Aloha fellow Honua Kai owners,

The 2024 HKCA Annual Meeting will be held this Friday, Nov 15th and it’s imperative you appoint a proxy you trust to vote for you if you won’t be attending in person.  Unlike past years, there will be many important resolutions affecting every owner.  So, unless you submit a proxy by the Weds Nov 13th deadline, you won’t have any say in these important matters which will determine the future of Honua Kai and your investment.  If you not already done so, I would be honored to serve as your meeting proxy and you can appoint me by submitting this authorization form.  I will be at the meeting and will be making motions for members to adopt the following resolutions:

1. Electronic meeting participation and director elections
2. Prohibition on the use of HKCA funds for Luana AC defects
3. NC2 director election by HKCA members
4. Procedures for committee formation and membership application
5. Professional Resort Management committee formation  

Why am I doing this?  As a long time owner (2010) and past board director (2015-2023), I care deeply about Honua Kai and its future.  After I stepped down from the board at last year's meeting to answer a higher calling in helping support the over 1,000 survivors of the devastating Maui wildfires staying at Honua Kai, I had hoped that the election of new directors would usher in a new era of greater transparency and acting in the best interest of all owners.  Sadly, this has not turned out to the case and the board is now as closed, secretive, self-serving, and unresponsive to the owners as I've seen in my 14 years here. 

In the aftermath of last year's Lahaina wildfires disaster, rather than embrace the sheltering of survivors at Honua Kai, the board heartlessly attempted to ban them and would have succeeded were it not for my direct lobbying efforts which resulted in the Governor's emergency proclamation which protected them.  Since then the board has continued to work against the best interest of owners in various ways including violating HKCA bylaws by changing the Hokulani elections without owner approval to unfairly favor the reelection of incumbent directors.  The board is also dragging owners into a costly private legal building defect dispute between the Luana developer and their owners which has nothing to do with HKCA. If that weren't enough, the board just fired Fred Mayo and is now looking to hire our 5th General Manager in 9 years as the GM carousel continues along with our severe staffing woes.  Isn't enough enough?

The annual meeting is the one opportunity that owners have each year to tell the board what they have to do for a change.  While most of the motions made during these meetings come from the board, every owner has the right to make a motion which will be debated and put to vote.  Unlike director elections, a simple majority of votes cast at the meeting passes.  This is why your proxy and who you appoint is so important because without it, you will have no vote and no say in these important matters.    

Unlike the board, I’m sharing my proposed resolutions now so you can read them for yourself and ask any questions.  If I know the board, they will not share their resolutions until the meeting, so owners won’t be prepared.  As such, the draft language of my resolutions below are subject to change but you'll get the gist of them:

1.  Amendment to HKCA meeting rules authorizing full electronic participation and voting by members

The HKCA meeting rules are hereby amended as follows:
1. All HKCA members are authorized to fully participate in any association meeting via electronic means including but not limited to voting, making motions, speaking, raising objections, and other actions in accordance with applicable RONR and meeting rules. 
2.  Any member wishing to participate via electronic means must register prior to the meeting. Registration will be available a minimum of two weeks prior to the meeting and each unit entitled to vote is assigned a single registration.
3.  Registered members will be provided with secure credentials for online access to all meeting activities.  These are for the exclusive use of the member and cannot be transferred to a third party or proxy. 
4.  The Association may provide electronic ballots for the purpose of voting on matters included in the published meeting agenda including the election of directors in accordance with bylaws. 
5. Registered members may cast their vote electronically before the meeting if they so choose.  All votes cast by approved methods will be tabulated together at the meeting with the results announced immediately afterwards. 
6.  While the board may inform and encourage members to participate in meetings and vote, once an election is underway the board is prohibited from taking any action which could unduly influence the outcome of an election including accessing and using confidential voting data. 
7. None of the above changes or affects the right and rules for members who directly participate in the meeting in person or via proxy in accordance with bylaws.

Discussion: Currently owners have the choice of either (1) participating in person at an Association meeting or (2) appointing a proxy representative.  This resolution provides a much needed third choice of attending electronically with the same rights and privileges as in person.  This is accomplished through a combination of online meeting (e.g. Zoom) and electronic voting (e.g. Vote Buddy) software. Both of these methods have already been approved and used by HKCA for board meetings and elections.  This resolution allows an owner to fully participate in a HKCA meeting remotely just as if they were there in person.  This long overdue convenience will result in far greater direct owner participation and fewer proxies in future HKCA meetings. 

Importantly, this resolution eliminates the cost and inconvenience of holding a separate electronic election for directors and provides a superior alternative in allowing owners to cast their vote for director electronically prior to the annual meeting if they so choose.  Since these votes are tabulated together with in-person and proxy votes cast during the annual meeting, this enables owners to vote for a director prior to the annual meeting while still being fully compliant with HKCA bylaws. 

Finally, this resolution prohibits the board from accessing confidential voting data and using it to improperly and unethically influence an election’s outcome as was the case in the just completed Hokulani director elections.  While it is likely the board will present its own resolution for future director elections, I believe you will find mine to be far more sensible and responsible.  

2. Prohibition on the use of HKCA funds for private residential developer defects (e.g. Luana AC)

Resolved, that HKCA funds are hereby restricted from use in resolving legal disputes regarding limited common element building defects appurtenant to privately owned residential units.  Any such expenses incurred by the Association will be recovered through maintenance fee assessments charged to the owners of the subject enclave. 

Discussion: This resolution prohibits the board from using funds to pay for resolving private legal disputes with developers which HKCA has no legal liability or responsibility for.  This is necessitated by the board's recent decision to take legal action against the developer of privately owned Luana residential units for certain building defects related to AC units.  HKCA governing documents stipulate that the owner of a residential unit is fully and solely responsible for any related repair and maintenance cost for a limited common element appurtenant to the unit.  While we can sympathize with Luana owners for the unexpected building defect problems they are facing, it is solely their responsibility and not that of HKCA to resolve.  As with any residential purchase, building defects are strictly a private legal matter between the buyer and seller - not the HOA.  Just as Luana owners will not be subject to a special assessment to pay for Konea and Hokulani AC repairs, we should not be funding a lawsuit and repairs for Luana AC units. 

The fact is Luana comprises fewer than 10% of all residential units yet the board decided to intervene on their behalf in a private legal dispute on our dime.  I think this has something to do with the fact that the majority (5 of 9) of residential directors are also Luana owners who directly benefit from this misuse of HKCA funds to drag all of us into yet another developer lawsuit.  The last developer lawsuit has taken years, cost hundreds of thousands of dollars in legal fees, and in the end will only recover a small fraction of that amount leaving owners deep in the hole. Our maintenance fees are already high enough without adding needless lawsuits. This resolution tells the board in no uncertain terms that owners will not tolerate their using HKCA as their own personal piggy bank by taking actions which privately benefit them at the cost of owners. 

3. NC2 director election by HKCA members rather than by board appointment

Resolved, that the director representative of the NC2 Commercial Unit owned by HKCA will be selected by a vote of all members and not through appointment by the Board of Directors.  The candidate receiving the greatest share of common interest votes cast in the election will be elected to serve the term on the Board of Directors. 

Discussion: In 2015, HKCA completed the acquisition of the NC2 Commercial Unit located in Konea.  Along with this came one of the 12 director seats on the board.  Since then, the board has claimed it has the right to appoint the director of its own choosing because it is the governing body of HKCA.  However, our governing documents are entirely silent on this and only stipulate that the owner of a commercial unit is allowed to freely designate their director representative in whatever manner they choose.  

This resolution gives all owners the right to determine the NC2 director through an election.  Unlike residential director elections which require a common share majority, this resolution elects the candidate who receives the greatest common share vote.  This eliminates the possibility of having to hold multiple rounds of voting until a candidate surpasses the common share majority election threshold.  

So why change this now?  The 3-year term for the NC2 director seat expires next year so if owners want to change how this director is chosen, we must do so now in the annual meeting.  Since 2015, a single person, Walt Kubiak, has held the NC2 director seat and if owners do not pass this resolution, it is all but certain the board will just appoint him for another 3 years because they look out for their own and don't want new directors to rock the boat.  Since we all pay for NC2, then the 700+ HKCA members should all have a say in who is elected as director - not just 12 directors who hold a vested interest in keeping things the same.  This is how democracy works and this resolutions rights a long time wrong put in place by the board.   

4. Formalized procedures for committee formation and membership application

Resolved that formalized procedures be established regarding HKCA committees which will insure that all members are formally notified upon the formation of a committee by the President and members interested in joining a committee may submit an application stating their reasons for joining and qualifications for consideration by the board.  Members will be notified if they are approved for membership within 14 days of application and if they are not, the reason(s) will be provided in the denial.    

Discussion: Owner committees are an essential component of HKCA and any HOA.  They provide an invaluable way for owners to be involved in the operation and leadership of the Association and to contribute their knowledge and expertise to the benefit of all owners. 

Unfortunately, HKCA Presidents have not seen it this way and instead has used committees as a way of further cementing the board's authority over owners.  While HKCA bylaws grant the President the authority to form committees and make appointments, this has not been conducted in a manner which encourages participation by members and leverages their experience and expertise. 

A clear example of this is the HKCA Governance Committee formed last spring.  No formal announcement of the committee's formation was made to owners and the President appointed 3 directors as the committee's sole members with no owner representatives.  Furthermore, the President appointed as chair Mike Wilde despite his inherent conflict of interest as a Hokulani director seeking reelection - after all, what better way to improve your reelection odds than to write the election rules yourself? 

When I learned of the governance committee in the HKCA newsletter, I sent an email to the board offering my expertise as an 8-yr board veteran with extensive knowledge of HKCA governing documents and election procedures.  I was turned down without any response from the President. Had I been appointed, I would have strongly objected to the Hokluani election procedures which are in direct violation of HKCA bylaws and also would have informed and solicited input from fellow owners.  Come to think of it, that's probably why I wasn't appointed.  

This resolution seeks to correct the current inequities in HKCA committees by ensuring owners are informed of the opportunities to serve the Association and be given fair consideration by the board.  Ultimately these decisions remain in the hands of the board President but hopefully the next one will embrace the importance of owner committees which are actually comprised mainly of owners rather than being stocked with directors who just rubber stamp the board’s agenda. 

5. Formation of an owner committee to study professional resort management options, solicit and evaluate proposals from qualified vendors, and provide recommendations to the board and members.  

Resolved, that HKCA members respectfully request the formation of a Professional Resort Management Evaluation Committee which will be open to all interested and qualified members to participate in.  The objectives of this committee are to:
1. Draft a Request For Proposal ("RFP") for the comprehensive management and operation of the Honua Kai Resort for consideration and approval by the board.  This RFP will include all operational aspects currently handled by HKCA including but not limited to housekeeping of common area, grounds keeping, pool operation and maintenance, security, engineering, maintenance, parking, etc.  The RFP will not include any services involving the rental and property management of private residential units.  The RFP will request confidential cost estimates from the responder.    
2.  Following board approval, the RFP will be distributed to any interested qualified professional resort management companies to respond to by a designated deadline date. 
3.  RFP responses will then be evaluated by the committee members according to criteria set by the committee and ranked.  The committee will prepare a summary report with its recommendations for review by owners and the board.  The report prepared for owners wil exclude confidential vendor financial information. 
4.  The board will evaluate the committee's reports and findings along with feedback received from owners and determine what actions, if any, will be taken.  

Discussion: This resolution seeks to put HKCA on a level playing field with our direct competitors by exploring the feasibility of hiring a professional resort management company to operate the Honua Kai Resort.  Currently, HKCA is the only 4-5 star resort on Maui with individually owned units which handles its daily operations entirely on its own as a HOA.  Our closest competitors including The Whalers and the Kaanapali Alii now both employ well known professional resort management companies to operate their properties.  Now that we find ourselves in the unenviable position of hiring our 5th General Manager in the last 9 years, we need to ask whether we want to continue on this carousel or if we want to get off on and set out on a new path which will better ensure our future success. 

I made this very suggestion a few years ago when I was on the board just before Fred Mayo was hired but the board flatly refused to consider this believing it would be too costly and we'd lose control of our personnel.  They felt it was better to put all our eggs into a single GM basket rather than in an entire company with the expertise and resources needed to operate a 5-star destination resort. In fact, it's likely the board still feels this way as they seem to thrive on micromanaging every aspect of Honua Kai. 

However, the stark reality in this very competitive luxury resort business is that you get what you pay for.  We have a 12-member all volunteer board with but a single director with professional resort management experience.  We have grossly overpaid our past GMs because that was the cost for any of them to agree to take a job at a place where it is all but certain their tenure will be less than 3 years before they are fired by a meddling board. 

However, it's not just the GM - we've been consistently unable to hire and retain the quality personnel we need to operate Honua Kai at the level of luxury and excellence we need to remain competitive.  The sad truth is Honua Kai has a very bad rep on the streets as a dead-end destination with the only real career path to leave for the big boys like Starwood, Marriott, Outrigger, etc. where you can work your way up the corporate ladder and even get off the island if you so desire.  We simply can't offer that as a HOA.  If we want a 5-star resort, then we need to be able to attract 5-star people.  

As for cost, I won't lie and say this will come cheap.  It likely won't but we won't know until we actively explore this option instead of entirely dismissing it as the board has done year after year.  I will share that an established professional resort management firm with nearby operations on Maui informed me they believed they could reduce our overall operating costs by taking advantage of economies of scale.  We are currently paying the open market rate for services like housekeeping and landscaping which a professional resort management company can operate at a lower cost through shared resources.  The same goes for other services like security, parking, maintenance, and guest services. 

Importantly, a professional resort management company can provide an upward career path for attracting top talent that an HOA simply can't.  Through economies of scale, they can offer superior benefits and the ability to work at other properties in their management portfolio.  They can provide attractive career advancement opportunities that HKCA simply can't.  While the board previously rejected this idea because it would no longer "own" our employees, this is actually an advantage as HKCA assumes far few personnel liabilities when we are no longer the boss.  With our insurance rates already sky high, this is one way we can save on these costs while lessening our exposure to potentially expensive lawsuits.  

Although this resolution doesn't guarantee change, it at least puts us on the road to considering and actively evaluating a vital change which can dramatically improve the future of the Honua Kai Resort and make us competitive with the top resorts on Maui.  Nothing short of passing this resolution will get the board to listen to owners about the necessity for change and operating Honua Kai as a destination 5-star resort rather than a glorified HOA.    

THE DECISION IS IN YOUR HANDS / PROXY

If you're still with me, then I sincerely thank you for hearing me out.  I know I've said a lot but there's much to be said when it comes to protecting the future of your multi-million dollar asset and a billion dollar destination resort.  The inescapable truth I've come to is that a change in direction for Honua Kai first requires a change in leadership and owners who are willing to stand up for their rights rather than be passively ignored by a self-serving board which cares more about its own agenda and interests.

While I don't have any idea if I'll be re-elected to the board as a Hokulani residential director, as an owner I know for certain that I can make a difference by attending the HKCA annual meeting to bring these 5 very important resolutions to the floor for discussion and vote by owners.  Even if they don't each pass, there is great value in having the conversation about these very important matters so we know where each of us stands in the future of Honua Kai. 

It's likely the board will not want to allow this discussion and I fully expect they will consult with the Association's attorney and parliamentarian to find ways to deny them.  If, however, you believe they do deserve discussion and consideration, then I ask you to appoint me as your meeting representative proxy using this form before Wednesday.  Even if you have previously sent in a proxy you can override it by submitting a new one with my name on it.  With your proxy in hand, I will do my best to bring about the must needed change at Honua Kai to insure your investment and home away from home are protected for the years ahead.  I also invite you to briefly reply to this email to let me know whether you support these resolutions and if you have suggestions or changes.  

Mahalo,
Carl Hu  
Owner, Hokulani 229
Past HKCA Board Director (2015-2023)

Please visit www.carlhu.us for more information or email carltchu@gmail.com / phone (425) 442-2297 for more information