is not excessive.”           (Emphasis added).

Additionally, after the Director had extensively discussed the

      31
            See note 3 for the definition of “certified shoreline.”
       32
             Kyo-ya argued to the Director, the ZBA, and the circuit court
that the 1965 Beach Agreement conferred upon it certain rights and
expectations that must be considered in determining what reasonable use Kyo-
ya could expect of its property under the variance test. Kyo-ya also
contended that the agreement “altered real property law as it applied to the
Moana Parcel and the ‘bundle of legal sticks’ that [Kyo-ya] held as its
property.” During the variance application proceeding, Kyo-ya maintained
that “the Director was required to consider the shoreline that the State of
Hawaii is absolutely legally obligated to maintain for the benefit of Kyo-ya
and its adjoining landowners (and the general public)” and that if the
Director had done so, “there would have been a more permissive variance
issued.”



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Beach Agreement, the Director found that “[f]or these and other

reasons, it can be recognized that [Kyo-ya] would be denied

reasonable use of the site if not allowed to encroach into the

[Coastal Height Setback].”      (Emphasis added).

          By placing significant reliance on the 1965 Beach

Agreement as a basis for its conclusion that Kyo-ya would be

denied reasonable use if encroachment was not allowed, the

Director effectively evaluated the reasonable use of Kyo-ya’s

property in terms of the width of the beach intended by the 1965

Beach Agreement.    Other statements in the Director’s Decision

further support the conclusion that the Director relied on the

1965 Beach Agreement to determine whether Kyo-ya would be

deprived of reasonable use of its land.

          For example, after referencing the 1965 Beach

Agreement, the Director stated, “A closer look at the 1965

Agreement suggests that if the State had constructed the beach

as required, the size and configuration of the buildable area of

the site would be significantly different,” “the beach fronting

the [Project site] might be as much as 180 feet wider than it is

today,” and thus “the building setback and height encroachments

would be reduced significantly.”         While there is no doubt that

the buildable area of the lot would be different if the beach




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had been extended, the fact is that the beach was not extended

180 feet, and the shoreline was never certified at that point.

          Despite the Director’s findings relating to the

intended beach width under the 1965 Beach Agreement, the

variance must be based on the certified shoreline, and the

hardship must be established in consideration of the facts and

circumstances in effect at the time of the application.            See ROH

§ 21-9.80-4(g)(2).    Thus, consideration of the 1965 Beach

Agreement and its hypothetical effects on Kyo-ya’s land if the

shoreline had been extended 180 feet seaward were entirely

irrelevant to determining whether Kyo-ya would be deprived of

the reasonable use of its land.

          The Director’s Decision demonstrates that he not only

considered the 1965 Beach Agreement to determine if Kyo-ya would

be deprived of the reasonable use its land, but that he also

considered the agreement when determining the extent of the

variance to grant.    In fact, the Director’s partial approval was

conditioned on, inter alia, “compliance with the 1-to-1 (45-

degree angle) coastal height setback as measured from the face

of the existing concrete seawall/walkway structure [] 180 feet

seaward (the approximate beach width intended in the [1965 Beach

Agreement).”   (Emphases added).      By relying on “the beach width

intended in the 1965 Agreement,” the Director shaped the


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variance to match the 1965 Beach Agreement.           However, the

governing conditions for the variance approval must be based on

valid criteria, not a hypothetical shoreline envisioned by an

unexecuted private contract with no legal effect on the

certified shoreline or the Coastal Height Setback. 33           The

Director’s conditioning of the variance on the shoreline

hypothesised by the 1965 Beach Agreement was therefore invalid.

Further, by conditioning the variance on a theoretical shoreline

derived from the 1965 Beach Agreement, the Director essentially

disregarded the certified shoreline.

            The Director’s fifth reason for finding that Kyo-ya

would be deprived of reasonable use of its land or buildings was

because the Beach Maintenance Project would extend the beach by

40 feet and thus reduce the extent of the encroachment.               As

discussed, the Coastal Height Setback must be measured from the

current certified shoreline and the hardship test met by the

circumstances in place at the time of the variance application.



      33
             The ZBA found that “[a]t no time prior to the closing of the
evidentiary portion of this proceeding did Petitioner’s [sic] offer any
competent, reliable or probative evidence that the 1965 Beach Agreement,
which had been entered into by the State of Hawaii and Applicant’s parent
company, was without legal effect, had terminated by its terms, or had been
terminated by the parties or operation of law.” Despite Kyo-ya’s arguments
and the ZBA’s findings, there is no legal basis for concluding that the 1965
Beach Agreement could be validly considered by the Director in evaluating the
Zoning Variance Application.



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Therefore, the Beach Maintenance Project was also improperly

considered by the Director.

           Pursuant to ROH § 6-1517, the Director was required to

“specify the particular evidence which supports the granting of

a variance” with respect to each requirement of the variance

test.   As to the first requirement, the Director was required to

conclude that Kyo-ya would not be able to make other reasonable

use of its land without a variance that allowed it to encroach

74 percent into the Coastal Height Setback.          Korean Buddhist, 87

Hawaiʻi 217, 953 P.2d 1315.      The Director not only failed to

apply this standard as stated in the Charter, but apparently

applied a different standard, concluding that Kyo-ya would be

deprived of “a” reasonable use.

           Further, the Director’s finding that the variance was

necessary for economic viability of the land or building was

without evidentiary support in the record.         The Director’s

remaining findings as to the PD-R permit, the 1965 Beach

Agreement, and the Beach Maintenance Project are not relevant to

determining whether Kyo-ya would be deprived of the reasonable

use of the property.     Thus, because the reliable, probative, and

substantial evidence on the whole record does not support the

Director’s conclusion that the variance was necessary to

maintain economic viability, his conclusion as to the first

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requirement of the variance test was clearly erroneous.            See

Bremer, 104 Hawaii at 51, 85 P.3d at 158.

           Additionally, “[t]he admission of irrelevant or

incompetent matter before an administrative agency does not

constitute reversible error if there is substantial evidence in

the record to sustain the agency’s determination.”           Shorba, 59

Haw. at 397, 583 P.2d at 319 (quoting Schyman, 133 N.E.2d at

525-26).   However, if a petitioner can show prejudice resulting

from the admission of irrelevant or incompetent evidence, the

admission of such evidence may be grounds for reversal.            See

id.; Price, 77 Hawaii at 176, 883 P.2d at 637.          “[P]rejudice

cannot be alleged to the admission of improper evidence unless

it be shown that the [agency] relied on it.”          Shorba, 59 Haw. at

397, 583 P.2d at 319 (quoting Schyman, 133 N.E.2d at 561-562).

           Here, Surfrider has clearly demonstrated that the

Director placed great reliance on the 1965 Beach Agreement and

the Beach Maintenance Project to find that Kyo-ya would be

deprived of the reasonable use of its land or building if it was

required to comply with the Coastal Height Setback as measured

from the certified shoreline.       While any reliance on the 1965

Beach Agreement and Beach Maintenance Project was error, the

reliance in this case was crucial to the Director’s finding of

deprivation of reasonable use, even to the extent that it

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provided the basis for the configuration of the variance that

was actually granted; thus, because the incompetent evidence was

significant to the Director’s conclusion, the admission of such

evidence was clearly prejudicial and “grounds for reversal.”

Id.

                          B. Unique Circumstances

            The second requirement of the City Charter’s variance

test requires a showing that “the request of the applicant is

due to unique circumstances and not the general conditions in

the neighborhood, so that the reasonableness of the neighborhood

zoning is not drawn into question.”          RCCCH § 6-1517.     The City

Charter provides the meaning for unique circumstances: unique

circumstances “has to do with whether specific attributes of the

parcel are present that justify the request for a variance.”

RCCCH § 6-1517 n.30 (emphasis added) (citing Korean Buddhist, 87

Hawaii 217, 953 P.2d 1315).        Thus, an owner’s unusual plans for

a parcel do not, in themselves, constitute “unique

circumstances.”      McPherson, 67 Haw. at 606, 699 P.2d at 28.

            Surfrider argues that the Project site is not

particularly unique to justify the variance.            In addition,

Surfrider argues the ZBA and Director’s Decision were clearly

erroneous because it shows the Director addressed only the

“unique circumstances” part of the variance test and “failed to

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address whether ‘the reasonableness of the neighborhood is []

drawn into question’ by the granting of a variance of

unprecedented magnitude.”       The Appellees respond that the

Director properly found Kyo-ya’s lot contained unique

circumstances that presented development challenges.            The

Appellees also contend that the phrase “so that the

reasonableness of the zoning is not drawn into question” merely

explains the purpose behind “unique circumstances.”

            In his Decision, the Director concluded that Kyo-ya’s

variance application was based upon unique circumstances and not

general neighborhood conditions and that the variance would not

draw into question the reasonableness of the neighborhood

zoning.    In support of his conclusion, the Director made the

following relevant findings: (1) the Project site is one of the

narrowest along the shoreline in the area with an average lot

depth of about 182 feet; (2) compared with the DHT tower and

Surfrider Tower, the Banyan Wing generates the least amount of

revenue per room; 34 (3) the Project site is subject to the 100-

foot coastal setback and an average 20-foot front yard setback

along Kalākaua Avenue, thereby reducing the buildable area by an

average of 120 feet; (4) the shoreline along the site is subject

      34
            We do not address this finding as it is not relevant to whether
the site has specific attributes that justify the request for a variance.



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to drastic change by artificial means compared with natural

beaches that cannot be altered; and (5) the Beach Maintenance

Project may extend the beach by roughly 40 feet and thus reduce

the Project’s encroachments by 40 feet.

                    i. Narrow Lot & Banyan Wing

          Surfrider does not directly challenge the Director’s

finding that the Project site is one of the narrowest along the

shoreline, or that because Kyo-ya was prohibited from

redeveloping the historic Banyan Wing, Kyo-ya was limited to

developing the narrower DHT portion of the property.

Nevertheless, as made clear in the Variance Guidebook’s second

and third example cases, the narrowness of a lot may not be

sufficient, by itself, to find unique circumstances when

alternative building designs are available.

          In the Variance Guidebook’s second example, discussed

above, because the applicant could build a conforming addition

in other locations on the lot, the guidebook concluded that the

“variance cannot be supported,” in part, because “alternatives

are available.”    Zoning Variance Guidebook, supra.

          In the third example of the Variance Guidebook, the

applicant “has a small, narrow lot, only 35 feet in width,”

while “[o]ther lots in the area are generally 50 feet wide.”

Id. at 5-6.   “The applicant cannot raise the existing dwelling


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and add a new ground floor without a variance because the second

story would encroach slightly into the required height setback

along one side.”    Id. (emphasis added).       The Variance Guidebook

provides that the “variance can be supported,” because, in part,

the lot “is the only such narrow lot in the neighborhood, which

is a unique circumstance,” and because “[t]he structural

conditions and dimensions of the existing dwelling do not afford

a reasonable alternative.”      Id. (emphasis added).

          Here, Kyo-ya appears to have other alternatives that

would not require a 74 percent encroachment into the Coastal

Height Setback; thus, the relatively narrow lot does not alone

justify the variance.     Additionally, the WSD allows for the

refurbishment and rebuilding of nonconforming structures so long

as the extent of its nonconformities does not increase.            It

would appear that the Director recognized that the narrowness of

the site was not sufficient to support granting the variance,

and thus the Director evaluated and relied upon additional

factors, discussed below, to support the finding of unique

circumstances.

        ii. Coastal Height Setback, Front Yard Setback

          A significant reason underlying the Director’s

conclusion that Kyo-ya’s variance application was based upon

unique circumstances was that the Project site was subject to


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“the 100-foot coastal setback . . . and an average 20-foot front

yard setback along Kalākaua Avenue,” which together “reduce the

buildable area depth by an average of 120 feet.”           However, as

Surfrider argues, both the Coastal Height Setback and the

average 20-foot front yard setback apply to all ocean front

properties in the WSD, and thus, the setbacks do not constitute

unique circumstances.     See ROH § 21-9.80-4; LUO Table 21-9.6(B)

(front yard setbacks must be “an average of 20 feet for zoning

lots fronting Kuhio Avenue, Kalākaua Avenue, Ala Moana and Ala

Wai Boulevard within the resort mixed use precinct”); see also

Collins v. Carusone, 126 A.D.2d 847, 848 (N.Y. App. Div. 1987)

(since all properties near the subject property share the same

hardship, the hardship is not “unique”); accord Greenawalt v.

Zoning Bd. of Adjustment of Davenport, 345 N.W.2d 537, 544 (Iowa

1984).

           By combining the footage of both setbacks and

determining the property’s buildable area would be reduced by

120 feet, the Director used generally applicable requirements to

find unique circumstances.      However, since all shoreline

properties in Waikiki have their buildable area reduced by

setback requirements, this is not a unique attribute of Kyo-ya’s

parcel.   See ROH § 21-9.80-4; LUO Table 21-9.6(B).          Moreover, as

defined by the City Charter, “unique circumstances” “ha[ve] to


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do with whether specific attributes of the parcel are present

that justify the request for a variance.”          RCCCH § 6-1517 n.30

(emphasis added) (citing Korean Buddhist, 87 Hawaii 217, 953

P.2d 1315).     The provisions of a zoning ordinance are not

“specific attributes of [a] parcel,” but rather they are legal

requirements that prescribe how a parcel may be used and

developed. 35

            The Director further based his finding that the

Project site was unique on the fact that the shoreline fronting

the property “is subject to drastic change by artificial means”

and the lot is subject to the 1965 Beach Agreement and the Beach

Maintenance Project.      However, like the setback provisions of

the LUO, these characteristics of the shoreline are not unique

to the Project site but apply to all properties fronting Waikiki

Beach, and they are not “attributes” of the parcel.

            Therefore, because the setbacks, shoreline, 1965 Beach

Agreement, and Beach Maintenance Project are not attributes of

the parcel, but rather are external conditions present in the


      35
            If, for example, a zoning ordinance imposed a maximum area height
of 350 feet above which no building could be constructed, that factor itself
would not constitute a unique circumstance. On the other hand, if a
particular parcel was graded 20 feet higher than other parcels in the
neighborhood, and an applicant sought a variance to construct a building on
that parcel with a maximum ground to ceiling height of 360 feet, the fact
that the parcel is 20 feet higher than neighboring parcels may be considered
a unique factor because it is a unique attribute of the parcel itself.



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neighborhood, the Director’s findings that these conditions are

“unique” attributes of Kyo-ya’s property are clearly erroneous.

           The only remaining evidence supporting the Director’s

conclusion that the second requirement was satisfied due to

unique circumstances were his findings that the individual

Project site was narrow and that the lot contained the Banyan

Wing.   However, because the record does not show that the unique

attributes of the lot--the narrowness and Banyan Wing--prevent

Kyo-ya from renovating the DHT or replacing it with a new

building that meets zoning requirements, the narrowness of the

lot and the Banyan Wing do not sufficiently demonstrate the

parcel’s “unique circumstances.”

           Consequently, the reliable, probative, and substantial

evidence in the record does not support the Director’s

conclusion that the variance was necessary due to the unique

attributes of the property, and thus his conclusion as to the

second requirement of the variance test was clearly erroneous.

See Bremer, 104 Hawaii at 51, 85 P.3d at 158.          Additionally,

because the Director significantly relied on external conditions

that are not relevant to the uniqueness of the parcel and are

commonly found in the neighborhood, the Director’s Decision was

based on incompetent evidence that significantly prejudiced

Surfrider.   Shorba, 59 Haw. at 397, 583 P.2d at 319.          Finally,

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the Director’s reliance on conditions commonly found in the

neighborhood necessarily draws the neighborhood zoning into

question as every property along the shoreline would be found to

have “unique” attributes and be potentially eligible for a

variance from the provisions of the LUO.         Accordingly, the

Director’s conclusion that Kyo-ya satisfied the second

requirement of the variance test was clearly erroneous.

C. Essential Character of the Neighborhood and Intent and Purpose
                         of Zoning Ordinance

          To satisfy the third requirement for granting a

variance, the record must show that “the request, if approved,

will not alter the essential character of the neighborhood nor

be contrary to the intent and purpose of the zoning ordinance.”

RCCCH § 6-1517 (emphasis added).         Thus, in this case, the

pivotal determination is whether the 74.3 percent encroachment

into the Coastal Height Setback would alter the essential

character of the neighborhood or be contrary to the intent and

purpose of the zoning ordinance.         See Korean Buddhist, 87 Hawaii

at 234-35, 953 P.2d at 1332-33 (court considered whether the

increased height of the temple hall, not the temple hall itself,

would alter the essential character of the neighborhood).

Notably, in contrast to the first two requirements of the

variance test requiring affirmative findings of deprivation of

the reasonable use of the property and unique circumstances of
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the property, the third requirement necessitates factual

findings that the variance will not alter the neighborhood’s

essential character and will not be contrary to the intent and

purpose of the variance test. 36

            Surfrider argues that the Director erroneously found

that the Project, rather than the variance, would not alter the

essential character of the neighborhood and would not be

contrary to the intent and purpose of the zoning ordinance.

Surfrider additionally argues that the Director did not address

whether or not the 74.3 percent encroachment itself “might be

contrary to the intent and purpose of the WSD.”           In response,

the Appellees argue that the Director properly considered the

intent of the zoning code, as well as the essential character of

the neighborhood, and correctly concluded that the variance

would be consistent with both.

            i. Essential Character of the Neighborhood

            The Director found, as characterized in the LUO, that

Waikiki is a “densely populated and highly developed, urbanized

area” with a wide mix of land uses, many of which are


      36
            Importantly, rather than making findings that the variance is
consistent with certain objectives, the variance test requires the Director
to make findings as to whether the variance request is not contrary to the
intent and purpose of the zoning ordinance. This analysis necessitates
first, determining the intent and purpose of the zoning ordinance, and then
evaluating the requested variance in light of such intent and purpose.



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“nonconforming and exceed the height limit and maximum density

[], encroach into required yards and setbacks, and lack the

minimum open space and landscaping.”          Based on these findings,

the Director concluded that the Project would not alter the

essential character of the neighborhood.           However, the

Director’s conclusion that the neighborhood’s essential

character would not be altered is flawed.

            First, determining that the Waikiki neighborhood 37 is a

“densely populated and highly developed urbanized area” with

many nonconforming properties does not preclude the City Council

from enacting an ordinance targeted at altering the

neighborhood’s character when a sufficient basis exists to do

so.   See Nine A, LLC v. Town of Chesterfield, 950 A.2d 197, 203

(N.H. 2008).

            In Town of Chesterfield, the town determined that a

lake, a unique natural resource, needed protection and enacted a

special district to prevent, among other things, “the

overcrowding of, and undue concentration of population on and


      37
            We note that the Director’s Decision did not discuss the fact
that the WSD contains multiple neighborhoods. See ROH § 21-9.80-1(c)
(“Support the retention of a residential sector in order to provide stability
to the neighborhoods of Waikiki.” (emphasis added)). Thus, while the
Director’s characterization of the neighborhood may reflect general
attributes of the WSD, those attributes do not necessarily represent the
“essential character” of the neighborhood that will be affected by the 74.3
percent encroachment into the Coastal Height Setback.



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around, the lake.”      Id.   With the creation of the special

district, the town prohibited cluster residences around the lake

and set forth new minimum lot requirements and minimum frontage

requirements.     Id.   A developer sought a variance 38 to build

cluster residences within the district on the basis that cluster

housing was reflective of the current character of the

neighborhood.     Id.   In affirming the zoning board’s denial of

the applicant’s variance request, the Supreme Court of New

Hampshire held that although the town previously permitted

cluster residences in the lake district, the town rightfully

determined that “the need to preserve a unique natural resource

outweighed having the character of the neighborhood control the

zoning ordinance.”      Id.



      38
            In Town of Chesterfield, to obtain a variance the applicant was
required to prove the following:

            (1) the variance will not be contrary to the public
            interest;

            (2) special conditions exist such that literal enforcement
            of the ordinance results in unnecessary hardship;

            (3) the variance is consistent with the spirit of the
            ordinance;

            (4) substantial justice is done; and

            (5) granting the variance will not diminish the value of
            surrounding properties.

Town of Chesterfield, 950 A.2d at 201.



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            Here, the City Council enacted the provisions of the

WSD, including the Coastal Height Setback, in response “to the

rapid development of the 1960s and 1970s, and the changes

produced by that development” to protect the unique identity of

Waikiki.    ROH § 21-9.80.     Accordingly, as in Town of

Chesterfield, it is evident that the City Council was greatly

concerned with the changing character of Waikiki and thus took

affirmative steps to preserve Waikiki’s unique Hawaiian

identity.    Therefore, the fact that there are nonconforming

properties in the WSD that were built prior to the enactment of

the special district in 1976 does not provide a basis for a

finding that the variance is consistent with the essential

character of the neighborhood.

            Further, the presence of nonconforming uses and

structures should not serve as the basis for further non-

conformance.    Martin v. City of Alexandria, 743 S.E.2d 139, 146

(Va. 2013); Packer v. Hornsby, 267 S.E.2d 140-43 (Va. 1980).                In

a factual context with some similarities to this case, the

Supreme Court of Virginia reviewed the zoning board’s approval

of an applicant-homeowners’ request for a variance 39 to encroach



      39
            The requirements to obtain a variance in Packer are similar to
the City Charter’s variance test in this case. In Packer, the zoning board
was permitted to authorize a variance only if “a literal enforcement of the

                                                             (continued . . .)
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73 percent into an oceanfront setback in order to expand their

house.   Packer, 267 S.E.2d at 141.        The applicants’ stated

reasons for the request were “improvement to existing structure

is needed” and “development of adjacent property makes adherence

to set back a hardship.”       Id. at 141.    The court noted that

“[t]he applicants already have a dwelling, . . . and they can

enlarge the house without violating the setback requirement by

adding to the west side of the structure,” but the applicants

preferred to expand to the east “in order to have a better floor

plan with a better view of the ocean.”          Id. at 143.    The zoning

board granted the variance on the basis that the applicant

“should be entitled to build as close to the ocean as ‘the

average of the houses along the block.’”          Id. at 143.        In




(continued . . .)

provisions (of a zoning ordinance) will result in unnecessary hardship” and
it finds:

            (1) That the strict application of the ordinance would
            produce undue hardship.

            (2) That such hardship is not shared generally by other
            properties in the same zoning district and the same
            vicinity.

            (3) That the authorization of such variance will not be of
            substantial detriment to adjacent property and that the
            character of the district will not be changed by the
            granting of the variance.

Packer, 267 S.E.2d at 142.



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reversing the zoning board’s decision, the court cautioned as

follows:

            If, as the Board concluded, one owner of the property
            complying with a restriction should be allowed to conform
            his structure to neighboring nonconforming structures, then
            every such owner would be entitled to do so. A board of
            zoning appeals could, by granting variances piecemeal,
            ultimately nullify a zoning restriction throughout the
            zoning district. But the statute provides that all
            variances shall be in harmony with the intended spirit and
            purpose of the ordinance . . . .

Id. (emphasis added). 40

            The principle that existing nonconformity should not

serve as the basis for additional nonconformity is itself

reflected in the LUO, which provides while nonconforming uses

and structures may be repaired and rebuilt, “constraints are

placed on [the] nonconformities to facilitate eventual

conformity with the provisions of the [LUO].”           ROH § 21-4.110.

Thus, although the LUO allows existing nonconforming uses to

continue, the expressed intent of the LUO is to reduce the

extent of nonconformity over time.

            The Director’s finding of a “large number of

nonconforming uses and structures” in the area is not a valid

basis for granting another nonconforming use.           If nonconforming


      40
            The Supreme Court of Virginia also noted that “[p]roximity to the
ocean is doubtless a ‘privilege or convenience’ coveted by every homeowner
along the beach,” “[b]ut a zoning restriction upon that privilege does not
constitute an ‘unnecessary hardship’ within the meaning of the Code.” Id. at
142.



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use is so pervasive that it is shared by the majority of

properties in a zoning district, the proper remedy is to seek an

amendment to the zoning ordinance, not a variance.           See Levy v.

Bd. of Standards & Appeals of N.Y.C., 196 N.E. 284 (N.Y. 1935);

Appeal of Michener, 115 A.2d 367 (Pa. 1955).          Thus, the presence

of existing nonconformities in the neighborhood to justify new

noncomformities constitutes incompetent evidence, and the

Director’s reliance on such evidence undermines the protection

of Waikiki’s unique identity and dilutes the intended effect of

the Coastal Height Setback.

          Consequently, there is not reliable, probative, and

substantial evidence on the whole record supporting the

Director’s conclusion that Kyo-ya’s request to encroach 74

percent into the Coastal Height Setback would not alter the

essential character of the neighborhood, and thus the third

requirement of the variance test was not satisfied.

    ii. Not be Contrary to the Intent and Purpose of the Zoning
                                Ordinance

          Although we hold that the Director’s conclusion that

the third requirement of the variance test was met is clearly

erroneous, we also review whether the Director properly

concluded that the variance would not be contrary to the intent

and purpose of the zoning ordinance.        Thus, we consider the

intent and purpose of the WSD and Coastal Height Setback and the

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Director’s conclusion that a 74 percent encroachment would not

be contrary to such intent and purpose.

                   a. Intent and Purpose of the WSD

          The WSD was enacted by the City Council in 1976 in

response “to the rapid development of the 1960s and 1970s, and

the changes produced by that development,” in order “to guide

carefully Waikiki’s future and protect its unique Hawaiian

identity.”   ROH § 21-9.80.

          The Council stated, “Waikiki needs to maintain its

place as one of the world’s premier resorts in an international

market; yet, the sense of place that makes Waikiki unique needs

to be retained and enhanced.”       Id. (emphasis added).      The WSD

provides, “The design of buildings and structures in the [WSD]

should always reflect a Hawaiian sense of place, as outlined in

the [district’s] design controls.”        ROH § 21-9.80.

          “Just as there is no universally accepted definition

of ‘aloha,’ there is no universally accepted definition of a

Hawaiian sense of place.”      WSD Design Guidebook at 3.        Although

there is no universal definition of “Hawaiian sense of place,”

the guidebook contains the following discussion of what

“Hawaiian sense of place” means within the context of

development in the WSD:

          The concern that Waikiki has lost some of its appeal as a
          tropical beach resort raises many questions about its
          future. A common opinion is that Waikiki needs to improve
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          its physical attractiveness and enjoyment for residents,
          employees and visitors, by restoring the images and
          experiences which make it unique. A Hawaiian sense of
          place is not just a particular architectural style which
          echoes our historical past, but is also a reflection of
          attitudes, experiences, place, spaces and symbols which we
          have embraced as reminders of and contributors to a
          uniquely Hawaiian experience.

WSD Design Guidebook at 5 (emphases added).          In particular,

“[d]esign in Waikiki should compose spaces and elements in a way

that encourages experiencing the natural environment.”            Id.

(emphasis added).

          To contribute to the goal of establishing and

preserving a Hawaiian sense of place, “[a]ll projects in Waikiki

will be expected to make an appropriate contribution,” and

“[n]ew developments will be required to demonstrate a high

degree of compliance with applicable objectives, guidelines and

standards.”   Id. (emphasis added).       Additionally, “[t]he

renovation of existing buildings will be expected to comply to

the extent possible.”     Id.

          Consequently, the City Council’s intent and purpose in

establishing the WSD was first and foremost to protect, retain,

and enhance a Hawaiian sense of place by restoring the

experiences, places, and spaces that make Waikiki unique.

       b. Intent and Purpose of the Coastal Height Setback

          Although each provision of the WSD is designed to

reflect a Hawaiian sense of place, few can endeavor to achieve

this far-reaching goal as effectively as the Coastal Height
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Setback, which was designed to maximize public safety, the sense

of open space, lateral access along the beach, and public

enjoyment of Hawaii’s coastal resources.         ROH § 21-9.80-4(g)(2);

WSD Design Guidebook at 4, 25.       Additionally, the Coastal Height

Setback, together with the other provisions of the WSD, is

intended to reduce the perception of crowding, enhance the

aesthetics of Waikiki, and generally impart a greater sense of

Hawaiiana into the built environment.        Id.

            For example, although requirements pertaining to

landscaping and building materials undoubtedly affect the

Hawaiian sense of place in Waikiki, they do not directly impact

lateral access along the beach, the public’s enjoyment of

coastal resources, or the sense of open space and perception of

crowding.    Thus, among the restrictions put in place by the WSD,

the Coastal Height Setback uniquely affects the preservation of

Waikiki’s Hawaiian sense of place.

 c. Director’s Findings on Intent and Purpose of the Ordinance

            The City Charter provides that the third requirement

is satisfied only if “the request, if approved, will not alter

the essential character of the neighborhood nor be contrary to

the intent and purpose of the zoning ordinance.”           RCCCH § 6-1517

(emphases added).    Accordingly, because Kyo-ya’s variance

application sought approval to encroach into the Coastal Height


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Setback, the Director’s evaluation should have focused on

whether granting the variance application--i.e., a requested 74

percent encroachment into the Coastal Height Setback--would be

contrary to the intent and purpose of the Coastal Height Setback

and the WSD.    See N. Bergen Action Grp. v. N. Bergen Twp.

Planning Bd., 585 A.2d 939, 944 (N.J. 1991) (“Because zoning

restrictions are enacted to further municipal planning and

zoning objectives, it is fundamental that resolutions granting

variances undertake to reconcile the deviation authorized . . .

with the municipality’s objectives in establishing the

restriction.”).

            However, rather than considering whether the variance

request--i.e., a 74 percent encroachment into the Coastal Height

Setback--was contrary to the intent and purpose of the WSD and

the Coastal Height Setback, the Director evaluated whether the

Project was consistent with three of the fourteen WSD

“objectives.” 41   Consequently, the Director made no findings and

      41
            Additionally, the three objectives relied upon by the Director do
not show that the Project would not be contrary to the intent and purpose of
the WSD. First, the Director found that the Project would “[p]rovide for the
ability to renovate and redevelop existing structures which otherwise might
experience deterioration.” However, this WSD objective, which concerns the
renovation of existing structures, has little bearing on the variance
application in this case because, as discussed, the record does not show that
the existing DHT may not be renovated or replaced without the variance.
Thus, consideration of this WSD objective is not implicated by the variance
application. See Ten Stary Dom P’ship v. Mauro, 76 A.3d 1236, 1245 (N.J.
2013).


                                                             (continued . . .)
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provided no analysis as to whether the 74 percent encroachment

would be contrary to the intent of the Coastal Height Setback,

which is to reduce the perception of crowding, and maximize the

sense of open space, lateral access along the beach, and public

enjoyment of the coastal resources.         Nor did the Director’s

findings address whether the proposed 74 percent encroachment

would protect, retain, and enhance a Hawaiian sense of place by

restoring the experiences, places, and spaces that make Waikiki

unique.   The Director appears to have misapprehended the

applicable legal standard set forth in the ordinance, having

made no findings with respect to the effects of the 74 percent

encroachment.       Thus, the Director’s conclusion that the




(continued . . .)

            The Director’s second finding that the Project is consistent with
the WSD objective for “creative development” did not reference the full text
of the objective, which requires the Project to be “able to facilitate the
desired character of Waikiki for areas susceptible to change.” LUO § 21-
9.80-1(h) (emphasis added). The enactment of the Coastal Height Setback
indicates that the City Council concluded that development close to the
shoreline was to be strictly limited. Accordingly, a building that
substantially encroaches into the Coastal Height Setback would not appear to
be consistent with the “desired character of Waikiki.”

            The Director’s third finding was that the Project “provides a
better public access to the beach, [and] view channels from Kalakaua Avenue
to the ocean.” However, the objective relied upon begins as follows:
“Maintain, and improve where possible: mauka views from public viewing areas
in Waikiki, especially from public streets.” LUO § 21-9.80-1(j). Replacing
an 8-story building with a 26-story tower adjacent to the shoreline would not
appear to increase the mauka view from the public viewing area of Waikiki
Beach.



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encroachment would not be contrary to the intent and purpose of

the zoning ordinance is based on an error of law.

          By the same token, the Director’s analysis must be

focused on “those purposes of zoning that are actually

implicated or triggered by the requested relief” rather than the

Project as a whole.     See Ten Stary Dom P’ship v. Mauro, 76 A.3d

1236, 1245 (N.J. 2013) (“[N]ot every deviation from prescribed

bulk standards implicates the same concerns.”).          Accordingly, as

stated, the Director’s findings should have evaluated the

impacts of a 74 percent encroachment into the Coastal Height

Setback on a Hawaiian sense of place, the perception of

crowding, sense of open space, and public enjoyment of the

coastal resources--purposes that are actually implicated by the

requested variance.     Instead, the Director made findings as to

the Project’s compliance with selected objectives of the WSD

rather than on the impacts of the encroachment as related to the

intent and purpose of the Coastal Height Setback and WSD.             Thus,

the Director’s findings did not, as required by the City

Charter, “specify the particular evidence which supports the

granting of the variance.”      RCCCH § 6-1517.

          Finally, even if consideration of the Project, rather

than the effects of granting the variance application, were the

correct measure for issuance of a variance, the Director’s


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summary findings as to the three WSD objectives were clearly

insufficient to support a conclusion that a 74 percent

encroachment is not contrary to the intent and purpose of the

Coastal Height Setback and the WSD.        This is particularly true

when the magnitude of the variance is significant.           “[I]t is

self-evident that the greater the disparity between the variance

granted and the ordinance’s restriction, the more compelling and

specific the proofs must be that the grant of the variance” will

not be contrary to the intent and purpose of the zoning

ordinance.   N. Bergen Action Grp., 585 A.2d at 944.

          As further explained by the Supreme Court of New

Jersey,

          an impingement of the zoning restrictions may be of varying
          degrees[;] [t]he less of an impact, the more likely the
          restriction is not that vital to valid public interests.
          Conversely, where the change sought is substantial, the
          applicant will have to demonstrate more convincingly that
          the variance will not be contrary to the public good and
          general welfare expressed in the ordinance.

Chirichello v. Zoning Bd. of Adjustment of Monmouth Beach, 397

A.2d 646, 654 (N.J. 1979) (emphasis added); cf. McPherson, 67

Haw. at 606, 699 P.2d at 29 (holding that the requisite evidence

that must be adduced to satisfy the variance requirements

involves proof of a rather narrow and somewhat technical set of

facts).

          In this case, because of the great disparity of Kyo-

ya’s request from the ordinance’s restriction--an encroachment

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of 74.3 percent into the Coastal Height Setback--“the more

compelling and specific the proofs must be that the grant of the

variance” will not be contrary to the intent and purpose of the

zoning ordinance.     Thus, the findings set forth in the

Director’s Decision are markedly inadequate in light of the

magnitude of the requested encroachment into the Coastal Height

Setback.    Further, the lack of specificity in the Director’s

findings does not allow this court to conduct a meaningful

review of the Director’s Decision regarding this aspect of the

third requirement of the variance test. 42        See also Gougeon v.

Bd. of Adjustment of Stone Harbor, 245 A.2d 7, 10 (N.J. 1968)

(“Supporting and explanatory facts and factual findings for the

conclusions must be set forth.        Unless such facts and findings

are recited, a reviewing court cannot determine whether the

Board acted properly and within the limits of its authority.”).

            In summary, in concluding that the Project was

consistent with the intent and purpose of the ordinance, the

Director erred for several reasons.         First, the Director did not

make findings demonstrating that the variance request--a 74


      42
            The Director’s findings did not expressly take into consideration
the effects of the magnitude of the requested encroachment on the intent and
purpose of the Coastal Height Setback and WSD. Thus, on the face of the
Director’s Decision, it is not clear that the Director appropriately weighed
the extent of the proposed encroachment against the intent and purpose of the
ordinance.



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percent encroachment into the Coastal Height Setback--was not

contrary to the intent and purpose of the WSD and the Coastal

Height Setback, and instead the Director relied entirely on the

Project’s compliance with portions of three of fourteen WSD

objectives.    Second, the Director did not evaluate the impacts

implicated by the variance request in relation to the purpose of

the zoning ordinance.     Third, the Director’s analysis did not

expressly take into consideration the extent of the variance

requested, and thus his abbreviated findings were insufficient

to conclude that a 74 percent encroachment into the Coastal

Height Setback was not contrary to the intent and purpose of the

zoning ordinance.

          Accordingly, the Director’s finding that the Project

is consistent with “several important WSD objectives”

misapprehended applicable law, and the Director’s conclusion

that a 74 percent encroachment into the Coastal Height Setback

was not contrary to the intent and purpose of the zoning

ordinance was not supported by findings that “specify the

particular evidence which supports the granting of the

variance.”    RCCCH § 6-1517.    Consequently, the third requirement

of the variance test was not satisfied.




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                              VI.   Conclusion

           In order for the Director to grant a variance request,

the applicant must satisfy each requirement of the variance

test.   Here, none of the requirements were met.         Accordingly,

the circuit court’s judgment, the ZBA Order, and the Director’s

Decision are reversed.     See Town v. Land Use Comm’n, 55 Haw.

538, 550, 524 P.2d 84, 92 (1974).

Linda M. B. Paul                         /s/ Paula A. Nakayama
for petitioners
Surfrider Foundation et al.              /s/ Sabrina S. McKenna

Peter T. Kashiwa,                        /s/ Richard W. Pollack
Lisa Woods Munger,
Randall C. Whattoff,                     /s/ Michael D. Wilson
David J. Hoftiezer and
Lisa A. Bail
for respondent Kyo-ya
Hotels & Resorts, LP

William Meheula and
Natasha Baldauf
for respondent 20,000
Friends of Labor

Donna Y. L. Leong,
Don S. Kitaoka and
Brad T. Saito
for respondent Department
of Planning and Permitting
City and County of Honolulu




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