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THE SENATE
STATE OF HAWAII
TWENTY-NINTH LEGISLATURE, 2018
3058 S.B. NO ' s.D.~ H.D. 2
C.D. 1
A BILL FOR AN ACT
RELATING TO PUBLIC LANDS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that the State has a
fiduciary duty to manage state lands in the best interests of
the public by enhancing state revenues and promoting social,
environmental, and economic well-being of Hawaii's people. As
the majority landowner in East Hawaii, the State has an enormous
influence on the vision, economic development, and overall
success of the East Hawaii community.
The legislature further finds that, under existing laws,
many public land lessees face uncertain futures following
expiration of their leases. The legislature further finds that
these lessees have little incentive to make major investments in
infrastructural improvements or to ensure the long-term
maintenance of facilities on the land. As a result, the
infrastructure and facilities on public lands in East Hawaii
have been deteriorating in many locations.
The legislature also finds that the Banyan Drive area on
the Waiakea Peninsula in East Hawaii, Wailoa State Park, Wailoa
Estuary, and the commercial leases in the Kanoelehua Industrial
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Area are currently facing this difficult economic challenge.
Due to the uncertainty regarding continued tenancy, despite East
Hawaii being the center of tourism for the island of Hawaii,
improvements have not been made and infrastructure has
deteriorated, leaving the region underutilized and in disrepair.
The legislature further finds that Hilo has the potential for
increased growth that can improve workforce and affordable
housing, parks and open space, public facilities, and
commercial, industrial, and hotel facilities, and a pilot
project in this area has the potential to revive public lands,
resulting in more tax revenue and community revitalization, and
be assessed to determine whether it can be replicated in other
areas of the State.
The purpose of this Act is to establish a ten-year pilot
project to authorize the board of land and natural resources to
extend leases of public land in an area to be known as the Hilo
community economic district to facilitate efficient and
effective improvement, and economic opportunity, in the area for
lessees who commit to making substantial improvements to the
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existing improvements or constructing new substantial
improvements.
SECTION 2. Chapter 171, Hawaii Revised Statutes, is
amended by adding a new part to be appropriately designated and
to read as follows:
'I PART . HILO COMMUNITY ECONOMIC DISTRICT
1171-A Definitions. As used in this part:
"Hilo community economic districtll means the area beginning
at the intersection of Manono Street and Kamehameha Avenue,
extending south to Piilani Street, east from Piilani Street to
Kalanikoa Street to include Hoolulu Park, and west from the
intersection of Manono Street and Piilani Street to tax map key
3-2-2-031-001, inclusive along the coastline to Maile Street
until its intersection with Kilauea Avenue and then to Aupuni
Street and beyond to include the following tax map keys until
intersection with Ponahawai Street: 3-2-2-013-003, 3-2-2-012-
001, 3-2-2-012-016, 3-2-2-011-01, and 3-2-2-007-018; extending
makai to tax map key 3-2-3-002-016, along the coastline and
including tax map key 3-2-2-001-006 until intersection with
Lihiwai Street; those lands bounded or abutting Lihiwai Street,
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inclusive through Banyan Drive until its intersection with
Kamehameha Avenue; from Kamehameha Avenue at its intersection
with Kalanianaole Avenue and extending east on Kalanianaole
Avenue to include those abutting lands until tax map key 3-2-1-
010-033 on the mauka side of the road and tax map key 3-2-1-01-
1010 on the makai side of Kalanianaole Avenue, to include also
any of those lands on Ocean View Drive makai of Kalanianaole
Avenue and the lands mauka on Silva Street and Keaa Street; the
lands within the Hilo airport area managed by the department of
land and natural resources as identified on tax map key 3-2-1-
12; and the lands abutting or bounded by Kanoelehua Avenue
extending south to Makaala Street, then east on Makaala Street
to Railroad Avenue then north on Railroad Avenue until Leilani
Street and east on Leilani Street until tax map key 3-2-2-037-
144, then west on Leilani Street until its intersection with
Kanoelehua Avenue; and all those lands abutting or bounded by
Pohaku Street, Kukila Street, Halekauila Street, and Lanikaula
Street as identified on tax map key 3-2-2-58; on Kanoelehua
Avenue heading north from Makaala Street those lands mauka
including those lands on Makaala Street, Holumua Street, Pookela
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Street, Wiwoole Street, and Kawili Street as identified on tax
map key 3-2-2-049 and 3-2-2-050; then on Kanoelehua Avenue North
from Kawili Street and Kalanikoa Street from Piilani Street
until they intersect with Kamehameha Avenue.
IISubstantial improvementsll means any renovation,
rehabilitation, reconstruction, or construction of the existing
improvements, including minimum requirements for off-site and
on-site improvements, the cost of which equals or exceeds thirty
per cent of the market value of the existing improvements that
the lessee or the lessee and developer install, construct, and
complete by the date of completion of the total development.
1171-B Lease restrictions. (a) The board, from time to
time, upon the issuance or during the term of any intensive
agricultural, aquaculture, commercial, mariculture, special
livestock, pasture, hotel, resort, or industrial lease of public
lands within the Hilo community economic district, may:
(1) Modify or eliminate any of the restrictions specified
in section 171-36 (a) ;
(2) Extend or modify the fixed rental period or the term
of the lease upon approval by the board of a
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development agreement proposed by the lessee to make
substantial improvements to the existing improvements
or to construct new substantial improvements so long
as the length of any extension granted does not extend
the original lease term by more than forty years; or
(3) Extend the term and modify any provisions of the
lease,
to the extent necessary to qualify the lease for mortgage
lending or guaranty purposes with any federal mortgage lending
agency; to qualify the lessee for any state or private lending
institution loan, private loan guaranteed by the State, or any
loan in which the State and any private lender participates; or
to amortize the cost of substantial improvements to the demised
premises that are paid for by the lessee without institutional
financing.
(b) Prior to entering into a development agreement, the
lessee or the lessee and developer shall submit to the board the
plans and specifications for the total development being
proposed. The board shall review the plans and specifications
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and, in determining whether to approve the development agreement
pursuant to subsection (a) (2), consider:
(1) Whether the development proposed in the development
agreement is of sufficient worth and value to justify
the extension of the lease;
(2) The estimated period of time to complete the
improvements and expected date of completion of the
improvements; and
(3) The minimum revised annual rent based on the fair
market value of the lands to be developed, as
determined by an appraiser for the board, and the
percentage of rent where gross receipts exceed a
specified amount.
(c) An extension of the fixed rental period or term of the
lease shall be based on the economic life of the substantial
improvements as determined by the board or an independent
appraiser; provided that the approval of any extension shall be
subject to the following:
(1) The demised premises have been used substantially for
the purpose for which they were originally leased;
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The length of any extension granted for the fixed
rental period of the lease shall not extend the fixed
rental period of the original lease by more than forty
years ;
The length of any extension granted for the term of
the lease shall not extend the original lease
more than forty years;
If a reopening occurs, the rental for any ens1
term by
ing
period shall be the fair market irental as determined
under section 171-17(d) at the time of reopening;
Any federal or private lending institution shall be
qualified to do business in the State;
Proceeds of any mortgage or loan shall be used solely
for the operations or substantial improvements on the
demised premises;
Where substantial improvements are financed by the
lessee, the lessee shall submit receipts of
expenditures within a time period specified by the
board, otherwise the lease extension shall be
canceled; and
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(8) The rules of the board, setting forth any additional
terms and conditions, which shall ensure and promote
the purposes of the demised lands.
(d) The board, from time to time, during the term of any
agriculture, intensive agriculture, aquaculture, commercial,
mariculture, special livestock, pasture, hotel, resort, or
industrial lease of public lands within the Hilo community
economic district, may modify or eliminate any of the
restrictions specified in section 171-36(a), extend or modify
the fixed rental period of the lease, or extend the term of the
lease upon a showing of significant economic hardship directly
caused by:
(1) State disaster, pursuant to chapter 209, including
seismic or tidal wave, tsunami, hurricane, volcanic
eruption, typhoon, earthquake, flood, or severe
drought; or
(2) A taking of a portion of the area of the lease by
government action by eminent domain, withdrawal, or
conservation easement; provided that the portion taken
shall not be less than ten per cent of the entire
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leased area unless otherwise approved by the board;
provided that the board determines that the lessee
will not be adequately compensated pursuant to the
lease provisions.
(e) The approval of any extension granted pursuant to
subsection (d) shall be subject to the following:
The demised premises has been used substantially for
the purposes for which they were originally leased;
The rental shall not be less than the rental for the
preceding term;
The rules of the board, setting forth any additional
terms and conditions which shall ensure and promote
the purposes of the demised lands; and
The length of the extension shall not exceed a
reasonable length of time for the purpose of providing
relief and shall in no case extend the original
lease's fixed rental period by more than forty years.
The applicant for any lease extension pursuant to this
section shall pay all costs and expenses incurred by the
department in connection with the processing, analyzing, and
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negotiating of any lease extension request and document and of
the development agreement under subsections (a) and (b) .
1171-C Lessees within the last ten years of their lease
terms; request for interest. (a) Notwithstanding any other
provision of law to the contrary, and except as otherwise
provided in section 171-B, a lessee of public land within the
Hilo community economic district that is classified as hotel,
resort, or commercial and industrial use pursuant to section
171-10, and that is subject to the management, administration,
or control of the board may, during the last ten years of the
term of the original lease, submit a written request to the
board to initiate a request for interest process as provided in
this section.
(b) Within one hundred eighty days of a lessee's written
request to initiate a request for interest, the board shall:
(1) Appraise the value of the land and any improvements to
the land that existed as of the date of the written
request pursuant to section 171-17(a) and require the
awardee of a new lease executed pursuant to this
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section to reimburse the department for the appraisal;
and
(2) Publish a request for interest and request for
qualifications notice inviting persons to express
their interest in leasing the land and their
qualifications as potential lessees and describing any
improvements to the land that exist as of the date of
the written request. The notice shall be given at
least once statewide and at least once in the county
where the land is located and shall contain:
(A) The qualifications required of eligible lessees
which shall conform to department policy for new
leases ;
(B) A general description of the land, including the
address and tax map key, the termination date of
the existing lease, and of any improvements to
the land that existed as of the date of the
written request;
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That the land to be leased is classified as
hotel, resort, or commercial and industrial use
pursuant to section 171-10;
The appraised value of the land and of any
improvements to the land that existed as of the
date of the written request;
The closing date and manner by which a person
shall indicate interest and submit a statement of
qualifications; and
Notice that a current business plan is a
prerequisite to participate at time of auction or
direct negotiation, if applicable, and shall be
made a term of the lease.
(c) Within ninety days after the closing date specified in
the notice, the board shall determine if any persons have
qualified under the terms of the request for qualifications and
shall notify all persons who expressed interest as to whether
they qualified. Qualified bidders shall be required to deposit
an amount equal to one per cent of the value of the leasehold
improvements as determined by appraisal, but not less than
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$1,000, to be held in an interest bearing account as deposit by
the department and returned to the applicant at the applicant's
cancellation of interest, the applicant's unsuccessful bid at
auction, or as a credit against the applicant's successful bid
at auction. The board shall also notify the current lessee as
to whether any other persons qualified.
(d) The board shall proceed to dispose of the land in
accordance with section 171-41.6."
SECTION 3. Section 171-41.6, Hawaii Revised Statutes, is
amended by amending its title and subsection (a) to read as
follows :
[-€I 1171-41.6 [fl Lessees within the last ten years of
their lease terms; requests for interest. (a) Notwithstanding
any other provision of law to the contrary, and except as
otherwise provided in [ccct ion1 sections 171-36(b) and (d) [-;-I
and 171-C, a lessee of public land that is classified as
commercial and industrial use pursuant to section 171-10, and
that is subject to the management, administration, or control
the board may, during the last ten years of the term of the
original lease, submit a written request to the board to
2018-2591 SB3058 CD1 SMA.doc
of
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initiate a request for interest process as provided in this
section.
SECTION 4. The department of land and natural resources
shall review the pilot project established by this Act and
submit a report of its findings and recommendations, including
any proposed legislation, to the legislature no later than
twenty days prior to the convening of the regular session of
2019 and every year thereafter.
SECTION 5. In codifying the new sections added by section
2 of this Act, the revisor of statutes shall substitute
appropriate section numbers for the letters used in designating
the new sections in this Act.
SECTION 6. Statutory material to be repealed is bracketed
and stricken. New statutory material is underscored.
SECTION 7. This Act shall take effect on July 1, 2018, and
shall be repealed on June 30, 2028; provided that section
171-41.6, Hawaii Revised Statutes, shall be reenacted in the
form in which it read on June 30, 2018.
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3058 S.B. NO ' s.D.~ H.D. 2
C.D. 1
Report Title:
Hilo Community Economic District; Redevelopment; Lease
Restrictions; Request for Interest; Public Auction
Description:
Defines the Hilo community economic district. Authorizes BLNR
to extend or modify the terms of certain public land leases
within the economic district upon approval by BLNR of a lessee's
development agreement to make substantial improvements to or
construct new improvements on the land as long as the length of
any extension granted does not extend the original lease term by
more than 40 years. Establishes conditions for BLNR to approve
any extension of the fixed rental period of term of certain
public land leases in the economic district. Establishes causes
of economic hardship for which BLNR may modify or eliminate any
of the existing statutory restrictions on public land leases in
the economic district, extend or modify the fixed rental period
of these leases, or extend the term of these leases and amends
the conditions for BLNR's approval of any such modification,
elimination, or extension. Establishes a separate request for
interest process to public lands in the economic district.
Requires qualified bidders to deposit an amount equal to one per
cent of the value of the leasehold improvements. (CD1)
The summary description of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.
2018-2591 SB3058 CD1 SMA.doc