HomeMy WebLinkAboutCOM 0468.002 1998-2000 w~ ~e
ALAN S. KONISt-Ii DONALD IKEDA
Cnunlr Clerk p,.~; !)epttry Cnutrn~ Clerk
CONSTA~ICE R. KIR[U
legislative Audilur
OFFICE OF THE COUNTY CLERK
Caunh~ ofHawpii
Hawaii CoutatP Bdllding
15 Aupadni Street
Hilo, Xawaii 96720
February 2s, 2000
-a
TO: James Y. Arakaki, Chair ~ '
And Council Members -
J
FROM: Constance R. Kiriu~
Legislative Auditor -
c~:
RE: .Special Study On Caunty of Hawai `i Leases
With Nonprofit Organizations
For your information and review, we are transmitting a document entitled Special Study
on County ofHawai'i Leases With Nonprofit organizations, which was prepared by the
Legislative Auditor's Office at the request of the County Council by its Resolution
No. l 51-99.
We hope this study provides you with sufficient information about the County's current
nonprofit organization leases, the leasing policies, nonprofit Lessee compliance, and
leasing policies throughout the state.
For your information, the administration was given about one week to respond to the
special study. Departmental comments are being transmitted independent of the study.
Should you have any questions regarding the study, please feel free to contact me or
Charmaine Doran at 96l -8386.
Enclosure -Copies of study on file in the Office of the County Clerk.
t~'iEe I~a~' ~
ft~~f. `1'0'
Itef. Date Fh,,, ~ 2 5
SI'~CIl~~, S°I`LII~Y
ON
COUNTY OF FIAWAI`I LEASES
WITI-I NONPROFIT ORGANIZATIONS
A Report to the Fiawai`i County Council
February, 2000
Office of the Legislative Auditor
County of Hawaii
T`~~LE OF CL?N7°EN7'S
INTRODUCTION 1
SCOPE AND OBJECTIVES I
AUTIdORITY ~
OI3JECTIVE #1 2
Identify And Co»tpare The Terans And Conditions OJExecuted Lease
Agreements Between the County of Ha?va!`i And Nonprofit Organizations
OBJECTIVE #il 5
,Examine Cotnpiiance Of The Tertns And Conditions Defined In Lease
Agreements Between the County of Hawai `i And Nonprofrt Organizaations
OBJECTIVE ~3 7
Ident~ Lease And Rentai Agreements The County Of Hawaii
flan Executed 6Yith Private Entities To House County Programs
OBJECTIVE 9
Exarmiine Lease Agreements Potieies Of T'he Other Three
Counties SI'ithin The Slcite of Hawaii
OBSERVATIONS D3EYOND THE SCOPE OF 12
SPECIAL STUDY OI$JECTIVES
CONCLUSION 12
ATTACHMENTS
NO. 1 40awai`i County Coatneil, Ideaolution 151-99, Draft 2
NO.1 Ifawai'i County Code, Chapter 2, Article 19
N0.3 County OC Ifawai`i - Leas Agreements With Nanprofit Organiza9tions
N0.4 County OC NawaPi -Contractual faoasting Forme
N0.5 County OC Nawai`i -Flow Chart Lease Negotiations And Contractual Process
With NonprofltOrganiaatiens
N0.6 County o4 fiawai•i - Catnpliauce Review Nonprofit Lease Agreements
NO. 7 C®mnty OP 1#awai•i - I,.ease Agreements With Private Entities
N0.8 City And County of Honolulu -flaw Chart Lease Negotfations And Contractual
Process With Nonprofit Organezations
N0.9 City And County oCliomolulu (devised Ordinances (ROIi), Chapter 28
NO. 11) County of Matei -Flow Cbart Lease Negotiations And Contractual
Process With Noaprofl4 Organisations
NO. I 1 Maui County Code. Chapter 3
NO, i2 State Board OCLand A®d Natural Resources Guidelines -Lease Negotiations
With Nonprofit Organisations
REIr'EItENCES
GLOSSARY
~~e~ial study Off' C®ur~ty Leases
With ~Tox;~~;ra~t Qrarii~ationS
INTRODUCTION
This special study is conducted in response to Hawaii County Council Resolution No. 151-99,
Draft 2 {Attachment No. 1) adopted on October 14, 1999. The resolution requested the Legislative
Auditor to conduct a special study of the County of Hawai`i's policy on lease agreements with
nonprott organizations.
SCOPE AND O]~.JEC'TIVES
The scope and objectives of this special study included: (1) identifying and comparing the terms
and conditions of executed county lease agreements with nonprofit organizations; (2) examining
departmental records to determine nonprofit lessee compliance; {3) identifying and reviewing lease
agreements between the county and private entities housing county programs; and (4) reviewing
lease agreement policies of the three other counties.
En addition to the above-stated scope and objectives, we documented the current process used when
negotiating nonprofit leases. We also obtained the nonprofit lease guidelines and negotiation
practices of the State board of Land and Natural Resources in view of the state's extensive
landholdings.
AUTI~ORITY
The county obtains its statutory authority to acquire or dispose of real property pursuant to
Chapter 46-1.5(16), Hawaii Revised Statutes, which reads:
"Each county shall have the power to purchase and otherwise acquire, lease, and hold real
and personal property within the defined boundaries of the county and to dispose of the real
and personal property as the interests of the inhabitants of the county may require, except
that: any property held for school purposes may not be disposed of without the consent of
the superintendent of education; no property bordering the ocean shall be sold or otherwise
disposed of; and all proceeds from the sale of park lands shall be expended only for the
acquisition of property for park or recreations{ purposes."
Accordingly, Chapter 2, Article 19, Hawai `i County Cade, regulates real property disposition and,
more specifically, nonprofit disposition:
"Section 2-t 20. Disposition to government, governmental agencies, nonprofit
organizations, and affordable housing devetopers.
(a) Notwithstanding any limitations to the contrary, the council may, by resolution
approved by a majority of its members, direct the finance director to negotiate the
disposition of real property by:
(l } Selling it in fee simple at such price and on such terms and conditions
deemed proper to governments and governmental agencies authorized to
hold lands in fee simple;
(2) Leasing it to governments, governmental agencies, nonprofit organizations,
or affordable housing devetopers at such rentals and on such terms and
conditions as deemed proper;
(3) Exchanging it for real property owned by governments, governmental
agencies, nonprofit organizations, or affordable housing developer on such
terms and conditions as deemed proper.
(b) A disposition of real property to governments, governmental agencies, nonprofit
organizations, or affordable housing developers may be evade without the notice or
appraisal required in this article."
oI~ECTIVE
Identify And Compare The Terms ~®d Conditions Of Executed Lease
A,~reements ~et~veen'The County Of I-1[awai`i And Nonprofit Organizations
1. Identifying And Co~reprartng Noriprofat Leeise Terans and CondfPions
Administrative agencies have submitted 11 executed lease agreements for county real property
between the County of Hawaii and nonprofit organizations. All leases are independently
maintained and administered by lead departments. because leases have been managed by the lead
departments and not by one central entity, we cannot say with certainty that we have received all
executed county Leases. We attempted to verify the completeness of the list by searching other
avenues, such as council resolutions, review of the line item budget and asking for confirmation
from the Mayor's Office.
Of the 11 executed lease agreements, the Department of Parks and Recreation (P&R}reported two
and the Office of t•€ousing and Community Development (OHCD} reported nine. Seven OHCD
agreements are with nonprofit organizations, which administer programs funded by the U.S.
Department of 1-€ousing and Urban Development (HUD).
Attachment No, 3, entitled "County of Hawaii Lease Agreements with Nonprofit Organizations,"
identifies and lists specific terms and conditions found in each lease. The following comparison is
provided:
A. Terms
Shoreest: Month-to-month.
Longest: 65 years.
2
The contract with the Volcano Community Association expired in 19$9 and
continues to operate on an automatic year-to-year basis.
Several OHCD leases operate under HUD prerequisites requiring an extended lease
term to facilitate a minimum 30-year mortgage.
1f3. Location and Property Square Footage
Approximately 29.33 acres in eight different geographical areas are being leased to
nonprofit agencies. Building area is as follows:
East Hawaii Cultural Center 11,988 sq. ft.
Volcano Community Association 4,2$1 sq. ft.
OHCD Unknown
Because all contracts vary in farm and content, the aforementioned figures were
compiled by reviewing the lease agreements combined with contract survey
documents, real property tax records {where available) and by conducting
departmental interviews.
C. Findings of Public Purpose
None of the agreements contain a finding of public purpose. However, all
agreements contain a "Use" clause that implies a public purpose is served by the
program to be administered at the site under agreement.
D. Repair & Maintenance
Ten leases require repair and maintenance at the expense of the lessee. Eight also
require the lessee to make improvements required by law.
E. lndernnification
All leases require indemnification ofthe County of Hawaii against all liens, claims
and damages.
F. General & Comprehensive Liability Coverage
All leases obligate the procurement and maintenance of a policy to include fire,
general and comprehensive liability by the lessee. Coverage amounts vary
depending upon the facilities being insured. Certifications of effective policies are
deposited with the lead agency or department.
G. Lease Fees
Ten lessees pay a fee of $ (.00 per annum. One lease has a higher tease fee of
$8,500.00 per annum (Papaaloa Elderly Housing).
I-I. Termination Practices
Three leases identify termination dates. Three leases also contain "E~Iold-Over"
clauses. All 11 leases include a "Surrender" clause. In addition, nine leases define
actions, including non-compliance, as constituting contract default or breach.
3
to addition to the above, two agreements mandate the retention of atax-exempt status, six require
yearly reports, and two include "Lessee Not Agent Of The County" clauses.
1. Documenting The Negotiation .9nd Contractual Process With Nonprofit Qrganizations
Because of the range of contract variations noted, we attempted to document the nonprofit lease
negotiation and contractual process by interviewing the finance director and the lead departments,
OHCD and P&R.
Generally, contract negotiations are conducted at the discretion of the department or agency
director with jurisdiction over the real property to be leased. Negotiation may begin when a
nonprofit organization approaches a department with a proposal. There is no internal selection
procedure or application process in place. An internal Contract Routing Form (Attachment No. 4)
is used by both departments and serves as the vehicle for obtaining necessary review and signature.
Based on an interview with P&R Director Juiie Tulang, we diagrammed the negotiation and
contractual processing in Attachment No. 5. She noted there have been exceptions to this flow.
OHCD Assistant Housing Administrator Ed Taira stated that each negotiation process differs
depending on the project site and the funding source of the program to be administered. Both the
Hawaii County Housing Agency and County Council approve all leases before execution.
Adopted resolutions were found for both P&R leases, and seven of nine OHCD leases.
DISCUSSION
The Hawaii County Code currently authorizes the finance director to negotiate the disposition of
real property to nonprofit organizations after council approval by resolution. This authorization
gives broad direction and has been the source of dispute at times. The legislative branch may feel
apprehensive about delegating negotiating powers away without having a hand in the final
decision. The executive branch has been caught in this dilemma and may negotiate in advance,
submitting a draft lease to the council for approval. When the executive branch does not provide
enough information, the council has been hesitant to make such blanket authorization. We make
this point at the beginning of this discussion because many of the key issues emerge from here.
There are no criteria to guide the finance director, the department head or an interested nonprofit
organization in deciding which nonprofit should be awarded a county tease or what price, terms
and conditions would be appropriate or "proper." The exceptions have been leases executed by
OHCD, which were established under federal qualifications or were council requirements when a
landowner received rezoning. While the presence of criteria may reduce flexibility, it decreases the
appearance or possibility of bias and is, therefore, more defensible.
With a few exceptions, there is na consistent application of certain standard lease provisions, which
would serve the interest of the county. These include basic clauses, such as:
4
? A finding that the allowed use serves a public purpose
? Demise and description of premise
? Repair and maintenance at the expense of lessee, including those improvements
rcquircd by law
• Indemnification of the County of l-iawai`i against all liens, claims and damages
? Procurement and maintenance of'an up to date insurance policy by the lessee to include
fire, genera] and comprehensive liability. Requiring certifications to be fled annually.
? Expiration date
? Program and financial reporting
? Retention oftax-exempt status. Requiring documentation to be filed annually.
? Lessee not agent of county
When lease agreements contained a summary page and table of contents, the lease was also
better organized and easier to read.
In practice, we teamed that department heads have been initiating negotiations, and the finance
director has had limited involvement in the negotiations or contrac.~tuat review. If county monies
are not expended, the finance director may be eliminated from reviewing a lease agreement
completely. In order to comply with the Code, the finance director suggested amending the Code
to allow a designated representative to conduct negotiations. This may bring the law into
conformance with present practice, but it overlooks the intent of assigning one responsible
department tread to assure that the county's interests are protected and the terms and conditions are
"proper."
We found the county does not have a central repository maintaining its executed real property
instruments (i.e. leases, licenses, permits, memoranda). Although problematic during this lease
study, the issue is basic to management. Decentralizing ownership information tends to militate
against Section 5-3.3(j) of the Hawaii County Charter, which designates the finance director to
"[P]repare and maintain a perpetual inventory of all lands, roadways, streets, easements and other
land interests owned, leased, rented or controlled by the county." To immediately resolve this, the
internal Contract Routing Form could be changed by adding the finance director as a recipient of an
executed contract. Amending the Code would provide long-term direction.
O>;.TECTIVE #2
Examine Compliance Of'I'he Terms And Co®ditions Defined In Lease
A~reeinents ~etvmeen The County Of f[avvae`i And Nonprofit Organizations
An examination of lessee compliance of those elements stated in Resolution No. 151-99 was
conducted. Information used to determine compliance was secured from departmental personnel
and from files maintained by the departments. Lessee compliance was investigated over a 10-year
period beginning in 1989. Attachment No. b, entitled "Compliance Review," details lessee
compliance of specific agreement terms and conditions. The following synopsis is provided:
5
A. Inspection of Premises
lJnless requested by a lessee, P&R routinely inspects only one of its leased facilities,
the Volcano Community Center. OHCD visits leased sites as the need arises.
OHCD reportedly inspected one facility in 1 y99. No other inspections were
documented.
B. Insurance/Indemnification
P&R has one insurance certificate on file. OHCD currently has three insurance
certificates on file.
C. Lease Fees
During the past 10 years, P&R collected lease fees only once from one lessee-- the
East Hawaii Cultural Center in October of 1999. Lease fees were never collected
from the Volcano Community Association.
OHCD records show at least 25 instances where lease fees became delinquent and
were collected in subsequent years. One lessee, Papaaloa Elderly Housing, has not
paid its annual lease fee of $8,500.00 per annum.
Nonprofit Status
OHCD requires two of its lessees to maintain atax-exempt status. Federal
certifications were not on file for either lessee.
E. Records and Reporting
None of the four lessees obligated to file reports had submitted all documents as
required in their individual leases. Two lessees obligated to file reports upon
request had not been asked by OHCD to submit reports.
F. Repair and Maintenance
Two of the I 0 lessees wha were required to perform repair and maintenance at their
own expense reported having expended funds for such on their annual or fiscal
reports. P&R administers both leases, and provided a list of repair and maintenance
expenditures at both sites. These figures are included under "comments" in
Attachment No. 6.
The records of repair and maintenance for OHCD facilities are retained by assigned
property or nonprofit organization managers. These records were not made
available by OHCD.
G. Improvements required by law.
We were unable to determine if any of the l0 lessees have made improvements
required by law.
6
~rscussroN
Lessee compliance with several key agreement conditions has been infrequent or absent. Filing of
current insurance certificates, lease payment receipts, tax-exempt certiftcations, and financial and
program reports were scant and not found in the files of the lead departments. The lack of
documentation and noncompliance was confirmed by the departments.
Correspondingly, enforcement and monitoring of the lease agreements by the county is
lackadaisical. Bath P&R and OHCD attribute inadequate enforcement to a lack of appropriate
departmental staff. OIiCD also maintains that federally-funded programs are regulated by the U.S.
Department of Housing and Urban Development.
Oversight of lease agreements, including periodic inspections, ensures that the lessee is complying
with contract requirements, the authorized use and implementation of county programs. :negligible
supervision places the county at risk by its indifference to contractual obligations.
OI$JECTIVE #3
ldentify Lease Anti Rental Agreements That The County Of Havvai`i
Eras E~cecuted With Private Entities To mouse County Programs
1. Identifying Executed Lease And Rental Agree6nents
Administrative agencies have submitted 18 lease agreements between private entities and the
county to house county programs. Attachment No 7, entitled "County of Hawaii Lease
Agreements with Private Entities," lists specific terms and conditions found in each lease. A
synopsis is provided below.
A. Number Of Leases ~y Department
1. Parks and Recreation (3)
2. Finance (I )
3. Liquor (1)
4. Police (b)
S. Public Works (2)
6. Clerks/Council (2)
7, Prosecutors (1 }
8. Fire (1 }
4. Research and Development (1)
li;. Use
Property currently being leased by the county serves a wide range of uses including
storage, parks, rubbish-transfer stations and office space. The county currently
Ieases approximately a total of 24,838 square feet of space. 4,l 33 square feet is
utilized in Nilo by the Police, Fire and Clerks departments at an annual cost of
7
$95,280. The remaining 20,705 square feet is predominately space leased in West
Hawaii to the sum of approximately $458,983.
C. Conditions
All agreements contain standard clauses including lease fees, termination practices,
repair and maintenance and indemnification requirements.
Q. Term
While we note that several long-term leases have received council approval, there
are those that have been negotiated on a month-to-month basis or have expired and
are operating using a hold over condition without council approval, The law does
not prohibit this practice.
2. Docutnenting The ,'Yegotiation And Contractual Process With Private Entities
In order to document the internal negotiation and contractual process used when negotiating leases
for private property, interviews were held with the Finance Director and personnel from Office of
the Mayor, Department of Finance, Office of Housing and Community Development, Department
of Parks and Recreation, Police Department, Department of Public Works, County Clerk and
Elections Division. Information obtained through these interviews suggests that the negotiation
and contractual process when entering private leases is consistent far a majority of departments.
Each department head, unless otherwise specified, negotiates the terms and conditions of lease
agreements, and uses a standardized routing foeen (Attachment No. 4) to obtain necessary review
and signature. A lease that requires payment of funds from appropriations of a later fiscal year or
of more than one fiscal year requires council approval. After execution and council review (if
required), all departments then independently domicile and maintain executed leases and any
supporting documents.
Numerous contracts contain month-to-month provisions. As long as funds are appropriated by the
council (usually through adoption of the operating budget), the department continues to operate
with ashort-term contract over a period of several years.
DISCUSSION
Other than the standard routing form discussed above, there is no written procedure far these
transactions. Several departments expressed a desire to be able to reference a procedure manual
that would provide step-by-step details of the negotiation and contracting process. An internal
manual would be more efficient, provide continuity, and assist during personnel changes,
8
O~ECTrvE
Examine Lease A~reernent Policies Of The Other 'Three Counties
Within The State Of Hawaii
The county codes and charters of the three other counties were reviewed to determine what, if any,
policies are utilized in nonprofit lease negotiations of county-owned property.
In addition, the Department of Land and Natural Resources forwarded recent revised guidelines on
lease negotiations with nonprofit organizations, which were adopted by the Board on Octoher 22,
l 999.
A summary of this information is provided below:
1. City and County of Honolulu (Attachment Nos. 8 and 9)
Chapter 28, Revised Ordina~tces of Honolulu (ROH), outlines the procedures and policy for the
lease of real property owned by the City and County of 1-lonolulu. According to the chapter, all
city real property is contracted and awarded under public, with exceptions. Special needs housing
and human service providers are two of l3 exempt categories.
The contemplation of leases or rentals of city property for special needs housing projects or
providers of human services is published by the finance director in a daily newspaper. Proposals
are examined and evaluated by the appropriate city agency using stated criteria. The agency may
then negotiate with the best three proposals in order to make a final selection. A report on the final
selection is submitted to the county clerk for public inspection and the agreement with a resolution
must be submitted to the city council.
With regards to special needs housing, the RO~1 specifies the conditions under which the
negotiated rent may be a nominal amount.
With regards to human service providers, the ROH requires the city agency to submit the lease or
rental agreement to the council for approval by resolution. The lease agreement must contain any
conditions and requirements applicable to the human service to be provided, including client fees to
be charged.
The term of any contract is limited to five years, provided the council may authorize the leasing or
renting of property in excess of five years when its is deemed in the public interest and when
(a) the tenant expends $25,000 or more for capital assets, (b) the property is devoted to training and
education of the handicapped or blind persons and when the tenant constructs $10,000 of
improvements on the property, (c) property is leased by state or federal government, (d) a contract
for the construction of housing units is beneficial to the city, or (e) property is leased to a private
nonprofit corporation or community association.
9
Except as otherwise provided, options for renewal are prohibited, no lease shall be longer than
65 years except for residential leaseholds, and no lease can be made to a person who is in arrears of
taxes, rents or other obligations owing to the city.
Violations of the ROH by an officer or employee are subject to disciplinary action pursuant to a
hearing. Violations of the RUH by a tenant shall cause the termination of the tenancy subject to the
payment of outstanding rent pursuant to a hearing. Violations upon conviction are a misdemeanor.
2. County of Maui (Attachr~aent ~'Yos. 10 acrd I1)
Chapter 3, Maui County Cade, establishes the policy for the use of county owned real property.
Any lease rent or rent negotiated without public bid and for less than fair market value is
considered a grant of public lands. Grants for county real property are approved by council
resolution after findings and recommendation of a grant committee. The grant committee reviews
and makes recommendations on monetary grants as welt as real properly awards. The grant
committee is composed of nine citizens appointed by the mayor and confirmed by the council
The grant committee is gavemed by adopted rules that includes the conditions of grants,
procedures and analysis of requests and standards of monitoring for awarded grants. Nonprofit
organizations applying for a grant must submit written proposals to the committee and maintain
federal accreditation governing boards. All records of operations must be made available to the
committee, mayor and council for review and evaluation. Recommendations of the committee
must include the public purpose served, target group, organization personnel classification, funding
sources and the process by which set objectives will be measured for effectiveness. All
organizations awarded grants submit annual financial and program reports.
The grant committee, or its designee, monitors and evaluates the grantee's grogram for fiscal
soundness and to assess attainment of goals and objectives. A summary of program findings is
provided yearly to the council for review. Findings of noncompliance by withholding or omitting
material facts or deliberately misrepresenting facts are forwarded to the council and, upon council
concurrence, the recipient is prohibited from applying for any grant for five years following the
finding.
3. County of Kaua `i
The Kauai County Charter places the lease and rental of lands with the director of finance. The
Kauai County Code makes no reference to leasing county property to nonprofit organizations.
According to Finance Director Wallace Rezentes, Jr., no contracts have been executed with
nonprofit organizations.
4. StaPe Board of Land and NaBreral Resources (Attachment No. 12)
The Board of Land and Natural Resources approved guidelines on October 22, 1999, which
primarily deal with land leases to nonprofit organizations that are granted through the Board of
Natural Land and Natural Resources. The guidelines distinguish new, directly negotiated leases
from those that were originally issued through direct negotiation and are executed as of the
10
adoption of the guidelines or are unexecuted as of the adoption of the guidelines but have received
board approval.
All applications for land leases must include a completed form that requires proof of the
appropriate certifications, a description of the program to be administered, specific objectives,
target group, demonstrate a public need and planned site improvements. DLNR staff reviews and
evaluates each application according to a set process and criteria.
For new leases, this criteria includes (a) confirmation that no other governmental agency has made
a request for the land, (b) DLNR has no plans for the land, and (c) the state will not forego
significant income. However, consideration should be given if the nonprofit proposes to make
significant improvements or if the public interest or benefit clearly outweighs the three criteria.
The nonprofit must also qualify by registering to do business in the state of Hawai` i, providing a
501(c)(3) and providing a plan which reflects adequate funding for development and operations.
Rental fees for new and existing leases are determined by
(a) Limiting factors (i.e. if purchase of service funds are made available for the
nonprofit's service, if commercial activities competes with commercial entities, if
trust lands are leased and the services do not clearly meet a trust purpose);
{b) Public benefit ratings (if services are for an all-inclusive population, if services
address important community needs or the DLNR mission is implemented};
(c) Whether percentage rent should apply; and
(d) Off-sets for documented improvements.
The determination of rent is submitted to BLNR for its action.
Terns of lease agreements range from two years to thirty years. This includes a standard rental
reopening every ] 0 years. Applicants and lessees must be in good standing with the state.
Lease agreements include a table of contents and repair, improvement requirement, inspection,
indemnity, insurance, covenants against discrimination, cost of litigation, right to audit, ownership
of improvements, reopening, breach, surrender and termination clauses. All leases are reviewed for
form and legality by the Attorney General's Office and signed by the Chairperson of the Board.
DISCUSSION
The County of Maui and the City and County of Honolulu have adopted guidelines and criteria by
which nonprofit negotiations and leases are to be decided. Maui County has formed a grant review
committee that oversees the county's subsidy of land/building or monies to nonprofit organizations.
The State Board of Land and Natural Resources has also approved guidelines to assist in its
decisions over permitting nonprofit organizations to use state lands. These efforts demonstrate an
attempt by some government entities to be fair and equitable, publicly accountable and effective
managers of the public's assets.
I1
O~SEI~VATIONS
BEYOND TIE SCOP>l; OE SEECIAL STUDY O~.TECTIVES
We did not examine topics of related interest, which were beyond the scope of the special study
objectives, but have bearing on the management of county real property or the complexion of
nonprofit policies:
? The county has executed tenancy agreements with nonprofit organizations that are
not leases (i.e. licenses, memoranda).
? There are also situations between nonprofit organizations and the county where no
formal or official tenancy agreements have been consummated.
• A nonprofit oeganizaeion (easing county property may be concurrently receiving an
annual monetary nonprofit grant award from the county.
• A nonprofit organization may be receiving market value rent fees to house county
programs.
CONCI.vU3ION
Section 2-120 of the Flawai `i Counry Code affords broad powers of negotiating with nonprofit
organizations to the finance director, provided the terms and conditions are deemed "proper."
There are no criteria to guide the finance director, the lead department or an interested nonprofit
organization in deciding what is "proper." Rules of procedure have not been promulgated to aid in
this decision. Without further definition of the term "proper," negotiations are easily open to
allegations of favoritism and preferential treatment.
Moreover, inadequate policies and procedures subject the county to performance that is
unpredictable and unreliable. The lease agreements we examined did not contain uniform
provisions to serve the county's welfare, such as a repair and maintenance clause, termination date,
actions that constitute default ar breach, reporting requirements, and tax-exempt status
documentation. We found varying degrees of noncompliance by all nonprofit organizations.
i~loncompliance was further aggravated by the lack of enforcement by the Iead departments.
Improving the lease negotiation process with nonprofit organizations is a responsibility to be
assumed by all stakeholders-policy makers, county administrators and nonprofit organizations.
12
COUNTY OF ~I~WAI'I STATE OF I~AWAII
~ESa~.uTioty No.
(Graft 2)
A RESOLUTION RE4UESTING THE LEGISLATIVE AU®ITOR'S OFFICE TO
PERFORIOo1 i~a SPECIAL STU®Y ®F fiHE COUNTY OF fiHE HAWAI'I'S POLICY ON
LEASE AGREEI~IENTS WITH NOIVPR®FIT ORGAiVIZATIOINS.
WHEREe4S, Chapter 2, Article 19, Section 2-120(a) (2), of the 0°~awai'i Coa~nty Coda
authorizes the disposition of County proper4ies by lease to nonpr®fit organisations at
such rentals and on such teams and conditions as deerreed proper; artd
WHEREAS, the Hawes"; CocanPy Coele does not address issues of indemnification,
rriairttenance, liability or other conditions ordinarily stipulated in lease agr~tnents_
NOW, Tt°6ERIrFOP~E, SE lT RES®LVED SY THE COUNCIL OF THIS COUNTY OF
t-IAVIIAI'I that it requests the Legislative Aud'otor's Office to conduct a Special Study of
the County Of Havanas'i's lease agreements v~ith nonprofit organisations.
Rla IT FURTHER RESOLVE® that the scope and objectiv®s of this special study shall
include the f®Ilorn~ing:
1. Identify and compare the teas and conditions of executed lease agreements
between the Courrty of i'i and nonprofit organisations, including
• Location and Property Square Footage
• Findings Of Public iPurpose
• Repair ~ A~sieatenance
Indert7nifacation
• General ~ Comprehensive Liability
• Lease Fee
• Termination O~ractices
2. Exarraine corraplia of the terms and condia defied ire lase agreements
between the County of Ha+avai'i and nonprofit organisatlorts.
3. identify lease and rertta! agreements that the County of Iiawai'i has executed
with private entities to house County programs.
IExarnine lease agreernerrt policies of the other three counties v~rithin tt~ State of
Haaevai'i.
SI= IT FURTHER RESOLVED that it requests the Offit~ of the Legislative e~ud'otor to
investigate the aboa4e-stated s~pe and objectives and submit a detailed report to the
Council for tevie~r by February 15, 2000.
Attachment No. 1
I~~ IT Fl1~iT1~E~ HESOLV~D that the Gountil regl~sts the full cooperation from the
6~9ayor and affe~d d~spaltrrtenffi in providing any re~luested documents and r~pons~s
f®r this apaci~! study.
Ala IT FiNALI_Y ~ESOL~D that the Clerk ®f the Coumry of ~lawai'i transmit copies of
this resolution tv the Legislative Auditor Cottstsrtcx Kiriu and the Honorable OVlayor
Stephen l4. Yarnashiro.
Dated at #~ilo, Haavai'i, this 14tt? day of October, 1989.
INTRODiJGED I3Y:
_
Co~ICil ember. C®unty of fi I'i
COUAITY COUNCIL ROLL. CALL voTE
C018F1t)/ Of Haddal`l AYES NOES ABS EX
Hilo,1{awai'i i
CHUNG
1 hcrehy certify that the Enregning RESOLUTION was by ELARION®FF X
The vote indicated to the tight het,~f adapted by the COUNCIL of tAe JAC08SON
County of Hawaii net QCtOb~>y i4 I999 X
LirTrF9f.AD-TODp X
PISICCHIO
A"TTEST SIIeIITH X
TYLER
i'
YAGt7NG '
b 3 a
Reference: 0-468.001/Council
COUIv'TY CLERK` CHAIRMAN & PRESIDING OFFICER RESOLUTION NO._ 1
(Draft 2)
Article 19. 1[tea! Pr®perty Y)ispositeon.
Sec4ion Z-110.
(a) As used in this article, unless the context clearly esquires otherwise:
"Lease" means the right to possess and use real property for a terra of one year or [Wore.
(2) "Real property" includes lands and strucnares or fixtures petYtaanenSy attached thereto, owned by
the County of Flawaii.
(3) "Remnant" means a parcel of land economically or physically unsuitable or undesirable for
development or utilization as a separate unit by Beason of locatian, size, shape, or other
characteristics. A ncmnant may be:
(A) Land acquired which is in excess of the Heads for which acquired;
(B) Vacated, closed, abandoned. or dascontinued road, street or alley or walls, latch, or other right-
of-way.
(4) "Nonprofit organization" means an organization, organised for other than profit-making purposes
and which is exempted from the federal income tax by the InterYtal Revenue Service.
(5) "Affordable housing developer" means an individual or business entity which dsaeiops low and
moderate income housing as certified by'the housing adnunistrator.
(1974, Ord. No. b9, sec. 1; Am. 1978, Ord. No. 364,-sec. 1; Am. 1982, Ord. No. 819, sec. 1.)
Sccti®n 2-111. Powet~ of cotmtdl.
(a) lrxcept as othetwiss provided by law attd subj~t to other provisions of tlsis aetick, flee cotaaacil araay, by
resolution approved by a majoriey of its members, direct the finance director or chief engineer:
(1) "To dispose of real property in flee simple by lease, license, or permit; provided that eery lease,
license, or permit evhose farm is for less than one hundred eighty days may be granted, without the
necessity of council actioat, by the finance director or chief engineer through direct negotiation and
without aecourse to public auction;
(Z) To grant easement for particular purposes, subjece, however, to reverter to the County upon
termination or abandonment of the specific purpose for which it was granted, provided that any
easement may be granted by direct negotiation and without recourse to public auction when the sale
peke of such easement is less that, $],00~;
(3) 7°o exchange sea] property for private property.
(1974, Oed. No. 69, sue. 1; Ana. 1978, Ord. No. 364, sec. 1: Asti. 1982, Ord. No. 819, sec. 2.)
Section 2-112. IlisposifDOn by auc3ion,
Unless the council finds substantial ieasons to dispose of real property in some other manner, all
disposition of real property shall be roads at public auction, after public notice as provided in section 2-]11.
All such auctions shall be held at the main entrance off the County build~g in whisks the n7ain office of the
department of fana$cs is located or at such other place as is convsnieat in the district in which the real
property is located, and shall be conducted by the finance director or by his authorized rsprssentative.
(l 974, Ord. No. 69, sec. ] ; Ain. ] 978. ®ed. No. 364, s®c. 1.)
Seetiott 2-113. Sam or leap kag~ s b#ds,
Wlaensvsr real property are to be sold or leased by call for sealed bids, the finance detector shall notify
by publscatioe~ for a call for bids as provided in section 2-] 16 with stacks details coreceming the call for bids
as he shall deem necessary grad ~ssrabls. All bids shall bs sealed and delivered t® the fitaatece director and
shall be opened by hits at the tinx and place stated in the call for bids. '']'lie finance a®sy reject arty
or all bids and waive any defects when in his opinion stash rejection or waiver wiII be for the best iratert;st of
the public.
(1974, Ord. No. 69, sec. 1.)
SecBior$ 2-I14. She oe by ste;otisttiorr.
(a) Real property rosy be sold or leased through negotiation upon a finding by the coaancil [list flee public
interest demands it.
Attachment ~~o. 2
§ 2_ l l q HAWAII COC.rN~rv CODE
(b) After a determination is made to negotiate the disposition, the finance director shall:
(l) Give public notice. in accordance with the procedure set forth in section 2-116 of the County's
intention to sell or lease real property through negotiation setting forth the [ninimutn conditions
thereunder.
(2} Establish reasonable criteria for the selection of the buyer or lessee.
(3} l~eterrraine She applicants who rrreet the criteria for selection, and notify all applicants of his
det,ermiatatiotr. Any applicant may examine the basis of rtes determination, which shall be in writing,
to ascertain whether or not the conditions and .criteria established were followed; provided that if
any applicant does not notify the finance director of his objections, and the grounds therefor, in
writing, within twenty days of the receipt of the notice, he shall be barred from proceeding to seek
legal remedy for any alleged fail[rte of the finance director to follow the conditions and criteria.
(c) If only one applicant meets the criteria for selection of the buyer or lessee, the finance director rnay, after
notice as provides in subsection (b){3) of this sectioer, dispose of the real property by negotiation. if two
or mote applicants meet the criteria for the selection of the buyer or lessee, the finance director small
select the buyer or lessee who submits the highest offer contained in a sealed bid deposited with the
finance director.
(1974, Ord. No. 69. sec. 1.)
Sertiort 2-115. lExcirge ®f rem ps®perty.
(a) No exchange of teal property for private property shall be made except far public proposes, including,
but not limited to:
(1) Consolidation of holdings of teal property;
(2) Straightening of boundaries of veal Property; or
(3) Acgarisition of adequate access for landlocked-real property which has development poeential.
(b) Exchaaeges shall be effected withoatt public auction. Public notice of arty proposed exchange shall be
given in accordance with the applicable provisions Set forth in section 2-116.
{c) The real property exchanged shall be of substantially equal value to that of priva~c land. In any exchange,
the fair market value of the private land and the County-owned land shall be separately detettnined by
a disinterested qual~ed appraiser or appraisers and the cost ihemof shall be borne egtratly between owner
and the County.
(1974, Ot~d. No. 69, sue. 1; Atn. 1978, Ord. No. 36~, sec. 1.)
Sacti~ 2-116. 1V®tfce.
(a) Auctions. Nonce of any proposed disposition by auction shall be published at least once in each of three
successive wester in a newspaper of genr..ml cirairlation its the County, the last publication to be not less
share five days before the date of the auctioti. Notice of the auction shall contain the following:
(1) Tints and place of attctiota;
(2) General description of the teal property, including the address and tax map key;
{3) Specific use for which the dispositio® is intended; and
{4} Upset price or lease rental to be charged. The snaps showing the metes and botutds description aixi
the classification of the land shall be kept in the office of the finance director and shall be open for
inspection ~ all reasonable hours.
(b) Sealed bids. Notice of any proposed disposition by scaled bids shall be published at least once ixr each
of three successive weeks in a newspaper of general circulation in the County, the last publication to be
not less than five days before the date set for the receipt of proposals.
Notice of the call for sealed bids shall contain the following:
(1) Tirrie and place for openiatg of sealed bids;
(2) General descrigtion of the real property, including the address and tax rnap key;
(3) Location where bid blanks and specifications tnay be secured.
2-44
ADM~iISTItATYON § 2-116
When deemed necessary by the finance director, bid deposits shall be prescribed in the public
notices inviting bids. Unsuccessful bidders shall be entitled to return of bid deposits when the finance
director has required such. A successful bidder shall forfeit any bid deposit required by the finance
director upon failure on his part to enter into a required contrace within ten days after the award.
(c) Negotiation. Notice of a proposed disposition by negotiation shall be published at least once in each of
three successive weeks in a newspaper of general circulation in the County. Such notice shall invite
proposals and state in general terrrrs the size, location, and prices or lease rental of real property to be
sold or leased, the terms of sale or lease, and the last date on which application will be reseived by the
finance director, which date shall not be less than thirty days after the bast date of publication of the
notice. 'Tlre notice shall also state the times and places at which more detailed information with respect
to the sale or base may be secured by interested persons.
(d) Exchanges. Public notice of disposition of real property by a proposal to exchange real property for
private property pursuane to section 2-115 shall be published ae bast once in each of three successive
weeks in a newspaper of general circulation in the County. The notice shall state in general terms the
size and location of the public lands proposed eo be disposed.
Notices are not required for license, pet~rttits, disposition of remnants, and disposition to government
agencies.
(1974, Ord. No. 69, sec. 1; Am. 1978, Ord. No. 364, sec. 1.)
Se~o® 2117. App .
(a) Public Auction and Sealed Bids. The appraisal of real property for sale or lease at public auction or by
sealed bids for the determination of the upset price may be perfortrred by an employce of the County
qualified to appraise lands, or by a disinterested appraiser whose services shall be contracted foe by the
County. No such real property shall be sold or leased for a sum less than the value fixed by appraisal;
provided, that for any sale or lease at pubDac auction or by sealed bids, the finance director may establish
the upset sale or lease rental price at less than the appraise! value and the real property trey be sold or
leased at that price.
(b) Negotiation. The sale price or lease rents! of real property to be disposed of by negotiation shall be no
less than ehe value determined by a disinterested appraiser whose services shall be contracted for by the
County.
(c) Whetuver more than one appraiser is appointed each shall prepare and submit an independent appraisal.
(l 974, Ord. No. 69, sec. 1; Am. 1978, Ord. No. 364, sec. 1.)
Section 2-118. 1Remna
{a) No parcel shall be disposed of as a remnant solely for the reason that it lacks an adequate access.
(b) Notwithstanding any other provision of this article, remnants or portions thereof rYray be disposed of
without recourse to public auction in dte manner see forth herein. Any rerraarant or portion thereof to be
disposed of shall be first offered for sale to the abutting owner for a reasonable period of time at a
reasonable price based on appraised value, provided in cases involving parcels of less than two thousand
five hundred square feet, the finance director may establish a price which is based ore the square foot
value used for determining real property tax valuations of the abutting owner(s). The director shall take
into consideration the lirttited market for the remnant andlor the resulting enhancetarent to an abutting
owner's property by the addition of the remnant as outlined in subsection (c). Por those parcel(s) utilizing
the square foot value of the real property tax valuatioar process. the final disposition shall be approved
by resolution of the County council. If there is more than one abutting owner who is interested in
purchasing the remnant, the remnant may be subdivided and a portion thereof sold to oath abutting
owner at the appraised or established value.
(c) Except for those parcel(s) comprising less than two thousand five hundred square feet whose values are
based on similar square foot values utilized by the real property tax office, the value of the remnant or
2-41 tare~~i c«a,~ s•i•ssr
§ 2-118 D"IAwAII CoulvTY CODE
portion thereof shall be appraised by an independent appraiser, which appraisal shall take into
consideration the limited market for the remnant and/or the resulting enhancement to an abutting owner's
property by the addition of the remnant.
(d) In any case, disposition costs including but nee limited to appraisal, survey work, preparation of
environmental assessments and preparation and recordation of documents may be added to the established
sale price. I~lowever, a buyer may provide for the independent appraisal. survey work and preparation
of environmental assessment at the buyer's expense, subject to review and agreement by the County.
(1978, Ord. No. 364, scc. 1; Am. 1996, ®rd. No. 96-35, sec. 2.)
Section 2-119. llsxnses and pe~tltg.
(a) The council may, after consulting with the chief engineer, direct the finance director to issue licenses and
permits through negotiation and witltoue public auction for the temporary occupancy of County-owned
lands or interest therein under such conditions which will serve the best interests of the County, subject,
however, to such restriction§ as may from tirrae to-time be expressly provided by law. Such- permit on
a month-to-anoneh basis may continue far aperiod-not to exceed Date year from the date of its issuance;
provided, Cleat the finance director may allow the pertreit to continue on a month-eo-rnonth basis for
additional one year periods.
(b) The council array, after consulting with flee chief of polace, direct the chief engineer to issue licenses and
permits through negotiation and without public auction to enter and occupy public highways and other
rights•of-way owned, maintained and/or under the jurisdiction of the County, subject, however, to such
reserictions, conditions seed terms which will best serve the interests of the County and the generab public.
(1978, Ord. No. 364. sec. 1.)
Sectl~ 2.120. 1Di~slti®ta to !®vcrri.>Htent, g®vera®utental agencies, n®npa~ofit ®rgaafl®rts, sesai
afiorda~~aie h® dev .
(a) Notwithstanding stay limitations to the contrary, the council may, by resolution approved by a majority
of its members, direct the finance director to negotiate the disposition of roal property by:
Selling it in fee simple at such price and- on such terms and conditions deemed proper to
governments and governtteental agencies authorized to hold lands in fee simple;
(2) Leasing iY to governments, governmental agencies, nonprofit organizations, or affordable housing
developers ai such rentals and on such tenlns and conditions as deemed proper;
(3) Exchanging it for real property owned by governments, governmental agencies, nonprofit
organizations, or affordable housing developers.
(4} Granting 1acenses, permits, and easements to goverr?nunts, governmental agencies, nonprofit
organi~tions, or affordable housing developers on such terms and conditions as deemed proper.
(b) A disposition of real property to governments, governmental agencies, nonproft organizations, or
affordable laotasittg developers may be made without the notice or appraisal required in this article.
(1478, Ord_ No. 364, sec. 1; Ain. 1952, Qrd. No. 819, sec. 3.)
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Date:
Departrrrent:
Contact:
(1J®es~e) (relephono Fateruion}
Name of Contractor:
Vendor Number: (If none, attach Form V-8)
Purpose of Contract:
Source of Funds:
Amount of Contract:
Procurement Approval: Contract No.:
For contracts requiring multi-year co,n,nitments:
Council Resoiudon Number: late Approved:
{httoeh copy o/ resoleeeon}
Route to: [ ] Contractor (Review and sign contract before notary public)
®ate completed & forwarded to next
[ j Ileparttatent Mead (Signature reco,nmending approval)
Date completed & forwarded to next:
[ j Purcltasang Agent (Procurement review and reporting)
Date completed 8t forwarded to next:
Cotatrollcr/I}irector of Firtatsce (Certiftcarion of
funds)
Date completed & fotwat~ded to next:
[ ] Civil Service (Director of Personnel certification, qtly as required by
Civil Service procedures for personal services contracts)
Date completed & forwarded to next: P0050
[ j Corporation Coeansei (Approve as to form and legality)
Date completed & fotwarded to next:
[ ] Mayor (Review, notarized signature and date)
Date completed & forwarded to next:
RCTUitN TQ DCPARTl~1[ENT REQUESTING CEItTIFICATIOIV
for issuance of notice to proceed and distribution of contract copies
to affected parties and Controller Attachment No. 4
After eaecuiion of contract, retain Ihis form in procurement file with all required attachments
COUNTY OF I-IAWAI`I
PAIiIt5 AND IBECItEATION I)EPAItTMENT
LEASE 1m1EOGOTIATI®NS AND CONTRACTUAL PItOCIESS
V4'ITI-I NONPI80FIT ORGANIZATIONS
Departra~ent Negotiates With Nonprofit
Organia~atians
(Drafts Lease A regiment}
Corporation Counsel Reviews
County Council Approves -
Mayor Approves & Signs
Executed Agreement Returned To
Negotiating Department
Ai`$gC}AB9b~YGt NO. ~
Prepared ~y The Office Of Legislative Audetor
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CITY AND COUNTY OF I~iONOLULU
LEASE NEGOTIATION AND CONTRACTUAL PROCESS
~iTii NONPROFIT ORGANIZATIONS
Director of Finance
Publishes Notice Requesting
Proposals
Appropriate Agency Examines,
Evaluates and Determines Best
3 Proposals
City Agency Negotiates w/Best
3 Proposals
City Agency Makes Selection
City Agency Submits Report
and Lease to City Clerk
City Clerk to Post Results
Corporation Counsel Approves
as to Form and Legality
City Council Approves Lease by
Resolution
Mayor Approves and Signs
Atfachrnent N®. 8
Prepared by the Of~'ice of the Legislative Auditor
.Y.= Revised Ordinances of Honolulu
KI;AI. hltC)1'l;tl'1'Y LEASE; ANU K1-_tv I'AI. 2S_ I , I
Chupla:r Z8
LLASL ANU ItIsN'1'AL Oh Cl'1'Y ItGAL i'IiOt°lslt'1'Y, INCLUDING hLLS
Arliclcs:
I. t:,enerall'ravisiuus
2. taiddaug [tcyarirenecaats Barad I'rucedatres
3. ~xeelttiuars lee I3iddirag Itszyuiretueart
4. 'I'erua oaf Agreeteteuls
s. i'@ataalty
G. Ccaterael 1'ruvisietets fur the Lease Hurl Itr'trlul I'~tlicy fur flat U4patrluteatt oaf Auditoriuttes
7. lietttrsl Sclaedttle
8. Cerrtca'ssioeas
9. Narttprufit Orgueiirsaliaaaas
lU. Severaebilily
11. Le®se aettd I'eruei! I'ollcy fur tlae Grottttds ul' City 11®Il areal the Ilutwlatdu i09uaeicipal 13aeilding
Article 1. Gettet••atl 1"rovisiorts
Secliaaras:
28-1.1 I'atrpusc.
28-I.2 8c®Itc.
28-1.3 ®eleraitletus.
Sec. 28.1.1 1'tsrpose.
The purpose of dais chapter is to establish a unifaxna procedure for the lease or rental of real property oaancxl
by the city, wills the e><ceptioaa of the city hal6 building and the Flotaolulu azaunicipal building. Aary arad all office
spaces located within flee: subject two buildings shall be reserved for flee exclusive use by agaaacies of flee City aatd,
County of lionolutu. (5ec:. 30-I.1, 11.0. 1978 {1983 ~d.})
Ses.28-I.Z Sc®pe.
Tfae scope of this chapter includes the policy Ilaat flee lease or rental of property of tlae City and County of
ldoraolulu or the award of concessions shall require public a$dvertiseraaents end bids, except uaaaler specific
circumstances. ~'hiS ChapleP else) inclaade5 flee requlrcd biddlrag procedures arld attendant tertalS Of agrecnaeaats alril
penalties. (Sec:. 30-1.2,11.0. 1978 (1983 Cd.); AarL Ord. 91-2'~, 97-U2)
Sec.28-1.3 ]Dsfstlliut~.
Tlae following words arad phrases shall, for the purposes hereof, leave tlae rneanitag respectively ascribed tea
them unless it is apparent from tlae context that a different rnearaing is interacted:
"Agency" aaaeaaas :easy office, ctepartaracut, boarct, corternissiott or other governnaetatal unit of floe city iraclucting
the city council and its ofraces.
"Coiacessiora" nae+ans floe grant lu a private inctivictual, partrserslaip or corpuratiou of tlae privilege to conduct
operatio»s esseratia6ly retail in nature, involving flee sale of goods, wmres, uaerchand'ase or services to floe geaaeral
public, such as restaurants, retail stores, parking facilities, golf driving ranges, canoe storage facilities (halaus),
in or on land or batilctitags owaaed or controlled by the trily and County of lioiao[ulu.
"Cottncil°° tT~tas t6te city c®ttnci! of 411 Ci9y ant(C®un4y of Hono6ulu.
"Finatace director" raaeaias rtes director of finance vF floe City and County of Hotaolulu.
"Mataaging director" rpaeans flee ananagiatg director of the City and Coutaly of I~lottolulu.
°'Nongr®l It Urgani7w3llon" loosens an associatiota, corporatiota or other cxati ty, cxgasai7~es1 and operat~l exclusively
~ ~ for religious, claaritabie, scientific, literary, ceiltural, ~iucational, recreational ur other nonpr®6'it purposes, no part
of the assets, incoatae or earnings of which inures to flee benefit of any individual vP aateiraber tlaereaaf, arad wtaosc
(Ilwooluiu 4')91
Attachment No. 9
Z~- l .3 lZIiVISI•:U Oltl)lN!\N('IiS UI' 1-~ONOLIJI.iI
charter or other enabling nee raml:ains a ~~aovisiun llrst. iaa Ilac event of Jissulutivn, flee assets uwaacal by such
assaxiatiuaa, corporation ur other enlit)• shall lx: distribulctil to :uautltcr ussucialiun, cuapuruliun or other ~ntily
urganiteJ caul uln:ratcd exclusively Iur nunprulit purposes, anal which furllaea yualilies fur exemption ftvna the
general excise tax provisions ul' IIIZS Chapter 217, ;as anacncJcd, and under Secaiou SUI of the latcrn:al Itevenuc
CcxJc ul• laI5.1, as anx:atalcd. Such nonprofit uagani~;etiun nnast not n>crcly be a sponsor of Iln; event, pnxluctivo,
alll'aa.'UOtI ur aaalYlly lxan~' ~',IVI.'ll. 1)Ut IaluSt 8t.'UVCiy lai•UInUIC, praxluce, stage ur cunaluaa such event, prualuctiwa,
aitractiun ur activity. (Sec. 1D-1.1. K.{). la)78 (1987 5ultp. to ItI83 l;d.))
Article 2. <lidditeg Ideeluirelaacaals ataltl I'raxedure's
Sectiutts:
28-2.1 15idd'ae'g rcaluired.
28-2.2 Caall 1'ur bids.
28-2.3 Qeaaalil'iraaliocl of bidders.
Zfi-2.d Advertiser®ea: ttt I'ur bids,
28-2.5 Cult usf laaeblidtatiura.
28-2.G 13aa4s~-~;mea,ilag;-Itejcctiun.
28-Z.7 131c1s~-1~Vi fll®alruavsa0s.
28-2.8 I.~eposits to trccuatrlraany bid.
28-~.9 Irorl'citurc of dclausils-Iteturra.
28-2.1U $loucl llr lieu of dslwsit.
28-2.11 Cae~atra$ct exaya;aetiulr--Awua•d to llighest reslsurrsibler bidder.
ZS-Z.12 Security delaosit.
28-2.13 Surety ®al IaaDeeal-~~Jeastilicagtiule.
28-2.1~i Viulaaliaan voids cuntraact. 1
4
5cs- 28-2.1 Iliddi®ag rctluiaraed.
Unless expressly exa:cptad in ibis chapter, tau real property or stay coatcessiuat ur concession space iaa any
building or on any lased owned by or uaadcr flat; jurisdiction of the City and Cuwaty of l luuolulu shall be Icasc~al or
rented except utackr coaltrua:t Ict under public adverliseatacut fur se:aied telxlers in flea; uaanaAer provided la:rein:after.
(Sec. 3Q-2.1, R.O. 1978 (1983 Ld.))
Sec. 28-2.2 Cull tar bids.
The fitaaa~a:e d'areaaor shall call for bids, aa;cept bids aaxJ sword cotlccssious ur award contracts iu Icasc: ur rent
property on terms, ctxlditiuras uard rentals approved by tiaecoa•poration counsel. as w for naatxl lcg;eGty. (Soc.. 3U-2.2,
R.O. 1978 { 1983 Eel.
Sec. 28-2.3 Qus1liC~atiora aaf bidders.
13efurc auy prospecGva: bidder shall be entitlcxl to subartit any bid roquired uodcr this chapter, flee bidder shall,
IIUt lcSS lllarl Six calendar (Jays IDCIOf IU tl~ day designated for opelting bids, give written stories to floc liaaance
director of rite bidd+~r's ialterlation to bid. seed the faience director shall satisfy Itiuaself ur irersa~lf of ti>< prc~ltc:ctive
• bieldel's fallaaicial ability, experleBlce and COBHIpa;"iCI1Ce tUcarry out 411e terms slid ctitldallW a5 Uf stay Cgaatl'acl first May
be awardeal. l-0or this purpose, rite fialattce dia•ec:tear may require prospective bidders to submit answers, wader oath,
10 CltaF:sl30B15 COntellttCd 111 ~ gtlCStlo1a11Jlre Setling ~®rl~l al COBfl9p1Ct6 St~tClt&E13t Uf llDaw arXpl`IiBtICC, c®Aaalactcaace aaxl
fitaancial standing of steels prospective: bidders. VVllenever it appears to ills Cttaatx:e d'u•cxtor tt:at as:y prusluctive
bidder is not fully qualil'ia~cJ al'td able to carry out file tel7sls ao¢1 conditions of rite cwitract llaat IRY~6y be awarded, flee
director Ir?;ty, after ;affording sueh prospective bidtkr an opportunity to be heard, refuse to raxeive or consider any
bid offerer by such prtispectiYt: bidder. All inE®rart~ta4Dt1 Coiataatll~l ni th8 a11SWL`a'S l0 ilUestlUnllilirt..~ Stall rCnl;llia
confidential, and any goveA•alaltealt officer or elllployee who lcltowingly divulges or permits to be d'IVUlgcd soy such
iaifonn;atioaa to any person riot fully entitkxJ tli>rreto shall be subject to penalties as lrrovicJed bylaw. Quastiautaires - ~
s0 sllbrlliflttr(J Sllall be rcturlied tU lies bidd~CS after leaving se7'V8d their purpose. (Sec. 3U-2.3, R.O. 19713.(1983 Ed.))
{ltmrsoluam G-99) 2$-~
SEAL FROPERTIC LEASE AND RENTAL 28-2.4
See. 28-2.4 Advertisement for bids.
(a) Publication of a call for tenders for the awardiaeg of concessions or concession spaces shall be made at feast
on three separate days in a daily newspaper of geeaeral circulation in the City and Cotanty of d-ioraolulu.
(b) Perbliaratiaet elf a call for Benders f®r leaseng of real property or easy i~pncnernents thereon, other there a
concession or concession space, shall be taade once a week for at least two weeks in a daily newspaper of
general cir~alation in the Citgr and County of 1$®atoluloa.
(c) Such public annotrnceauent shall incltade, but not be lireaited to the following inforreaation:
(1) I3esceiption of flee concession, real property, or ie®proveanents and the objectives for it;
(2) Location;
(3) Scope of the award oe lease;
(4) l.etagth of the award or lease;
(S) Amount and type of governanent funds, if easy, available for the project;
(6) 'ption of arty special requirements of unique features.
(Sec. 30-2.4, 1978 {1983 Ed.))
See. 28-Z,~ Cost oaf publication.
`The feetancx director e>aay esquire the party requesting the publication of a call for tenders to deposit with the
director a mortified chexk or cash equal to or greater Clean the estiruated core of publishing the adtrertiserraent for
bids, before stash advea~tisement as published. The cost of publication ~sy be deducted [cotta said deposit and
retained by Chao oily acrd cotanty if said party fails to subr®it a bid. (Sec. 30-2.5, R.O. 1978 (1983 Ed.))
S~.2l1-2.6 ~iag~rti®g~It~~tioii.
'I°!ae time of opening of stash tenders shall not be less theta Eve days after the last publication. All bids shall
be sealed aa'd delivered to the finances director, and shall be opened by the director at the hour and plane to be
stated in the ca11 for tenders, ire the presence of all bidders who attend. and may be inspected by any bidder. The
finance director may reject any or all bids seed waive stay defects, when in the directoa's opinion stash ri3jectiota or
waiver will be for tla®b~t interest of the-city and county. Upon a~pl®tion of flee em+altaatioar and eeelectaoar press,
the fsttance director shall flit a written report with the eity clerk, including the results with the sucoessfial bidder.
T'he city clerk, tapoit receipt of the written report, shall post setae [or peablie inspectaoea antler sea appropriate title
net the bulletin board on which meeting notices of the counsel, including its agenda, are posted and such report shall
be a public record. (Sec. 30-2.fi, R.O. 1978 (1983 l~d.))
Sec. 26-Z.7 13€al~Witladarava-als.
I`Io bidder stray withdraw such bid for a period of 60 days after the opeaiiitg thereof (See, 30-Z.7, R.O. 1976
{1983 Ed.))
Sec. 26-Z.i l~eparsita to eiceo~ipariy bid.
All bids shah be aocomparaied by a deposit of legal tender or by a certified check payable to flee finance
director dratvti on a bank doiti~ business within the State of i~awaii, for or in a suer equal to live peitrent of the
aratount bid, but ire no event to be less that 550.00; provided, that when the aattatint bid ~ceeds SSO,OlIf1.00, the
certificate of deposit or certified check shall be 32,500.00 pleas tsuo percent of the amount in excess thereof. {Sec.
30-2.8, R.O. 1978 (1963 Ed.})
Sec. 28-2.9 Forfeiture ®f deposit$®Reteirn.
If the bidder to whoeat the caeatract is awarded fails or neglects to enter into the contract and [urnash
satis[actory security as required by this article, within 10 days after the award or within such fuether tittle as the
finance director taaay allow, the 6rtance directoe shall pay the deposit into the treasury as a realisation of the City
and Caoaaaty of 1•lonolulu. If the contract is entered ieato and the security [urnished within the required tame, the
deposal shall be returned to the successful bidder. Deposits aatade by the unsucxessful bidders shall be returned to
25-3 (itonvlae~u ~.9>>
28-2.9 REVISED ORD3NA]dCES OF HONOLULU
them after the contract is entered into or, if the contract is aaot entered into, after the capitation of 60 days after
the opening of the bids or after the fiaaarace clirectcar pul,lishes another call for tenders, whichever is sooeaer. (Ses.
30-2.9, R.O. 1978 {19113 3rd.)}
Sec. 28-2.10 JB®erd ltt ilea oS clel?os®t.
[n lieu of the deposit of legal tender or a certified check, a bid arasy be aocouapanied by n surety hosed naauing
the city and county as obligee, with the bidder as principal, and a surety eonapany, authorized to do business as such
in this state, as surety, in a penal sane equal to• flee deposit required under Section 2&2.8, conditioned upon flee
bidder entering into the contract and furnishing the eequired security within 10 clays after the award ar evitlain such
further tithe as the finance director may allow. (Sec. 30.2.10, R.O. Y978 (1983 F..cl.))
25-2.11 C~tt°aet exectatiua~-As+,~rd t® hlp~est a~spoe,sible bidder.
All such contracts shall be in writitag, shall be executed by the finance director in the name of the City and
County of I~onoiulu, and sha11 be made with the highest responsible bidder, if such bidder shall quality by providing
the security required hereinbelow. if the highest and best bid or any other bid has been rejeceed, or if the bidder
to whom the contract was awarded has failed to enter ineo the contract and furtaisla satisfactory security, the fitaance
detector array, in the director's discretion, award the contract to the nex8 highest responsible bidder. (Sec. 30-2.I1,
R.O. 1978 (1953 Fd.))
Sec. 28~-2.12 S~aa~iBy deposit'
33efore eery contract is entered iaato, the bidder shall give security for fire oampliancx therewith by deposit of
sea ataaount equal to two anonths' rental or other charge required tender the contract, except shat in flat. case of a
contract f®r 4he 3e of residential property, a sectrity deposit iat an amount equal 40 one anaanih'a refer slaaU be
required. In lists thereof the f nanoe director c®sy accept good aid sufilcieaat bond for the said agaotant, naataiaag the
city and cxetanty as obligee, with the bidder as principal, and a surety ~pany autltoriaed to do business as such
in this state, as surety. (See. 30-Z.12, R.O. 19711(1983 Ed.))
Sec. ?$-1.13 Satara~y cam llporad~Jrastil;aca8ion.
if the surety or sueeties on such bond shalfl be other than a surety company authorized to do busiaae~ under
the laws of this state, there shall be not amore than four such sureties who shall severally justify such ~auounts as.
taken together, will aggregate the full amount of flee bond; provided, fleet in the comae of such sureties they shall
deposit with flee finsattce director testified checks or certi6'icates of deposit (payable on demand on or after such
period as the finance director may seipulate) or bonds. seoclcs or other negotiable securities, or execute and deliver
to such officer a deed or deeds of frost of real property, all of such character eta shall be satisfactory to the finance
director, in security equal to the foil cash value of 100 peacent of the amount fur whkh each surety shall leave
assumed. The finesses director may waive the necessity of furtaishitag such security. in cases where the director is
satisfied as to the financial responsibility of flee proposed surety or sureties; provided, that if eherar be brat ores
personal starety, said surety shall justify the full ammount of the bond. (Sec. 30-2.13, R.O. 1478 (1953 lEci.))
Ste. Z81-2.14 Violation m~oids contract.
After the effective date of this chapter, gray contract awarded or executed iaa violation of this chapter shall be
void and of no effect. (Sec. 30-2.14, R.O. I978 {1983 Fd.))
(ainsaolulu 6-93) 2$-4
R~?[. PROPERTY LF~S1F ntvp 1tEtvT'At, 28-3.1
Article 3. lExceptaons to lI<lcidang Itequir~acnt
Sections:
25-3.1 Itldding not ~quireal~L,eased or carets! property--~Coreditloras.
28-3.2 Ridd'aetg raot trequlred-I9tvel®p~trrtt of spa:caat neods leottsang.
211-3.3 Madding trot requirtel~ontessi®ns.
28-3.4 >liddiaog not requat~d-leasing to private dev~o~rs.
28.3.5 Ridding n®t required~lFluntan servaces pm9omdders.
Sec. 28-3.1 IaBddenE not requires--- or rermtal pro;eerty~otadati®ras.
The finance director shay award contracts eo lease or rent property on terttas, conditions and rentals approved
by the corporation counsel as to form and legality without calling for public bids, when:
(a) 1?minent ®omain. Real property and/or improvements thereon have been acquired by the City and County
of Elonolutaa by eminent domain proceedings, negotiated puricltase or exchange, and where ittamediate rase of
the property acquired is not necessary. Said property shall be rented on a anoneh-to-rttonth tenancy which shall
be revocable at the option of the city after the tenant has barn given 30 days written notice to vacate. The
total tenancy under any stack tease or rental agreement shall not exceed the period of one year frown she
effective date of such !case or rental agreement; provided, however, that with consent of the waencil, a
renewal or extension of said tenancy beyond such period rosy be allowed. 'The provL~ions of ehis paragraph
shall sot be construed as prohibiting the flnatts~ director froth leasing or renting sash property by public
bidding ward for a period in excess of one year, pursuane to she provisions of this chapter.
(b) Eanployce o€ the City and County of iioetoltalu or the State of Hawaii. Real property andstnproveancnts
thereon are leased or rented to employees of flee City and County of )Flonolulu or the state. Said property
shall be leased or rented only under the fallowitag conditions:
(1) The parry or parties to whom the property is lewd or rented sharer be and continue to be an employee
of ttte City and County of llonolttiu or the state daring the teaatt of the de:tnise; wend
(Z} The !casing ce renting of the property to said erttployee tastast be related to the etnployce's employment.
(c) Thirty-l7ay Period or Less. Real Property and/or uraproveanents thereon are leased for a period not to exceed
30 days. No extension of such lease shall be petttaitted without salliaag for public bidso
(d) Tourist ~letivities 9~/iehout Charge. Enterprises, shows or aceivities presented without charge primarily for the
prot®otion of the tourist industry in and for the City and County of D-lonoltalu regardless of which person,
association or company sponsors such enterprise, show or activity; provided, however, that such lessee or
tenant does rtot eel! merchandese on the premises, directly oe indirecely, or engage in any business
protnotionals or advertising, whether oral, by priaated tnateer, signs, displays or electronic devices.
(e} Neal S. l3laisdell Center or the 1At'ailsiki Shell. The rental is for the case of facilities for the purpose of holding
any event or attraction at the Neal S. Rlaisdell Center or the !hlsiltilti Shell in accordance with the provisions
of Articles ti through 9 of this chapter.
(f) City and County Employee Organizations. Real property and/or office spaces that are leased or rented to any
federal credit union of city and county eenployces or employees of city and county affiliate groups or
organizations.
(g) Eleemosynary Corporations. Real property and/or iataprovements thereon are leased or rented to any
dectatosynary corporation, society or organization formed for the prevention of cruelty to animals, and which
is authorized and empowered by law to seize and itrapound stray dogs running at large.
(h) Government Employment Training Programs. Real property and/or improvements thereon are Icased or
rented to any nonprofit organization primarily engaged in employment training programs sponsored by the
federal, state, or city and county government.
(i} Accessory Uses. Real property is Icased or rented to contractors who ace awarded city construction contracts
for use as a Geld office and storage of equipment and supplies. Rental shalt be at the fair market rental and
shall be limited to the duration of the construction contract only.
2p-s ~Ilonolulu 6-99)
Z8-3.1 REVISED ®RDINANCES OF ~'IONOLULU
(j) Governmental Subdivisions. heal property and irupravetaents thereon are leased or rented for the use of any
political of governmental subdivision of the federal, state or county governments.
(k) Private Developer. (teal property and improvements thereon are teased or rented to a private developer as
described in Section 26-3.4.
(1) Nonprofit Private Corporations and Community Associations. steal property is leased to a nonprofit private
coeporation or cocnisuetity association for the development of speadai needs housing, as prescribed in Section
28-3.2.
{m) Q°luanan Services Providers. Real property and/or improvements thereon are leased to a provider o[ human
services as prescribed in Section 26-35.
For tare purposes of [lies subsection and Section 28-35, "human services" includes child care, health services,
and social services. "Social services" means those services required by persons wrath social problenes ur physical
or manta! disabilities to i®prove their ability to live independently.
{Sec. 30-3.1, R.O. 1978 (1963 Ed); Any. Ord. 90-14, 92-95)
Sec, 28-3.2 i3jeldiitag got requiired®®cvei!®psererre oE' sg~ eaa housurg,
(a) The city racy lease, by direct negotiation and without recourse to public erection, city property to a nonprofit
organization or coraraunity association for the purpose of developing special creeds housing in accordance with
this section.
(b) Nonprofit orgsniiaatioats or conarnunity associations shall base:
(1) Been detee'rrrined to be an organi~tion eligible for exemption from income tax under Section SQt of
the faders! laterrea! Revenue Code;
(2) tltl or pan of lrs [needs furnished by either the federal, crate, city gavernraents, or a private charitable
trust or foundation;
(3) A cainirauea of 25 percent of its service similar t® those seewices whiclr are provided by the city;
(4} Beery incorporated, or activated. in the case of cat associstiores, ae least tvuo years prior to the
date a request for the leasioog of city pr®Perty is Made heraurtdr:r; provided that the council rmay waive
this requirement ire aoeordanca with this section; and
(5) included is their bylaws or other rules a disqualificatioer for raerabeesltip on their board any person who
is an officer or enapioyee of an orgartizatiain conteacted to perform a component of any progearu or
activity funded oa adisitristered by the nonprofit or 'nor coatraureity association
(c) d?lten the lease or rental of city property for devetoprirent of special needs housing is contemplated, the
director of finant:e shall cause to be published a notice which iadudes the following:
} The garrets! location, size, seed other pertinent chae~acteristiss of the city property to be leased or rented;
(2} °Tlte type or types of special needs groups to be provided housing;
(3) The tainimurn qualification that propect proposers yens[ rase[, secluding the requirements specified in
subsection (b) herein;
(4) The crieersa to be used to rank and select proposals; and
(5) The proposal fortrr, applicable deadlines, and other snformation necessary for interested persons to
submit proposals<
's`he notice shall be published 'err a daily newspaper of general circulation at least once a week for two
successive weeks, and she last notice shall be published at least 14 days prior to rile deadl'ane for submission
of proposals.
(d) The appropriate city agency shall examine all proposals properly submitted from interested persons, evaluate
chant according to the stated criteria, and determine the best three proposals thereby. T'he city agency rttay
negotiate with persons submitting the best three proposals in making s final selection of a proposal.
(liorvvlu7u 6-97) 20-6
l~l. laltoPF.~7"Y i-.I+ASE AND R~IY'I'AL 28-3.2
(e) if no qualified propa~sals are reexived in response to the notice, the city agency enay negotiate with noaaprofit
or tioams or oaanity lions not eameetiag time ~amaaai~aamm period of incorporatson required in
' n (es) above; provided that the city ~geemcy shall note that fact iae its report pursuammt to subsectioam
(f) below, and al~ll requese oouamcil waiver of that regaairemeamt fro the resoBaation approving the i~se or rental
~ ' P~•
(f) 1?oIlas~riog selection of a proposal, the city agency shall 5de a vvritteae report with the qty clerk oonta~Ing the
public ffi®tice paeblished to request proposals, a listing of the top throe proposals, seed identifying the proposal
selected, includlmmg the resamlts of any negotia#ions evith flee eeleceed r.
(g) [9poa receipt off the report, tlac caty clerk shall -post the report far public ' on imm city hall where other
public rsotie~ and meeting s~dae of time ~uemcil are posttd. °The report shall be a paeblic record.
(h) Followitag selection off the al, the e~ty agency $lmall submit a lcasc or rental agrent therefor to the
eouncal for approval by re~fution, fihe leaac agreement i~lude provisions a+squiriaag the le,GSee to:
(1) ~?dd the e~ty as an .additional iaasured ttt ~ o~mpreheeasave public liability ~ policy relative to
the of the pre .
(2) ~ , defend and hold Mess the city, indaadermg its offieaets, employees and agents, from easy and
all liability, loss or ge the qty may eB a result of detraaeads, o or judgmmaents a~aimst
ca8y due to or ~ by the ~ of aaa aafllcer, employee ar amaember of the foregoing
o or sss+ociatioems; and
(3) F a pert ~ broad to file city to a~aere that the terffis and condatlo®s ®f times agreement shall
be anat.
(i) In approving the resolaetioem, the council may add, delete, ar amend any temffi or coemditioem of the lease
ant
{j) 'Ylme qty property may be l or related at a negated re®t< °I~me negotiated rent easy be a nominal
amount ig
(1) A public h lags been held by the city agency; seed
(2) city agemmcy has submitted to .the ~statagl fleet:
(As) were is a public emeed for the sorviees rendered by the rmonprofit private
or a or the so 'lion;
{l3) A suitable aemd prir~ed private fface~ity is not available; aamd
(C~ 'P1me a t leas led rmeed; and
(3) °I`lae lease sornpliea the r ima Section 2g-4.2.
({c) For the of the tom:
yC~ity property°° real property oarsaed or coaesolled by the city.
"Spega,4 needs hotm~ng" ' g saalts for pereoeas with social problee or physical or mental
disabi~es tlmat imxapair ability do live leads , ~d ffor ~rhozrt such ability can be iaaproved by more
suitable Sandi '
34.3.2, lst.®. I97S (1983 Am. ®rd. ~3t1.14, 9B-gb)
Sew X3.3 ~
The director eaaay avrard oDa and ooaaditions approved by floe evaporation counsel
as ~ form and legality vtldmout for public bids, wtmen:
(a) ~lTithout , Co yr which ass set a~lde without any charge for
e~veem~ productions, a yr a~ivities ierclttdiog time ezlmlbition sail sale of efts, works of art,
prods or prvduc~s off a ~t or , as ele~eae ~ Article 1, yr its re as long as the sale
of any rrafft item, works of art, prodaace ap pr~duct~ are aamade by the member of the 'on wlmv
creates, groom or gathers the items and ~ king as all set profits earamed by time noamprvl'at
five fso~ the ~n et are ~ be t~ flee of the ®rg . n ttraed iaa ~tmoctiotm
vr~ events or actsvities related to the floe which it Lacs been
(b) 3~eriods of ~+?o or Less. oems o$ eoeeiora which era set aeside for a period or periods
of tiffie rant to two su days vrithout e~arge:
(1) For time eaahibition and sale of works of art by artists who actamally product the worlrs of art being
~lmibited and sold;
28-7 ca,~,? a-~
28-3.3 ~as~ ®ttonvnrrC~s o~ Hotvol.ul.u
(2) For the eatDabitioaD and sale of handcraf8ed itc~ being exhibited and sold; and
(3) For the display arDd sale of fruits and vegetables, seafoods and prepared beat not tttanufactaucd load
produces by floe perm who actually grows or ga~Ders the fruits and vcgctables, catctDCS 49De Seafoods or
preps the food products beirDg displayed wad Sold,
(c} Handicapped or lllind lBersons. Co or co 'orx spaces which are set aside for the case of
handicapped oe blind persons oe aray nonpr®f"at or lion priDnarily engaged in physical rehabilitative
progrargDS>
(1) Nonprofit Private Corporations. The word "perms" contained lDesein shall include a nonlDroGt private
corporatron which leas beeaD eaenDpted frown tuition as prescsib~ under section SOl of tdae Intcmai
IBeverauc Code of 1986, aDroanded, ~d its acticiea of incorporation or allaf,4, have a
prov~issn eontairaed thereirD that ttDe objective of the oa>gporation is to servie® or aid or abet or
moist the h pped or blind
(2) No Rant, apt for l<tlaire COSt. Notwiths a3wny provisions to the auDntrary soaDeained
herein, the fiatataee director shalfl no rent for leas$DDg or renting of wnoeSSions or concession space
to or blind personas ilttd>xDg aray vcnditDg ~ arSigeDed to such ~ndors; provided,
that for real property, inclaD inDprovcmcrDts thereon, the ce director shall au t]De cost of
aDtcDtance of fleet portion of s~D real property lid or rented to handia,apped or blind persons.
(d) Gyve Su . Co 'orDS or 'oar spaces whiclD are set asido for the use of any polatical
or gsrvc a ' 'on of tl'c fcderaE, state or county ernaDents.
(e) Nonprofit Co® . Cosaaxio~ or 'on spaaxs wlDich are act aside for liccaased
by the state nt of
(1) Polite. T~ a~aDncii finds ttDat H beaS~Dlaoys are rooted ire tiDe state's historical a1Dd cultural
tra ' ' t~l tlDerc is a mead for flee city to provide for conaaons available to ' bcachboys
on beD property aDaDdcr the j 'on of the City and County of Honolulu.
(2) ISc ®`NorDproGt beachbaryy 'orD" ss the grant to a qualified beachboy ' tiorD of the
privile,~ to conduct operaeions entially retail nature, involving flee rental of s 1DOdyboard$
or A q bcachbay "lion is an ' tion whiclD is dedicated to the preservatiort of
the be:clDboy tradition and is incorporated as a nonpa~t corporation in acoordasDCe with state law.
(3} Spcl Condition tv l3e I~ct I~vidang l$eactDboy Conc~si®ns on Beach 13ar1; Property under
the J of tine CDty and Cout~? of Homylulu. TIDC ffollowing special conditions Shalt govern 8hc
award of nonprofit beachboy 'Des on be~D park propea#y under the jurisdictioat of doe City ~d
Couctty of Horaolulaa.
(A) TkDC depattroent of parks ark rea~eation shall desigreato specidic sites on t3De beach for each
beachboy ' n erect shall locate the sites ~ as rDVt to i~pa:dc aaxss to and use of the beach
by the ptDblf~c;
(l3) A nnay oiler to provicBe ' ' u for the use of reDttal equipraaeaat inciclcntal
to the rental of said aq ' t, and nDay offer the sale of canoe rides inddcntal to file rental of
and
(C) The alcpareDnerDt a[ partcs and recrcatioDa shall policies to ensure that the use of the
rDOnprofit bcachboy is restricted to wha ace licensed t to Chapter
gds Title 19, kiawaii ~ RDeles ( t of trarDSportatiorD), annd that such
' ffi are operated to equal o for Dace by all licensed bcashboys.
(4) Fees and Charges- for l3eachboy ns. The depat~eat of parks and recreation is authorized to
set the fleas merged by t9De o®
(S) ~ulesa '17DC dirrector of parks aaDd rc~eation shall adopt rules pursDaant to 1H1tS ClDapter 91 necessary
for tlDC of this n.
. (f) Nonprofit boo, Cadtur:! Parlr and C3arden ~;eDn ' ns. ions oe conossSion space at county
coos, aaalt p or botartiwl gaardet~ ~t aside ~t e~ by support groups which era inwrporatcd ~
Donprofit astlDOradosts ire aocord~tcc with stile law, r the of suppa?rting ovttnty arDd goals of
flee zoo and b®taDnical gardens arDd cultural parr provided, that eac1D support groaDp shall y subnDat to
the director of parizs arDd recxeation and the ceunc~l an financial atate®Dent of the revenaaes aDDd
cxpcnditurca of that support groDDp. .
lam. PItOFfiRT1' i.~s~ n~ I~ta'rAt. 28-3.3
(g) Cainrated Vending 1V,9aclsines. Concession spaces which are leased or rented for coin-operated vending
reaacflsinea wept coin-operated insurance vending manes.
(b) F'aablic Pay'~`e9epho. Condon spate wbi~h are fleaaed or rented foe public pay telepb®nes.
(i) Hans I.°ge afll Facallty. Concaons ~r n app ae t9ae Hans L'Oraaage bassball facilit,+
which are set aside without charge to the pee~oattee of a professiaal sports aetivaty; provided, howerver, that
the period of use ®f such ~ncessflons or concee~ion spacx shall be limited to the terere of the pererait. Ns used
in this unless the oorateaat o
(1) "i~ernaittee" means the proffioter, , esbibitor, league or other person who obtains a pernaie for
flee of otsnducting a prof sports ac~vity at a professional sports facility for which
' n fees are urged;
(Z) ~Profe~ional sports activity" Meares a gaolo, evont, ~hibition, or activity of a reoog~ed sport for which
a ' n fees are charged and the p f$ in which receive eoraapensatioes in return for
don in tho s&aor8;
(3} ~Ha I,'Oranges facilely" aneana the playing field, blew, stscds and othee areas of the
facility eaaclosed by a fence,
(S®c. 3®-3.3, 19'dS {H9S3 flrd.r Ord. 974, 4453, 980, 93-61)
S~ 23.4 Iii not tl€ng fo f<%
(a) The city fleaae or rent real property, iaclu~g thereon, to a Private developer without
for bids for the puxpo~s of oo ltousirig, eoni~ercials parking and otlxr fac~lides or uses iee
i~Pleffiont the p of tho sty seed co~tty.
(b) Tlee city agene)r .shalfl kc a gaablic ann ton each oocasioer wheae any Project is proposed or
con fed and set fords ties to be for the project a®d request isetted persoaes to
saeb s therefor. T~ e~itg? a slew eaech aneeo in a daily r of geeeral
cara~latioffi its the state owe a weok for two woelnt, and by postiaeg .the Project at the
aasociatson headgeaasters of deveBopeaa, realtors and cordbraa~ora Saesh public neent chef! include,
but not ~ lineited to ties f®Dleag infor~aati®n~
(1} ' tin of flee Proposed Pro)est and the obj for the P~1~:
(Z) ftion;
(3) Se~ope ~ the project;
(4) Leeagth of the lease;
(5) amount and type of governeaaeset fiseeda available for tie Project; and
(6} O off ang? special requirear~ts of oanique features.
A,ny ire r 6le the developer'` h~tenti~n ra seebemit a p with the city agency on or
before 3t3 days after the last nt<
{c) {1) Tice city agency shall p interesated developers and del those developers
tho a~ncy deeros quselffied to perforcct the for the spceafic pe+ojext under eonaideration. The
agera~ , tlaeaeafter, felo a writBen report silo city clerk in order of qualifications,
no less than d who ed resat to perforce flee mired services;
p that if there are leap the t , after the for pro the
agog may still select a developer .and a roPort wide the city clerk,
{2) Ldposi o~pletiora of the evaluation and ~lecti~ ,flee director shall file a we~ettetl report with
the clerk, isrcluding the is of tiro veith flee sueoos$ful r. The city clerB~,
upon reeoipt of any of flat foaregoir~ eesitten shall pat for public ' sender an
aPProPriate title on lice buileta~ board oa ~E emoting notices of Bho , including its agenda, are
posted, and such report be a public regd.
• (d) The evalreat~n ~d selection by any catj off design and developer ahafl! include, but need not
be ' to, otaaidera~ore of the e~iteria;
(1) f~pfle~eeetation of the plan ob' a~ EPo in fire area of
(2) patibiGly with a!l other ble goners! plan objectives and policies;
?.~-9 (e~sootaava s-~
2~-3.4 It~vis~D Ql~DH1dANCES of ~-IVtdoH.ULU
(3) Contr~ution toward implementissg flee plans~d Hand use pattern and other develupsncnt or
redcvelopa25ent lsoliciesfor flee site and aurrouad%ng arcs, as apec°afted des the adopted devetopnsent plan
and adopted special design or his4oric, casltaeratl and ~:enic district oovas~issg the area; seed
(4) 1~toraet;~n~ seed functionality ®f the project d~i$st. 3Hseeaf' c eonsideratio®s shall include:
{A) ~oasfornsanoe with the urban dead principles and controls specified La flee adopted dcvelopsnent
plan for the arcs;
(B) itela~oaaship of structures within the project to earls other, and of flat entire project to
searroussdimg , iss terms of psovidiaig a harmonious cotupositiun of maws, colors and
{G~ integration of spaces and bullditsg forans;
(D) lielationship of o~-serect p.~r ' . to flee omeralt ~rculation systesaa;
{E) l?edcstriaas circulation plan;
{Fj P of recreational and other facilities for aon~unBty and leisure time aactierlti~; seed
(G) H:.aradacpisag of the site.
(S) Foonoraaic f9bility of the project. Sp~"ac aaaaasideratio~ shall include:
(A) H7ed for the type and price of hoaasing to be provideds
(H3) H~aojected developat costa;
(G~ p ~ostse from ueadt aaleffJrentala;
{D) ,~vaila'~ility of federal adds seed
(E) ~ casHa 410.
H]eareloper's pa~evdous eseperieasee astd fdnarscial asipabildty.
boss to be prodded the saty for floe lat€rd lease ®r rental.
(e) Sea t to sel~tioat by the appropai cdty dircetcar, tic director atsall i~ue to the developer a
letter of isetesrt wHai~ add ' e to the de~Holaer tit tip ~aay proaxcd at the developer's oavra
seed tee initiate and amdertak® t2ae developer easy .
(f) S ant to the r~dpt by the city a~crk of the the couatci! may require t1Be city
lion to praaparc an appraisal of the Hid ~ h flee probe is proposed. '1°#se couna%l shay rea
faire
the aP So ba: based ®n flee highest atsd best aasg, flee s p use, or taotb. In either ,
the appral. be bid ore flee caarrent Unaforns S ds of Profeonal sisal praa~ice (iJSi'AP)
and as ps~orasulgated by the S H3oard of tlhe l4ppraiaaH ~oundaeiou. 'Ytse
rcgasircmenti be sae as resolutiora by ttae waancit `H~Se rasoHea~on shall include
a due date for naabsrsitta! of the appraisal to the
~]Vitkain g days faoffi receipt of an order, the- asha~ll do e:ather of the followi~:
(1) Direct the de nt of pesbHdc ~rloa or sity ag~sg? 3e for the project to prepare flat appraisal
and 't it to ilea saounsa'l by the due date. `i'hc asHtafl be in waiting, with a gimpy sent to the
ootancils or
(2) PdoOify tHaa< that the cdty rem to prepare the appraisal. °l~ae saotaficatioas shall
be in writfsag sand daaclasde etae rein for the
(g) At site $blc date, a dev t a~ntraci shales be 'tied to the council for apgsrova! ~
resolutiosa; that the wuncil, prior is approval by tfota, >amy add, delete or amend say terns or
condition of saw d~rclop®sent oontYact.
Upon ag d demsclopmcnt a~ntract set forth in detail all covcaaasats, obli~ntions, restrictions,
regaaiaemeta6s seed oanditiosas to governs flee proposed d t a®d subxquerat opera~on of said project;
provided, tires sins dcve t ~niract shall india:ate shellac and design a®ork which musB be
satisf~t®sily ~t seed tppa~ved a vonditdon to the a~caation of a leap for eah! pa~opcrty. eaafter
approval by the of said developntettt o~ntract and aaontpHetion by the de~Hoper of saaclr
word is rerlaaircd ~d set forth tlreraltr, ~ leap for a ptriod n to ®btain ~trancdra~ shall
be subat~ittcd to t~ council for approval by re$oleakiant.
(h) ~ersy agent teeing a pity Haoersiasa project aff~td tla® ' ' ns of this chapter shall establish a
system to de preferences by lot fat the cvcaet the ntaarrber of quad applicants e~cecds the number
of housing asnits msadlable. iVlrere the adty leas establisttcd prcf for housing aaasits by or ' or raslea
i~ arm 28-10
~a~ Fztol'~la~ L.~esi? Arco ltlrrl'Al, 2$-3.4
and regulations, the order of preferenoe$ withiae each category for tl~e selection of units shall be determined
by lot.
(Added by ®rd. 9a14; Am. ®rd. 97~)
Ses. Z$-3.~ ~iddaaag sect eta see~ic~ p~~d.
(a) The city ~aay lease or rent real property asedlor improvements thereoeB awithvut recouese to public auction to
providers of hur?aare services as defined ire subon ~-3.1(m).
(b) ~d'leen such lease or rectal to providers of haamaae sererlces is eonteanplated, the direct®r of finance she!! cause
to be published a notice stag:
(1) Ties servmce obJectives to be ac~aieved, inclreding the type or types of human cervices to be provided and
easy limits ~ client fees charged;.
(8) The mireinatene q fives that proriders of hu~aa services raaust meet;
(3) The criteaia to be used to raaek sand ~les~ p s aamd
(4) `Thep form, a deadlines, and other information necessary for interested peraores to
stabramit p
fibs rmoti®e shal8 be published ire a daily nevrapaper of general cir~alation at least once a week for t~vo
' weeks, and the last notice sbaU b®prablislaesi at least 14 days prior to the deadline for subeaei~ion
of proposals>
(c) filae a 'ate city agencgv shall all p properly subffiitt®d from interested persons, evaluate
there aaeordireg to the stated ~iterla, and date the best tler~ee pro thar~eby. 'Tree city agency many
negotiate with peraoras submit#ing the best three proposals ire a final 'oem of a °
(d) Folloa4~ selection of a pr ,the eery agency shall fife a written report witlm time city clerk cantainireg the
public notice pub ' to request a ° of the top rheas p ared hlentifyin~_the prcaposal
selected, leecludieflg time results of asey negotiatisraas raitle the selected proposer.
(e) Uporm receipt of the report, the city dark shall post time report for public ~pection in city hall where other
public rmotic~s and meetaaag ageredaQa of flee eouneil are The report shall tse a public record.
l4o selective ~ the the citj Remy sleall submit a lasso or rental t therefor m the
ocil for approval by resolution, 'Ilea lease ant shall contain easy oonditiorea and requirements
applicable to the huffiare sexvia~ to be prvvided9 iamcluding client fees to be
{Added by ()rd. 98-95)
!?rti~e 4. ~ e®ta
s e
z~~
~ae4.z
s~ ~4.i IQt,
The terux of ooniract to lease or rent property of the City and County of I$onvlulu shall rmot exceed five
years; fleet flea by reaolamtaon y autl~rize the l~sireg or rentieag of property for a period in
of yew, vvleert serch longer period ~ is time public intem~t arad~
(a) /hen flee- or tenant is sequir~ by the is of the cxmtract to expend the scree of 525,[0.00
yr more for capital or to for atr,~ capital or the 's or tenant's ~apenditure is equal
to or in of lies of 525,0180.014, ~ det by the council. 'rEme term °'capital asset" ~ used
herein shall include not only flea ' n of ' to but the ' atiou of fa~iture and Mures,
flee wet of which would be a le over a period of the or lease ~ of live yeses;
(b} ~Yherl flee Property is to be devoted tv time ~ ' aced ed vt leasedi or blirmd persons and by
flee teratas of the propassed corm, time lee or te®aat ~ requieed tv cvrestraect on such property ammy
im t, flee estimated cost of which, in+~diam~ of labor acrd aematee~ls, ~ equal tv, or iri excess of,
the scan of 510,000.x, de ' ed by the coaeeme~i;
2&1{Da (eaoaosevu e-v11
.
28-4.1 x~slr® ~»l1vANCiws oa= HoNOlulu
(c) i~Vhen the real property is leased or rented for the use of the state or federal gaveraament or slay agency
thereof,
{d} When the city enters lasso a dcvelopanent contract with a petsori for the devclopaaaeaal of the property grid the
construction of hoassing units of all !rinds said types as permitted hi the area where tlae p:operly is silacated,
or any other type of structural development which many be bemeticaal to the city, or
{e) ~Vlsen the real propeaiy is leased to a private nonprofit soagoratioa or cottitaauisity as:.oc:iation, in acxorQance
with SecOoa ?.g-3.2,
{5ec.. 30-'4.1, RO. 1978 (1983 Ed.); Aaai. ord. 90.14)
S~ .2 y.
apt ~ ott~rvaia~ provided, tla® following reseaictlons shall apply to all leases anaQc in as®ordanoc with this
chapter:
{a) flptioaas for of term are prohibited;
(b) No lease be for a lo>tger terns than 65 years, apt is flee of a residential lease~ld which ,~sy
provide for sn initial term of 55 yeses. with file privilege of exte~lora to t flee regsalrea~ats of flee Federal
Housing Bois, Federal National a 'atioti, Weteraiss A afros or other mortgage
iisssera ,provided, flies the aggregate of tlae initial terara sad extension shall in no event exceed
75 yeaas;
(c) i~v lease: be made to say per~sa who as in az is tlae payaaent of eases, rea?ts or other obligations
nrvhig tm the city.
(Added by ®ad. 90.14)
5. 1~~1~
St~~e
sal dAt~ ~~®Ea.
$4~. ~$-~.1 1~ a~®~
(a) Airy ofiaoer or employees who vi®latea airy of the of this chapter upon a finding pursuant to a
hearia~g to be w®daicted fey susla per~a'a 'ling authority, steal! be subject to di~c9lsliaiary action by such
peasora's ' thig aaithority.
(b) Any l or tettffit violati~, easy p of chapter cause the ternaination of 4tse lease or
tenancy and file l or tenant isyay be saabjaact to the t of airy outstaiadiaag teats! before slid after
such
(c) AzYy or eanployee violating gray Provisions of this chapter shall, upon vaiavictioas, be guilty of
a ~isdemeaaor~ and be subject to the provisions of Section 1-3.1, it®H 1990.
(Sec. 30-5.1, It.®. 1978 (1983 I?d.))
s-sri 28-IQb
COUNTY OF 1?'IAUI
LEASE NECOT1ATiON AND CONTRACTUAL PiiOCESS
~'ITii NONPROIFiT ORGANIZATIONS
Department of Human
Concerns-
Grants Review Committee
Publishes Notice of Solicitation
Committee Reviews
Applications, Qualifications &
Makes Recommendations
County Council Approves by
Resolution
Corporation Counsel Approves
as to Form and Legality
Mayor Approves and Signs
Director of Finance Files
Grants Review Committee
Evaluates, Conducts Site Visits,
and Monitors Reporting
Reports Reviewed by County
Council Annually
Attsclearaent No. 10
Prepared by the Office of the Irt$isiative Auditor
Maui County Code 3.36.Ot0
pia' 3.3fs 3.~.t12A 1lBBa~ C~4y ~ ~e~w
fl~ltUl[ C® ~~wl'~17'S ~I w. Tl~ t:.~uety aesv ~ y
. E. ~1eee ~ of mia~ .
3~.~H~ e~h of vrhosn shall lx aeo fay she cseayog seed coea-
3.3~.®~ 1~ Cety ~ ley tlao: coesceeil. S~cBioae 13-2 of the ~visea! car
of ~ ~a~a®ey of luta~aa shall appsfly o® she coias'8ai iee she
3~6. saw at apply ~)soag~ts ~ c~eai-
3 ley dies a~+is~l olsa~r.
• shy acieni®isfa~ve
3.3i.OStB f~ ~ ~ coefe.
3.3~.t ~ shall awe colas eo
3 91. liiavsraii Std, revlating to she follocwin~:
3 ~ 1. foe
3.~. ~ 2. asad a !e few ~ seab>aeissioae of
.its
3,x.110 3. 'Tlac aeealy~ of ;
3.36.11# aa~ 4.
3~6.13~ ~ ,
3.140 ~ `I~ ex~ay otheg evtes as ae~
3.36.1 ~ ies ' °tiias ceae~g etiis
3~.1t1~ (~Cd. 1559 ; 7 195 ®trd. 1353 ~ 2 1953)
3.3570
3811
as is a e fog allosasaoss, ekes
..~®f~ -
3.~.01® aid a (t~s#.1559 ~ ~ (p~t).1959:
ws iea shit . eat 1353 4 2 (paz~), 1953)
rags:
"~eacy" e~y 'vee. 3 a ia.
or otl~ of Bey M a shall meet all of flee f®1-
' l4 l®s~im5 ,
co ~ Eta eala<l~+s
"~re2" as e~ ~ ~ebiis ~ e~ S ~ Ha~vala, sbr a t ot5aaaeaatioea ee-
faends og ~ a f®r a f ~ax.tsy IIeE ls~iesnat
.~a~ ~ ~ a
ce~l few l tl value. fi. Ia case ~ a fit ~®ra, have a
°°~eq-loaa'~ a ebf f~ a t have eao eaatgal conf6ist
a og t~ of ' '
~ s . < ~ pal. C. iia~)syla~ ~ the flee;
,•ld ~ a~ ~ la Such layl~ p®lica~
a oftheickd~ ~tl~ ~ a~
ink 'ey, thus aae~ ~ away. 8 ~ ~
i
°`1 a ex ae~ ~ ~eQ
wleach civa~ a t elm . (41ad. Zti'?y # 1. ~ a a~
1995; ~d.2b61 ~ 1, i9~; . 2326 # 1, 1994; t~C+d.15S9 es~ as . ([~+d.15.S9; 7 (pa~t),1959: ~ 1353
4 7 (paet~ 1959: 1353 ~ 2 (pest). 1953) ~ 2 R 1953)
3,~6.
e~ea app a slen~] to c.~aply
~ (5a~. etD
Attachment No. 11
3.36.QS1}
~sah else fo befct~ as 3.3~. ~a~ea m~
$~h fit: 'the shall taatnsaatia to Ybs c~sssscil any ar~sacst
A. ,~ll~arr ~ . tlge a~yex os fir a t a£ s+arl . incl4adiaaQ coa~sai®r~ at less
the coaaaaaafta+ aaf tl~ ci1 aatd its , a~ aaa~- tl tae. its aoridf
tae bts she s~q:a~t. R~ eo~ancifl assay ~aa~s®tise else rasa by
, seed a ~ a ffit (Ckd.1~59 ~ 7 (past),14a9: 1353 ~ 2 (peas),
~d ss~ ~ t~ a 1933}
be ~ dae ~d oc-
Rlere o$ as 3~.lll~
13. saw ~ ~ A. M '®a $ar a Ott shall n®t be ~ape~ed
a~ ss 'hY tl~ a nth a is c®td intta betweasa Ilse Cossassy, and
f . a aa~l 1. ( i~99 ?(p~at),191i9: ~ ' '
~+d. 1333 ~ 2 (pats), 19x3} l3. shall sp~i!y t the Cosssaty ~sall
amt be lsary _
~ flea a~ ®f elm
Edesy f~ a slaali ~ C. ~ a sal be bated on
' ~a~ a a4, iat Frith flee rsel~
by e~ 33~ E 2,1994: 1159 lsy the 1as9 ~ 7 19119: 0.1333
~ 7 (mss}, 199: , 1353 f ~ 19113} ~ 2 (mat}. 193}
~ 3,36.119 ~ ~
1~ ill a€ed A. ~ a ®f ~`eaaa~.
~ l a~8 ba ' 1. AHi aaff l s~ .
A. itg l~ r as ass faa~
'tom ~ lee ~ t~ aeff t~116a
C. °I~ a ~ b~ aa. la t a sad
D. `Y~ ~f tad ley t~ stay t
p~aax~ If ~ ilia ate a~ SS,OW ~ less easy
el leave tl 1s9t ®ff
E. 'a'les s ~t ~ ~Y t~ ~ h Q
avidh shall ~ a tt8 a flee
~e ~saap ~ be ; ' ~ ' aaa tlha aatd ~ flea 1'as~°.al
G. )s9r ~ yeas ~ :
~tmbe 9
H. `1't~ atad' ftirt~ b. a ;
fit. 11359 ~ 7 (fit). 19x9: (3aal. 1333 ; 2 (s~ c. S ~ amass;
19E3) d tht: l~ttds mod;
3,3~, alr tam 3. lay of a asf p~lis 9
'T~ ~ aa~a9ra ~ s
t 3 a ~ ~ ~ flea asp y
a~ota ~ a ~
tie ~ 1. vifid ®tal~ dal year,
~ a seal 't
mss ci ~ a 19a9: C~ad.143t1 ; 1, 19134: ford. 1353 ; 2 (peas), 193)
. (®ed. 4bi7 ~ 2,199 l i Z,199a: Cam.
?,319 ~ 1, 1994: mod. 1859 ~ T (pmt}, 19'69: fed. 1353
4 2 (peat). 19a3}
q 66
3.36.120
3.3~6.1ZQ llllo eased laaatioea. 3.36.18&l li®cye~31~ 8t-Boag a°evmlvlts8
A. 'Che conartaitt~ shall trtoaaieor every 8sarae eo ensure faa®d.
conagliatace with this chaptet•. A. ~'lae office of ecanoanic develapanent shall be
l$. 'b~litlain ei~$at weeks after flee etas of ebe faecal year, t~esponsible foe the adnainistradon of this fused.
the CoL4lIIlitte€ shall Brant:~llt ro Bt7e coaaaacfll an evaluation T'lae diasctar of fat?ance shall establish a separate
of every lit ar~cch was rrgtaested oc on;oio8 durin8 tine aa:oaattt to record all sevenues received grad expeaases
fiscal year. 'life abseil t:vettasta a suntrnary of vvbether incurr~ which rt;Bate to this fated.
each crane aetaiaeal fife iattended rssatlts in flee ®aataner C. `The revenue$ received ate deemed appropriated
coatem . {®rd. 1859 ~ 7 (pare), 19149: Oed. 1353 ~ upon receipt and are authoriaxd to be expended for ehe
2 (pact), 19113) puagose of th6s fused,
17. '17ae of else office of econvrtaic develop-
3,~,g p~® mane shall adopt Hales eo chapter 91 of the Hawaii
Any a~ecipieaae ralto wi or ootit~ any facts, itevised Statutes. ce the iasaplearaentation of this fund.
yr deliberately Bs stash facts to flee cotnaaitsee, (ord. 2423 ~ 1. 1993)
flee cotatacil. flee araayor, asr stay . a?IDall lee in '
of dais chapter. If t3ae ®o~caittaae -fends estate a r~ipient has
tires ~ the teas of ibt 11ae
t~ sisals arafoa~ e~ tatayor vvlao shall itt tlae council
in wridrt~ seed. ttpoet coaancil ,flee recipient
shall be praaltibiteel fry applyitag foe away giagst foe' five
years f®ilv~+sa,~ cle fatad~a~. 1884 ¢ ~ (pail), 3989:
Ord. 1353 ; 2 (pact), 1983)
3~6.1~$ b7
The txiayor array his duts~ this
to rise exteaat alloe~xl by law. {1~d. 1859 f 7 (part}, 1989:
1353 ~ 2 (part). 1983)
3.3t3.1i5d
lelvthint8 eta Ibis shall tvsb'ict ilea colattcil
taaakitag its for publ'ac , pevvideci tla~ s~oeas
3.36.1QQ to 3.36.140 slaaall apply. (ord. 1859 ~ 7 (p®tt.}.
1989: ~ 1353 ~ 2 (pace). 19113)
336.2 ~ of t a
filae coaraesmitt~ sl~ll review all for 8raatats
foe pm ~ ~CrviCes° 'ey yob
8roups. grad cults stead ~ arts. (C3td. 2247 f 1. 1993)
336.170 IGct
A Cotasacll ~3' atutlsotiu sat laa~ by reaiturittg*
as a ' ' n of t4ae of feattds, a>e~yt~rat of the
loam ' ~ flats ipi~t°>ti ability ~ gay.
33. Eae~ nogtaest far a ~atat-toa;a shall i~ltade. but
toot ~ limit®d tae. flee itafor~aati~a c+egtaia+od by section
3.36.070.
C. All l4 ls~tas ~Attst coatply with 3.315.100
to 3.36.14Q.
l]. At the of tl~ t~g~en8. t-loan cepay~sat
terms atasay bt: r+evist~l, deferred, yr ~waiv®d° its potct or ~
whole by a t+esolution mf eouaacil. (t)rd. 2326 ~ 3, 1994)
66-1 1s~.
3.40.010
~ 8h~
~ ~ A~ ~
~ ° ~ ar.~E
~~r ~
~ ~ any to 4 a~
~ ~
~ ~ ~
~ ~
~ air 6~+
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b 6
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~ ~
!L 8 ~ ~ ~i 8 lts ~ ~
~ ~ ~9.3~ (ord. ~~ffi9 g
&7
3
3.~ 1~lo a~ x~ 3 ~ bs ~ 9
~ ~ be
b sad
t~i~t€~o ~
~Sl~
. it969 f 1 ij,1'9ffi:
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3.4Q.I30
' ~ ~~3 ' ~ elf is
al}~ ~ ? ~
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` at flora. a~4 i t tk
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y
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X48 ~J v i0ff
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1~ Ifs ~ ~ ~ ~ j= ~ 3
~
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s ~ ~
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~
~ ffi 8 ~ ~ ~ ~
$ y ~ ~ SPA
~ ~ ~
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3.~.1~i
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~ ~ ffi
~1 ~ I9~1: mod. $
a
i. ~
3.
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~ ~ ~
'7. ~
b~
ba ffit
~ ~ ffi
f+~rt~
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~a
STATE OF HAWAII
DEPARTMENT OF LAND AND NATURAL RESOURCES
Land Division
Honolulu, Hawaii 96813
October 22, 1999
Board of Land and Natural Resources
State of Hawaii
Honolulu, Hawaii Statewide
Subject: Revision to the Policy Regarding else Leasing of State Lands by Non-Profits
BACI{GROUND
For the past couple years, the Board of Land and Natraral Resources ("Boazd") has
g~PPI~ with the issue of leasing public lands to non-profits. 'The discussion began with
Board subYnittals which reconranended issuance of leases to non
profits at nominal eent and
the reduction of rent on existing non-profit leases to a no aanount. The Board defereed
action on these items after a discussion on how we should be looking at private non-profits
leasing State lands.
Staff conducted a briefing, entitled "Non-Profit Leasung of Public Lands Pursuant to
Sections 171-43 and 171-~3.1, Hawaii Revised Statutes" on Thursday, May 14~, 1998 to
peovide background infotinatioa and to receive feedback from the Board on the issue of
leasing State lands to non-profits.
At its meeting of Septeanber 11, 1998, under age~a item D-1~, the Land Board
approved and a~aended staff's recotntirended policy on leasing of State lands to non-profres
(see Bxhibit A). This pol'acy outlined the process by which non-profits could obtain a State
lease and included the steps in this process and the criteria used to tnake decisions, including
rent determination. The policy focused on addressing the following questions:
• How much rent should we charge?
• How long shota[d ehe lease ferret be?
• What should the rental reopening provisions be?
• Should we allow thorn to use the specific parcel of land being requested?
• Should we lease directly to this non-profit?
~t~~
A~>9~~vE v TIE ~~A~D o~ I TEc~I D-20
t,AND AND NATURAL RESOURCES
AT iTS 14AEETtNG MELD ON
Attachment No. 12
_
BLIvR -Revision to Hon-Pro Fit Page 2 October 22, 1999
Leasing Policy
More recently, at the Board meeting of May 28, 1999, staff submitted agenda item D-
9, "Reconsideration of Rent Pursuant to the Non-Profit Leasing Policy, General Lease No.
5-560, Easter Seals Society of 13awaii, Lessee, and Amendment to the Policy Regarding the
Leasing of State Lands by Non-Frofits" . This submittal implemented the non-profit leasing
policy for the first time while also amending the policy. The Board deferred action on this
submittal due to concerns eegarding the policy, izacluding the appropriate agency to be
making funding and qualification determinations, analysis of the non-profit's funding sources
if the Land Division does not provide nominal rent and looking at outcome-based methods of
measuring anon-profit's performance.
In reaction to these concerns, staff agreed shat perhaps it would be appropriate to revisit
the policy having run through the policy on some of the leases and encountered difficulties.
These difficulties include:
• Staff s lack of expertise in determining qualifacations and public benefits,
particularly in light of the broad range of non-profit organizations and services.
Existing non-profit leases include such diverse uses as a parking lot used by a
Japanese church, a facility used to provide services to children and adults with
disabilities, such as Down's Syndrome and muscular dystrophy, recreational cabins
used as a pastors' retreat or as vacation get-sways for members of organized
r
chueches and camping grounds used by the Boy Scouts. Land Division staff does
not have experience in the eleemosynary field.
• ~'he subjective nature of the policy. Because the non-profit leasing policy needed
to encompass a very broad spectrum of non-profe types and services, the resulting
policy is unavoidably subjective.
Another factor serving as an impetus to revisit the policy and its underlying
philosophies is the current fiscal situation of the State.
According to the Department of Budget and Finance (B&1~, the State will soon be
experiencing serious fiscal pressures as annual expenditures will exceed annual revenues
starting in l:"Y 2000. B&1? presented a bleak picture of the revenue prediction for the State
due to the weak economy and recent tax cuts. Targeted cuts are $30 million for FY 1999,
$60 million for ~Y 2000, and $120 million for FY 2001.
To address these budget restrictions, the State government is conducting the "Statewide
Program Review". As pare of the Frograa~a Review, fundamental questions are being raised
with regard to services currently funded by ehe State, such as:
• Should the State be performing this function at all?
• Is there duplication in services that can be eliminated?
• Can the activity be funded by other sources?
• How effective are the services; are we getting the most "bang for the buck"?
BLNR -Revision to Nan-Profit Page 3 October 22, 1999
Leasing Policy
It is anticipated that major changes will result from the Program Review, including the
possible elimination of entire programs.
These circumstances raise the question of why subsidies being given to non-profits on '
State lands are not subject to the Statewide Program Review. Conceivably, the Program
Review might result in the determination that the subsidies being provided to non-profits
should be spent on other, more critical government services. Due to the way these subsidies
are provided through nominal rent, such an analysis is not taking place with the non-profit
services under our general leases.
Also called into question is why the funding of non-profits through nominal rent is not
part of the established State fvnciing mechanisrra which is in place to determine what activities
should be subsidized by the State.
ASSUMPTIQNS
Staff has based its amendments to the non-profit policy on the following assumptions:
1. There are worthy non-profit uses of State land wlxich should be subsidized. The
mare pertinent question to 19e addressed by this pol'acy is: what method should be
used to provide this subsidy and what form should this subsidy take?
2. Land Division staff does nit have the expertise to determine funding and
qualification of non-profits, especially over the broad range of non-profits which
may request a lease. Dtlter government agencies are in a better position to make
such determinations ffor the following reasons:
a. These agencies have dsstinct missions for which ehey plan and implement
public services. These services may include the provision of services by
non-profits.
b. In most cases, these agencies have open and fair procurement processes to
provide subsidies to non-profits.
c. These agencies have personnel who are qualifted to determine which non-
profits should receive subsidies based on qualifications, past performance and
other relevant factors.
3. Rent subsidies provided on lands under the direct management of the Land
Division are not part of the established State funding rnechanisffi (purchase of
services under chapter 103, IiRS), and they should be for the following reasons:
a. Purchase of service (POS) offers a comprehensive process to determine what
services should be funded by the State acid what non-profits should receive
SLNR -Revision [o Non-Profit Page 4 October 22, 1999
Leasing Policy
funding through an open and competitive procurement process. This process
includes planning and needs assessment for services, appropriation of funding
levels by the Legislature for the different service areas, procurement of
services, and contracting of services, including monitoring anti evaluation of
services provided.
b. Experts in each of the specific service ftelds are making the determination of:
1) Whether anon-profit is qualified to receive State funding;
2} Hvw much subsidy ehe non-profie should be receiving vis-a-vis all non-
profits in the same field applying for State funding; and
3) Whether anon-profit is adequately providing the services.
4. Rent subsidies to non-profits may be provided on lands under the direct
management of other governmental agencies, pursuant to Section 171.3 or 171-
~3.1, €~ItS. Lands set aside to other government agencies under Section 171-11,
SIRS, may, in Burn, be leased to nonprofits at nominal consideration. In these
cases, the benef
is cited in item 2. above would be realized.
5. Where anon-profit is unable to obtain a State subsidy through the POS process or
through nominal rent fronn a government agency via a set aside, perhaps the
determination is being made ehat the non-profit's services should not be subsidized , .
by governntient.
6. Existing lessees and new lessees should be treated differently for the following
reasons:
a. Entering into a new lease is a fundamentally different situation than
continuing in an existing lease. When entering a new lease, anon-profit can
look at a variety of site options and is usually conducting a fundraising
campaign to raise capital and operating funds for the new project. Por
existing leases, the derision to uproot and relocate operations is a major one
and, in most cases, will pose significant hardship on an agency in terms of
cost and disruption to services.
b. Over the years, lessees have built their programs around thcir State property,
including, for some, investing much capital funds into these properties.
REVISED POLICY:
Staff has attempted to revise the non-profit polacy with the underlying philosophy that
we should be having the experts determine funding and qualifications for better decision-
making while taking into account the difference between existing and new non-profit leases.
SLNR -Revision to Non-Profit Page 5 October ~2, 1999
Leasing Policy
In brief summary, scoff recomxanends charging all new non-profit leases fair market rent
and implementing the original. non-profit leasing policy with regard only to rent calculation
for existing non-profit leases. In implementing the oeiginal policy, staff proposes to utilize
the services of experts in the non-profit field to make determinations of public benefit.
Authority:
.Pursuant to Section 171-b, HRS, the Board may "establish additional restrictions,
requirements, or conditions, not inconsistent with those prescribed in this chapter, relating to
the use of particular land being disposed of, the terms of sale, lease, license, or permit, and
the qualifications of any person to draw, bid, or negotiate for public land."
Pursuant to Sections 171-43 and 171-43.1, I~II3S, the Boazd may lease, at nominal
consideration, by direct negotiation and without recourse to public auction, public lands to an
eleemosynary organization.
Sc®pe acid Aiaplicability: ,
This policy shall only apply to public lands under the management and jurisdiction of
the Land Iivision.
This policy shall n®t apply to:
1) lZevocable permits which are seasonal or otherwise temporary in nature, provided
that such perreaits shall contain: a} a termination date which reflects a term of not
rn~re than one year and b) a provision which prohibits any extension of the term.
Note: It as the interrtiota of the Land Division to convert revocable pervnits which
are intet~tded for lo~ag-term accupa~acy acrd are held by prlvrate non profir
organisations to genera! leases, thus malting therm subject to this policy.
2) Government agencies which may receive drrect leases or set asides pursuane ro
sections 171-1 i oe 171-95, FIRS, or non-profs[ organizations which nosy lease
from such govertunent agencies. Non-profits which are quasi-governmental or
created by a government agency may either coanply with this policy or pursue a
set aside from their affiliated government agency.
Policy:
L For are~a+, directly negotiated general leases and revocable permits requested by a private
non-profit organization:
BLNR -Revision ~o Kon-Profit Page 6 October 2?, 1999
Leasing Policy
A. Pro
The Department shall determine that a specific parcel requested by anon-profit
may be used for non-profit use based on the following criteria: '
1. There ace no pending requests for the parcel which have been made by a
government agency;
2. The Department has no plans for the parcel which are reasonably expected to
be implemented; and
3. The State will not forego significant income if the parcel is given to a noiZ-
profit.
Provided that in determining whether to Iease a parcel to anon-profit, the
following may be taken into consideration:
If the non-profit proposes to make significant improvements, then the parcel
may be used for anon-profit purposes; or
5. If the public interest or benefit clearly outweighs criteria I.A.1, I.A.2, or
I. A.3 above, then the parcel may be used for anon-profit purpose.
B. Oualiftcation:
A non-profit shall qualify for a direct lease based on the following criteria:
1. The applicant shall be registered to do business in the State of Hawaii;
2, The applicant shall provide SO1(c)(3) determination from the Internal
12evenue Service; and
3. The applicant shall provide an appropriate plan which reflects adequate
funding for development and operations.
C. Disa~gn Method:
Non-profits may receive a lease through direct disposition provided that I.A and
I.B above are met.
D. Terns:
Standard lease tersra shall not exceed 30 years, except where anon-profit provides
evidence that a longer terns is Iegitirnately required for funding purposes. -
BLNR -Revision to Nan-Profit Page 7 October Z2, 1999
Leasing Policy
E. ReooeninQS:
Standard lease rental reopening provisions shall be every 10 years and shall be the
fair market rent.
F. Rent:
pent shall be the fair market rent.
II. ~'or non-profit leases that: 1} were originally issued through direct negotiation and 2}
are executed as of this Board action date or are un~xecuted as of this Board date but
have received I.atad Board approval as of This date:
A. itent:
1. Existing non-profit lessees shall have the op4ion of appealing their rent
annount only at the time of rental reopenings.
2. Rent shall be determined based on the following criteria:
a. ~cterrr~.i a lfactors:
i. If PC}S funds are made available for the non-profit's services, then
fair market rent shall be charged, subject to section II.A.2.d.
below.
ii. If the non-profit conduces activities on the State parcel which
competes with comtrtercial entities, then fair market rent shall be
charged, provided in cases where underserved or special needs
populations are being served, less than fair market rent may be
charged.
iii. If trust lands are being leased and the proposed services do not
clearly ®eet a trust purpose, then fair market rent shall be
charged.
b. fete ine n~ablic
benefit rating:
i. If the non-profit serves an all-inclusive population, encourages
widespread participation by the general public, does not restrict
particlpatl0n in lts aCt1V1[1e3, or restricts participation due to a poor
or needy population being served, then the Wort-profit shall receive
a rating of 1. Conversely, if ehe non-profit serves a more limited
population that is not needy, accrues benefits to its own members,
BLNR -Revision to Non-Profit Page 8 October 22, 1999
[.easing Policy
charges membership dues which may exclude the general public
from participating in their activities, or otherwise restricts
participation, then the non-profit shall be rated 0. Non-profits
shall receive the rating that most closely reflects their population.
ii. If the non-profit's services address important conununity needs,
significant public benefits are derived, or the DLNR mission is
directly implemented, then the non-profit shall receive a rating of
1. Conversely, if the non-profit's services are non-critical or
public benefits derived are limited, then the non-profit shall receive
a rating of 0. Non-profits shall receive the rating that most closely
reflects their population.
iii. Subject to sections II.A.2.a. and II.A.2.c., the ratings from
II.A.2.b.i. and II.A.2.b.ii. shall be added eogeeher and the
following per annum rents given:
Total score of 2 g S1
Total score of 1 = 50% of fair market rent
fiotal score of 0 a 100% of fair market rent
c. Determine wh,~th,~,r Pn,~ta a rent should apps:
If the non-profit generates revenues from the use of State land in the
form of sublease rents, tnerchandase sales or other activities for which
excise taxes are due, the State shall participate in a percentage of
receipts as determined by appraisal, in addition to the rent as
determined above.
d. I)eterrn~c~ Mfg-set:
Base rent may be off-set on adollar-for-dollar basis, based on
docutraented improvements made to the teased property. Such an off-
set array be applied froth the point in time when the improvement funds
were expended.
3. In determining anon-profit's public benefit rating, staff shall utilize the
services of experts in the non-profit field, including but not limited to,
representatives frotr? organizations such as the Aloha United VVay, Hawaii
Community Foundation, Hawaii Coanmunity Services Council, and State
departments.
4. Staff shall submit a Board action showing the application of the above criteria
and the staff's recommended rent amount based on the criteria.
. .
BLNR -Revision to Non-Profit Page 4 October 2?, 1999
. • Leasing Policy
RECOMMENDATION: That the l3oard:
1. Rescind its action of September 11, 1998, under agenda item D-14;
2. Apgrove the above stated revised policy regarding the leasing of public lands
under the jurisdiction of the Land Division to non-profits; and
3. Authorize the Chairperson and staff to take any action necessary to
implement the above stated revised policy.
Respecefully submitted,
• GY~iL~?.p ~~r~
DIERDRE S. MAMIYA
ASSistant AdtniniStratO
APRROVED FOR SLJ1~I~IITTAL:
MOT~I . B S, Chairperson
State of Hawaii
DEPARTMENT OF LAND AND NATURAL RESOURCES
Land Division
Honolulu, Hawaii 96813
September 11, 1998
Board of Land and Natural Resources
State of Hawaii
Honolulu, Hawaii STA'T'EWIDE
Subject: Establishment of Policv Regardiusg the Leasing of State bands by Non-Profits
BACKGROUND:
The issue of hoa+ ffiuch to charge non-profits using State land has increasingly cors~e
to the attention of the Board of Land and Natural Resources ("Boazd"). At the Board
meeting of August 21, 1997, under Agenda itetat D-23, the Board approved staff
recommendation to amend the rental provisions of General- Lease no. 5-4560, Easter Seal
Society, to 20~ of fair tnaarket rent for all reogenin$s. Eollo~vin$ the Board's decision,
Easter Seals requested the Board consider a further reduction in rent due to the financial
hardships rent, even at 20% of 8aaricet, would bring to the non-profit.
At the saffie Board ffieetin$, under Agenda Iten113m3S, staff recomffiended the
issuance of a direct tease to the Rom Catholic Church of I°ia~raii for youth athletic and/or
educational activities at 25 ~ of the fear- marl~et rent for the initial rent and all subsequent
reopenings. The Board deferred action on this item after a dascussaon on how we should
look at private non-profits, including the extent to which the public benefits froffi the services
of anon-profit and ~+hether such benefits equal the subsidy beang provided the non-profit
through nos~nal, rent.
These examples reflect the lack of and criteria for decision-snaking and the
resulting inconsistencies, as well as the growing concern among the Board of these
deficiencies. Without a policy .and clear criteria, staff has become increasingly uncertain on
how to proceed with the issuance of new leases and revocable petits to non-profits as well
as how to handle existing non profits which -are cl ' an i~bility to pay the -rent as
outlined in cheer leases. Requests are received from a nonprofit to lease State -land for a
variety of purposes and populations. Withoo~ a policy.or criteria, staff faces several _
questions, such as: "How much rent should we charge?", "Fio~v Long should the [ease tet~ri
be?", "What should the rental reopening grovisions be?", ~"Should we allow them to use this
specific parcel of land?", "Should we lease directly to this non profit?"
I T~I~ D -1 ~
BLUR boa-Prorit Page
Septe^:ber l:, 1598
Leasing Poi~cy
t,
In past months, newspaper articles have highlighted this issue of lease rents charted
non-profits on State land, specifically, the disparities in rent and other lease provisions
among the non-profits as well as the large rent increases some of these leases are
experiencing as their rent is reopened.
Staff conducted a Board Briefing ("Briefing"), entitled °Non-Profit Leasing of Public
Lands Pursuant to Sections 171-43 and 171-~3.1, Hawaii Revised Statutes" on Thursday,
May 14, 1998 izt order to provide background information and to receive feedback from the
Board.
NEED FOR POLICY
In compiling statistics on non-profit leases for the Briefing, staff concluded that there
has been much inconsistency in the terffis and conditions established for non-profit leases,
including variations in the initial rent amount, rental reopening provisions and Iease terra.
While some of this inconsistency might be explained by the change in administrations and
boards over the years. staff retnai~ unclear as to under what circumstances we recotnffiend
direct issuance of an encumbrance to anon-profit and at what ferias and conditions. The
lack of clear Statndards and criteria to tna.Ye decisions increases the liltelihood of inconsistency
and unfair treatffient.
Staff's intention is to remove ffiuch of the subjectiveness out of this area of managing
our public lands. Hopefully, establishing a structure will lead to decisions that are fair and
consistent and that ensua~e our public land trust responsibilities are upheld.
On a snore practical level, the need for a policy also stems froffi the need: 1) to
proceed with processing new lease and revocable permit requests from non-profits which are
being held in abeyance until this policy is clarified, 2) to address several existing non-profit
leases which are going through a rental reopening and in daspute, and 3) to clarify the policy
in anticipation of scheduled reopenings of many other non-profit leases.
Staff has arteffipted to address concerns surrounding non-profit leasing of State land
by developing this policy. i~hile soffie non-profits tray continue co complain that others are
allowed to keep certain privileges granted years before, staff can only reply that this policy
represents a neva stare froffi this point forward and the past cannot be changed.
ISSUES:
The initial issue of what rent to charge non profits on State land broadened as
intertwined issues became apparent in staff's analysis of the issue. `These issues arc
summarized in the questiotas posed to the Board it the Briefing:
1) ~Iho should give the State subsidy and how?
2) Should non-profits be qual~ed to use State land?
1
SLUR • do?-Profu Page 3 SeYCe ~'~e; ! i. ! yyg
_ Leasing Po(ticy
,And if the Board provides the subsidy through nominal cent:
3) Should we limit which parcels should be available to non-profiu?
Should there be an open and fair process to award State land?
5) 1-low much rent should we charge?
For the purposes of standardizing the terms and conditions of non-profit leases, scarf
has added the following questions:
6) Iiow long should the lease term. be?
7) That should the rental reopening provisions be?
ANALYSIS:
At the Briefing, the Board generally agreed-that:
1) While soffie .nonprofits naay be able to go through the existing State funding
processes, the Land Board would like to retaan authority to provide subsidies
to non-profits through nominat rcpt on State land;
2) An application forffi should be developed in order to qualify non-profits for the
purpose of ensuring that the agency is legitiaaate, has a track record art
performing the services and provides public benefits;
3) 'l°here are considerations which should be taken into account when deciding
whether a particular parcel of State land should be leased to a non-profit, and
there tnay be cases where we would not ffiake ehe parcel available to a non-
profit due to incoffie loss or alternative uses of the parcel;
4} There should be ~ open and-fair process to snake public lands available to aiI
non profits;
5) °rhere are a variety of factors which should be considereri an Bete g the
rent amount, such as what type -of service as provided or population is served,
hour much public befit is derived, whether the service -meets a mast purpose
and whether the non
profit will generate income froffi the use of the parcel.
In response to than general guidance, staff has developed the "Non Profit Leasing
Process Flowchart" , attached as I'p A, which outliers the- process by which non-
profits could obtaiza a State lease. °°Non Profit Leasing Process Steps and Criteria" (attached
as i`~ B) dudes a description of the steps an -this process, the criteria used to make
decisions, and an expla~tion of the rationale l~hind -the criteria,
For the questions which wart not presented or discussed at the Briefing, staff
provides the follov+ang coenu:
~L~~ ,~v~.-. cau~c - xric...vc: i7Y2S
I.:aS1II$ ~O~1CV .
How Iona should [he lease term be? -
From the statistics com fled b staff, the ma'ori
p y ] ry of existing non-profit leases have
terms of 50-65 years. Such an extended term reduces the flexibility with which the Board
has to react to changing conditions, such as evolving comtnuniry needs and changes in a non-
profit's operations or services. Because of the uncertainty, it tray be wise to leave decisions
on the best use of the land at future times to future Land Board members. If anon-profit
would like to continue to use the leased premises beyond the lease term, a request could be
made for the issuance of a new lease. Also, if so desired, future Boards tray require the
non-profit to undergo an application and review process similar to the one proposed ,here in
order to ensure the provision of needed, effective services to the public. In consideration of
this, staff proposes a shorter terztl.
A ffiajbr consideration in establishing a base lease eerm is whether the non-profit is
crying to obtain funding through a mortgage or grant. Maxitnua! mortgages are normally for
30 years. For grants, staff questioned the following organizations as to the rninitnuffi lease
term they would like to see on a lease when are given:
Hawaii Cotnffiunity Foundation No •specif~c requireffient, but they want to see at '
least a "double dagit" lease team.
Darold Castle Foundation No specific ant, but theg+ assess the lease
terms against the proposed project. For instance,
if the project was for a community center facility,
they would west about 2S yeses on a lease.
VVeiaberg Foundation No spcc~c requirement, but want to see a long
' teaffi (e.g. 30 years) since they provide capital
Elands.
Department of Housing and ~?verage lease term needed is about 20 years.
Urban Developnsent
Based oat this infot~ation, staff r+ecota+~aend~s a tnaatim+uan lease teaffi of 30
years. If a non-profit shows proof that a longer term is required by a handing organization,
then such term array be gives.
What should a ten v' i ?
Rental reopenings are traditionally performed for the puapose of ad' lease rater
lCCOrding Lo Gurgent market Cot1d1t10DS. In the case of non-profit leases, which ffiay be at
lotainal rent, the rental reopening becomes a tnechanisnt by which the l~epaeat can I
insure that a non-profit continues to use the State land in the r represented to the
loard when the rent discount was given or in alaother ffianner acceptable to tree Board.
i
3[.~R `'cn-P:otic Page ~ -
L.easi;,g Policy ~rP'z~=~z' ; l . :>y3
If a non-profit alters its operations co serve less needy groups or to generate income
from clients, the Board may want to reassess its decision to ;rant nominal Bent.
Furthermore, different circumstances may apply in the future which would affect a Board's
decisions. .As an example, new trust beneficiaries may be defined which might result in a
reevaluation of what "nominnal" rent is.
Where State funding is provided, there is much scrutiny of the non-profit and its
operations in order to ensure that the non-profit does what ~it proposed to do. 'T'his scrutiny
consisu of site visits, reporting requirements, audits and other monitoring methods. When
the Board granes nominal rent, we, in our role as lessors, do not engage in such activities.
Because of these factors, the t7aost prudent course would be to maintain flexibility for
future decision-tnalcing by reopening the rent every ten years at fair market rent. Trese
provisions- will ensure that future Boards will have the discretion to detet~ine what is in the
best interests- o€ the State at that point in tune.
POLI Y:
authority:
Pursuant to Section 171-5, YES, the Board tnay "establish additional restrictions,
requirements, or conditions, not inconsistent wiith those prescribed in this chapter, relating to
the use of particular land being disposed of, the terms of sale, lease, license, or petit, and
the qualifications of any person to drag, bid, or negotiate for public land,"
Pursuant to Sections 1713 and~171-~3.1, S, the Board tray lease, ac nominal
consideration, by direct negoeiation and without recourse to public auction, public lands to an
eleemosynary organization.
Staff notes. that the lottery ffiethod is established here pursuant to Sections 171-43 and
43.1, IiRS, anal is not to be co with-the drawing method under Section 171-15, HRS.
Scope anal Appll~bill~y:
This policy shall apply to:
1) Neva, directly negotiated general leases and revocable permits requested by a
private non profit organization; -and
2) existing non profit leases which were originally issued through direct
negotiaeion and where the lessee is dissatisfied with their rent amount,
including but not limited t®, rental reopenings, and desires to Dave the Board
re-examine their rent -for the purpose of reducing the ansount.
This policy shall apply only to Stag lands managed by the Land Division.
~~.•:c .~~^-c'-~;:; Pag- 6 Sepce~pe: ' i. :998
~ ~as:cg poi:cy .
C
Ties poll y shall not apply to:
1) Revocable permits and ;eneral leases which have already received hoard
approval as of this date.
Revocable permits which are seasonal or otherwise temporary in nature;
provided that such permits shall contain: a) a termination date which reflects a
term of not ®ore than one year and b) a provision which prohibits any
extension of the term. .
Note: It is the intention of the land Division co convert revocable permits
which are intended for long-tersxt occupancy and are held by private non-profit
organizations to general leases, thus making theffi subject to this policy.
3) Government agencies which nzay receive direct leases or set asides pursuant to
sections 171-11 or 171-95, HRS. Non-profits which are quasi-governmental
or created by a govet~ent agency may either comply with ehis policy or
pursue a see aside froffi their affiliated governmenu agency.
Policy:
1) applicants requesting leases under Sections 171-43 or 1713.1, HRS, shall
follow the process eland criteria established in TI'S and R.
2) Existing non-profit lessees sl~ll leave the option of appealing their rent amount
by follov~ing Steps 9 and 10 of the process and criteria established in '
Y°TS A and 13. `T'his option tnay be exercised no snore than once every
five years.
For existin non rofit leases containing the rental reopening provision which
g F
states that the new tint shall be the rental for the previous period or the fair
market rent ac the time of the reopening, whichever is approved by the Lessor,
. the Department's appraisal shall be set at fair market rent and the lessee shall
have the oppoflunity to reject the new rent and follow Steps 9 and 10 of the
process and criteria established in TTS A and `
3) for leases awarded pursuant t® Sections 171-43 and 171-43.1, ~t.S: I
a) Standard lease term shall be 30 years, uoless a shorter term is
requested by the non profit. ~aeceptions tnay be if ehe non- ~
profit shows proof tit a longer term is legitiffiately required by a ~
funding organisation.
b) Standard leas+r rental reopening provisions shall be every 10 years and ~ , , ~
shall be set at fair market rent.
3LtiR - Ica-P~oc;c page ;
Leasing Polic;~ Sz~~e:acc-
REC0~1ytENDATION: What the Board:
1} Approve the above stated policy;
2} Authorize the staff to develop the application form to be used to implement
this policy subject to the approval of the Chairperson;
3) Authorize the Chairperson to approve changes as may be deemed necessary or
. prudent froth time to time on the application form; and
Authorize the Chairperson to approve conducting lotteries as may be
recot~ended from timc to time by stafif.
ltespeetfully submitted,
DIF~tDI~ S. MAi1~iIY
Assistant Adstrator
APPRO~ F®~ SLJ~I~T`I'AL:
ICH.~EL D . WI CN, hairperson
LAND DIVISION
Non-Profit Leasing Process Flowchart
(rev. 9/17198)
- (Ncn-profit makes a request)
i
Step 1 ~ Determine if parcel okay to lease
L ,
No ~ ~ Yes
End I
(Non-profit completes application)
Step 2 I Determine if non-profit is qualified
i
No I Yes
End ~ I
Step 3 I Determine disposition method
Step 4 ; Determine character of use
i
• Step 6 Obtain agency comments
NEGOTIATE,I~ OTTERY '
Step 6 ! Obtain Chair approval
Step ~ ; ~ Advertise lottery
i
i
• Step 8 ~ Peceive screen applications;
_
Step 9 ~ Determine rent
t
I
Step i0 Obtain Hoard approval
Step 1 Conduct lottery
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a. The standard terns and conditions of the most current right-of-
entry form, as may be amended from time to time;
b. The right-of--entry shall commence upon the approval of this
submittal and expire on the construction completion date or with
the issuance of the subject executive order, whichever comes first;
c. Such other terms and conditions as may be prescribed by the
Chairperson to best serve the interests of the State.
17. Approved as Submitted. The Chairperson did ask about whether or not there
was a pier on the property. Charlene, have one of the Oahu people check it out
when they aze in the area. If there is a pier there, they need a permit or maybe are '
caught in the Pier Project that Lauren grad Cecil are working on.
18. Approved as Submitted,
19. Approved as Subaaitteei.
20. Approved as Ainendeei.--The ~oazd, after lengthy discussion, amended the f
submittal as follows:
Page 1, Changed the Policy to Guidelines®This was based on concerns raised by
member Matsumoto regarding the need for rules if it was a policy and his belief
that flee ~oazd must ultimately decide the rent as is allowed for in the statutes.
Page 5, deleted the requirement that new leases will be issued at fair mazket value.
Rents for new leases will be put through the same process outlined in Section II,
A, of the Guidelines. I
Page 7, delete the requirement that new leases will be issued at fair mazket value.
Rent determination for new leases will be put through the same process outlined
in Section II, A. of the Guidelines.
Page 7, delete all of Section II, A, 2, a, i. Availability of POS funds will not I
automatically trigger fair market rent.
Page 8, amended Section II, A, 2, d, to read as follows: I
Determine any off-set:
)3ase rent maybe off-set on a dollaz-for-dollar basis, based on documented
improvements made to the leased property, subjec°~ to Land 1)ivisaore review seed I
approval jSuch an off=set may be applied from the point in time when the ~
improvement funds were expended J
Page 8, amended Section II, A, 3 to read as follows:
3. In determining anon-profit's public benefit rating, staff shall utilize the
services from a group of State Departments/Agencies [of experts in the
non-profit field, including
Page 8, added Section II, A, 5 to read as follows:
5. The determination on the amount of rent is to be done by the Board taking
into consideration information provided by the applicant through this
process.
Page 9, amended the recommendation section as follows:
2. Approve the above stated revised guidelines ~policyJ regarding the leasing
of public lands under the jurisdiction of the Land Division to non-profits;
and
3. Authorize the Chairperson and staff to take any action necessary to
implement the above state revised guideldnes ~policyJ.
4. Subject to review by the Department of Attorney General.
This action followed much debate and discussion on the difficulty of developing a
fair, open and competitive process for assessing rents for non-profit organizations. The
Board themselves, at one point during the discussion, indicated that it was difficult to
come up with one system to assess, properly, how rents should be determined for non-
profit organizations. Dede did a good job of developing the guidelines, especially
considering the fact that there were no standazds for non-profit leases in the past. She
will be cleaning up the revised guidelines and getting copies out ASAP. She also will be
taking some of the pending reopenings to the Board for a rent determination.
21. Approved as SubYnattecl.
22. IDeferreeio
Board deferred action on this based on questions raised by the
applicant. The Princeville representative wanted gratis consideration because
they indicated that they provided the roadway parcel to the state several years ago.
Essentially, they indicated that they conveyed the 56 wide roadway to the state to
provide access to the forest reserve. They also stated that the roadway provides
public access and that the state will benefit because Princeville will improve
certain sections of the access. Il{DI~D, please follow-up. Does the fact that they
conveyed the roadway to the State several years ago have any impact on the
valuation of the proposed easement? brow will the public use of the easement
iYnpact the value of the proposed easement? If the law precludes a less than fair
market value disposition, this needs to be discussed thoroughly in the submittal
and provide this information to the applicant.
Interview, January 13, 1999, Nancy Crawford, Business Manager, Hawaii County
Public Works Department
Interview, January 13, 1999, Gary Maesato, Business Manager, & departmental
personnel, Hawaii County Police Department
Interview, January 1,1999, Julie Tulang, Director, ~ departmental personnel, Hawaii
County Parks And Recreation Department
Interview, January 10,1999, Harry Takahashi, Director, & departmental personnel,
Hawaii County Finance Department
Interview, January 30,1999, Edwin Taira, .Assistant Housing Administrator, Hawaii
County Department Of Housing And Community Development
ACi®VVI~I)~ElVIE10TT~
We wish to express our appreciation for the cooperation and assistance extended to us
during this special study by Hawai 'i County department heads and their staff.'
Glossary
Abandonment Clause Fail to use as specified.
Arbitration Procedure for arbitration.
AsSignmen4 S Subistting Lessee will not without prior consent assign or sublet Oremises.
Attorney/ Fee RECOVery The right of the prevailing party to recover attorney fees.
Complete Agreement Clause Full and complete agreement. No further written and oral agreements exist.
Compliance wrath Laws Clause Requires compliance with county/state/federal laws as well as licensing for operation and accred.
Condemnation di Partial If condemned, then lease is terminated. If partial, then a proportionate reduction in rent.
Conditions of Premises Clause Disclaims any warranty and further responsibility. Property is'as is'.
Construction of Language Singular shall include the plural.
Contracts for Construction Clause Prior consent required.
Costs of L'etigation Claus@ Lessee responsible for all legal costs.
Damages to Propefty Lessee is responsible for bsses oMer than willful act or negligence of the lessor.
Destruction Clause Releases further obligation If premises are in someway destroyed. Shah not rebuild.
EStoppei Certificate Upon request, a certificate tha4 rent is current and reflects certain information about lease.
Firs ~ Other Casualty Insurance for fire 6 casually 4hat is not covered by landbrd's insurance.
Force t~ajure Delays by certain reasons (s4eikn, etc.) may extend conditions.
Forum Ssiection Legs! action must be Oaken in Circuit or District Courts of the 3rd Circuit. '
Hazardous blasts Prohibition of dumping hazardous waste materials.
Headings Headings does not describe the full scope of the provisions.
HOId OVSr After expiration of thelaase, lease may continue on s month to month basis.
$mprovemsnt CBauss Requires prior consent before conducting improvements. Reserves right for inspection.
Indemnification To hold lessor harmless.
Landlord Improvements Right of lessor to improve property.
Lessee Holder of real property under lease.
Lessor Property Owner.
Liability Insurance Liability Insurance.
Liens CBauSe Requires lndemnificatbn of county against a!1 Hens and encumtxances.
IdFaintsnante ~ Repairs Must reasonably maintain kt good condition at the lessee's cost except for stnutural.
Mortgage Clause No assignmenB or mortgage without prior approval.
Non Discrimination Non-discrimination as pertaining 4o Baw.
Non-Pr04it Sta$u8 CIauSS Requires 4hat Less®e SP.aintains status and provides, if required evidence of certification by the IRS.
Non t9lfaivsr Lessor does not give up the rights of the tease by accepting lease payments.
Non-Caratuity A1fP'idavit Affidavit that certifies tha4 no gifts were made to empbyess or tt~ir families to in4luerx:e. I
Notice of Lisn If lessor receives lien notion. Chen lessor may deny access.
Notices Procedure for nonce of demar~.
Observance of Law Comptlartce of laws, rules, regulatlats and ordtnanceS of the government.
Operating Expens®s Cessna shah pay atl operating expenses associated with the premise tha4 are required.
iasrsonal Property CBauss Requires all equipment 40 operate facility to be provided by Lessen.
Personnel Clause Requires lessee to provide a!! staff necessary to operate facility applicable to defined use.
®uist Enjoyment Cessna Shall peaceatNe hold b enjoy the premise.
Relocation Right to relocate lessee. I
Remedies of Default The right to remove lessee due to rton-performance of the t®ase.
Removal of Fixtures Lessee may not remove fixtures without written consent of lessor.
Reporting/Records Requirement Claus@ Requires spet:ific reports.
Right of 6:retPy? Lassofs right to enter premise. I
Rtt1sS b Rsgula46ons Must fOlbw lease cond3tons and may be changed by mutual wnsent
Sanitation C1auSS Requires premises be tsep4 ~ sanitary condition in corrtpliartce with all applicable laws.
Security Deposit to addition to rent, a deposit for cleaning and damages.
Ssvsrability N any cortditiort becomes invalid. then remainder shah not bn affected.
Subordinat® to 9'Wortgages The Inese is subordinate to amy lessors ertcumbrartces. I
Successors dr Assigns The lease agreePrtent wil0 continue with attccesaors or assigns.
Surrender of PremiSS Peaceful surrender of premise at end of the lease.
Tax Clearance Execution of tease and final payment shah root be made until ap taxes have been peed curent.
T®t'minatioft by Part9sS Mutua! termination upon 30 day notice to the outer.
'Time is Of tits IeSSanCS Time fs important in alt provisions of 4he lease.
Description of use.
Utility Charges Lessee to pay water, etecKric, sewer and telephone expenses.
iilfasts, Nuisance, llniawful Activity Lessee shall riot permiH waste, nuisance or unlawful activities.
Gfosgary
t~r®pared BY Th® OPtlce Of Tha Legslatlvs Auditor