Kauai finds itself at a bittersweet crossroads

•Kauai officials are debating legislation that could ban new vacation rentals outside designated tourist areas and phase out existing options, including those in scenic Hanalei and Haena on the island's north shore. This follows a Jan. 1 crackdown on unlicensed vacation rentals on Maui. Observers say the moves are prompted in part by locals' growing frustration over real estate costs on Kauai, where median condo prices jumped 40% last year to $565,000, despite a nearly 60% drop in sales.

•More than a dozen major construction projects are underway across the island — most in the sunny south shore resort area of Poipu. The price of a 2,038-square-foot, "plantation-style" cottage at Kukui'ula, a 1,000-acre luxury residential complex slated to open near Poipu Beach in 2010, starts at $2 million.

"None of us likes change, and (post-Iniki) development has been more geared to bringing people onto the island than to the people who already live here," says Kauai's mayor, Bryan Baptiste. At the same time, he notes, many enamored vacationers have decided to stay put or return year after year, with timeshares and condos making up more than 50% of island lodging.

Some repeat visitors to Kauai are as nonplussed at the rapid pace of that change as the kama'aina (longtime residents) they're joining.

"We came here (in 1983) because it was the anti-Florida," says Morristown, N.J.'s Jerry Clendenny, who spends two months a year in a Poipu condo. "Everybody wants to be the last one in, but I sure hope this isn't a case of 'pave paradise, and put up a parking lot.' "

Though a proposed moratorium on south shore projects didn't materialize, current ideas range from boosting the island's limited bus service to a ban on new subdivisions of agricultural land into so-called gentlemen's estates.

But for all Kauai's challenges, "we're still way behind the development in other places," adds Baptiste. "All you need to do is go to Oahu to see that our traffic is nothing. Finding a balance between a good economy and quality of life is where we're at."

On a rainy night at Hanalei's bamboo-thatched Tahiti Nui bar, a guitarist strums his zillionth rendition of the Peter, Paul and Mary hit Puff the Magic Dragon (inaccurately rumored to invoke the area's marijuana crops) while a handful of locals launch into a spirited debate over the pros and cons of the troubled Superferry.

A few miles up the coast, meanwhile, Mark Fredrickson and his wife, Lynne, are just happy to be trading sub-zero temperatures in the Upper Midwest for the sound of crashing surf in their low-glitz beachfront condo at the Hanalei Colony resort.

"I'm a small-town guy, and this is more my style than Maui, " says Fredrickson, of Watertown, Minn.

If any property represents Kauai's struggle to find a balance between preservation and growth, it's the Coco Palms.

Opened on the island's east coast in 1953 amid coconut palms planted by Hawaiian royalty, the hotel catapulted to fame as the setting for Blue Hawaii but was never rebuilt after Iniki. Despite a string of revival efforts — the most recent would have included 200 luxury condos and a fitness spa — it remains a crumbling eyesore along the main highway, its blown-out roof shingles gaping like missing teeth.

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