HB1385 SD2

PART I

SECTION 1. The legislature finds that Act 149, Session Laws of Hawaii 2018 (Act 149), established a ten-year pilot project to authorize the board of land and natural resources to extend leases of public lands in the Hilo community economic district for the purpose of facilitating improvement and economic opportunity in the area for lessees who commit to making substantial improvements to the existing improvements or constructing new substantial improvements.

In extending the lease of public lands in the Hilo community economic district, Act 149 authorized the board of land and natural resources to:

(1) Modify or eliminate any of the restrictions specified in section 171-36(a), Hawaii Revised Statutes;

(2) Extend or modify the fixed rental period or the term of the lease; provided that the board of land and natural resources approves a development agreement proposed by a lessee to make substantial improvements to the existing improvements or to construct new substantial improvements, so long as the extension 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 meet the requirements of a lender or to amortize the cost of the substantial improvements that will be paid for by the lessee without institutional financing.

Noticeably missing from Act 149 is language that expressly allows the board of land and natural resources to unilaterally amend any terms and conditions of the extended lease to conform to the most current lease form and leasing practices and policies of the board of land and natural resources. The legislature finds this to be in stark contrast to Act 219, Session Laws of Hawaii 2011 (Act 219), which was a similar measure that authorized the board of land and natural resources to extend hotel or resort leases for lessees who commit to substantial improvement to the existing improvements and contained specific language requiring any extension of a lease granted under the measure to be executed using the most current lease form and leasing practices and policies of the board of land and natural resources.

The legislature also finds that Act 149 allows the board of land and natural resources to subject its approval of lease extensions to additional terms and conditions; provided that such terms and conditions must be set in the rules adopted by the board. The legislature finds, however, to this date, the board of land and natural resources has not adopted any rules governing the extension of leases of public lands under Act 149 or any other lease extensions permitted under chapter 171, Hawaii Revised Statutes.

The legislature further finds that despite the foregoing, the board of land and natural resources has been approving extensions of leases pursuant to Act 149 by amending the lease terms and conditions to conform to the board's most current lease form and leasing practices and policies.

Accordingly, the purpose of this part is to clarify that:

(1) The board of land and natural resources shall not unilaterally amend the terms and conditions of any lease of public lands being extended pursuant to Act 149, codified at part X of chapter 171, Hawaii Revised Statutes, except as otherwise provided therein; and

(2) If the board of land and natural resources wishes to amend the terms and conditions of any lease of public lands being extended pursuant to Act 149 to reflect the board's most current lease form and leasing practices and policies, such lease form and leasing practices and policies must be included in the rules of the board governing the extension of leases pursuant to Act 149 or chapter 171, Hawaii Revised Statutes, adopted by the board in accordance with chapter 91.

SECTION 2. Section 171-192, Hawaii Revised Statutes, is amended to read as follows:

"[[]§171-192[]] 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 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 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;

(2) 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;

(3) The length of any extension granted for the term of the lease shall not extend the original lease term by more than forty years;

(4) If a reopening occurs, the rental for any ensuing period shall be the fair market rental as determined under section 171-17(d) at the time of reopening;

(5) Any federal or private lending institution shall be qualified to do business in the State;

(6) Proceeds of any mortgage or loan shall be used solely for the operations or substantial improvements on the demised premises;

(7) 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

(8) The [~~rules of~~] most current lease form and leasing practices and policies of the board[, ~~setting forth any additional terms and conditions, which shall ensure~~]; provided that the lease form and leasing practices and policies shall:

(A) Ensure and promote the purposes of the demised lands[.];

(B) Be included in the rules of the board governing the extension of leases of public lands pursuant to this part or this chapter, adopted by the board in accordance with chapter 91; and

(C) Not be used as a reason or justification to delay intaking, processing, considering, and approving requests or applications for development agreements and lease extensions pursuant to this section and the department and board shall continue to intake and process applications for development agreements and lease extensions pursuant to this section pending the promulgation or approval of administrative rules.

(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 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:

(1) The demised premises has been used substantially for the purposes for which they were originally leased;

(2) The rental shall not be less than the rental for the preceding term;

(3) The [~~rules of~~] most current lease form and leasing practices and policies of the board[~~, setting forth any additional terms and conditions which shall ensure~~]; provided that the lease form and leasing practices and policies shall:

(A) Ensure and promote the purposes of the demised lands; and

(B) Be included in the rules of the board governing the extension of leases of public lands pursuant to this part or this chapter, adopted by the board in accordance with chapter 91; and

(4) 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.

(f) 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 negotiating of any lease extension request and document and of the development agreement under subsections (a) and (b).

(g) Except as otherwise provided in this section, the board shall not unilaterally amend the terms and conditions of any lease of public lands being extended pursuant to this part.

(h) Nothing contained in this section shall diminish, alter, or amend any existing rights, privileges, or practices of the Native Hawaiian people.

(i) For the purposes of this section, "lease of public lands" includes leases entered into through direct negotiation without public auction and leases granted at public auction."

PART II

SECTION 3. The purpose of this part is to establish a temporary public land trust working group to be placed within the office of the governor for administrative purposes only. The working group shall have the sole, special purpose of compiling a definitive inventory of the lands that comprise the public land trust described in section 4, and referred to in section 6, of article XII of the Hawaii State Constitution. The legislature intends that this inventory and valuation will be the basis for future legislation to determine the income and proceeds from the pro rata portion of the public land trust under section 6 of article XII, of the Hawaii State Constitution for expenditure by the office of Hawaiian affairs for the betterment of the conditions of native Hawaiians.

SECTION 4. (a) There is established in the office of the governor for administrative purposes only a temporary public land trust working group that shall have the special purpose of compiling an inventory of all lands in the public land trust and then, once an inventory is completed, establishing a valuation of the lands in the inventory. The working group shall use its reasonable best efforts to complete the inventory within twenty‑four months of the effective date of this part.

(b) The working group shall comprise six members, one of whom shall be appointed by the governor, one of whom shall be appointed by the speaker of the house of representatives, one of whom shall be appointed by the president of the senate, and three of whom shall be appointed by the office of Hawaiian affairs board of trustees.

(c) All state agencies shall identify and provide full cooperation and access to information requested by the working group regarding all lands under the agency's ownership or control, whether the land is owned by the agency in fee or set aside by executive order, to the extent required by the working group to fulfill its purpose of identifying all lands in the public land trust inventory.

(d) The office of Hawaiian affairs shall provide the working group with a comprehensive list of all parcels of land that the office of Hawaiian affairs believes:

(1) Are required to be included in the public land trust inventory; and

(2) Constitute crown lands that should be included in the public land trust inventory.

(e) The members of the working group shall appoint, without regard to chapters 76 and 89, Hawaii Revised Statutes, an executive director who shall serve at the pleasure of the working group. The executive director shall oversee the day‑to‑day operations of the working group and perform other functions as directed by the working group, including procuring any professional and other services necessary to complete the inventory of the public land trust. The executive director's salary shall be determined by the working group.

(f) The working group may employ, without regard to chapters 76 and 89, Hawaii Revised Statutes, and at its pleasure dismiss, other persons whom the working group deems necessary for the performance of its functions. The working group may establish the compensation of any persons employed pursuant to this subsection.

(g) The working group shall submit an annual report on the progress of its work to the legislature no later than twenty days prior to the convening of each regular session. The working group shall further submit interim progress reports to the legislature, office of Hawaiian affairs, and governor by the close of each fiscal quarter.

(h) The temporary public land trust working group shall cease to exist on , 20 .

SECTION 5. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2023-2024 and the same sum or so much thereof as may be necessary for fiscal year 2024-2025 to carry out the purposes of this part, including the hiring of necessary staff, purchasing of equipment, and procurement of professional and other services.

The sums appropriated shall be expended by the office of the governor for the purposes of this part.

PART III

SECTION 6. There is appropriated out of the general revenues of the State of Hawaii the sum of $65,000,000 or so much thereof as may be necessary for fiscal year 2023-2024 and the same sum or so much thereof as may be necessary for fiscal year 2024-2025 for repairs to bulkheads and revetments located in the parcels conveyed to the office of Hawaiian affairs pursuant to Act 15, Session Laws of Hawaii 2012.

The sums appropriated shall be expended by the office of Hawaiian affairs for the purposes of this part.

PART IV

SECTION 7. (a) The office of Hawaiian affairs shall prepare a programmatic environmental impact statement for any office of Hawaiian affairs development projects within the Kakaako community development district makai area.

(b) The office of Hawaiian affairs shall submit the programmatic environmental impact statement to the office of environmental quality control. Acceptance of a programmatic environmental impact statement by the office of environmental quality control shall be a condition precedent to the implementation of any proposed development project by the office of Hawaiian affairs within the Kakaako community development district makai area.

(c) Once the programmatic environmental impact statement has been accepted by the office of environmental quality control, it shall satisfy the requirements of chapter 343, Hawaii Revised Statutes, for any development project approved by the office of Hawaiian affairs within the Kakaako community development district makai area.

(d) The office of Hawaiian affairs shall adopt rules pursuant to chapter 91, Hawaii Revised Statutes for the purposes of this section.

(e) As used in this section, "environmental impact statement" shall have the same meaning as in section 343-2, Hawaii Revised Statutes.

SECTION 8. There is appropriated out of the general revenues of the State of Hawaii the sum of $6,000,000 or so much thereof as may be necessary for fiscal year 2023-2024 to prepare a programmatic environmental impact statement for any development projects within the Kakaako community development district makai area.

The sum appropriated shall be expended by the office of Hawaiian affairs for the purposes of this part.

PART V

SECTION 9. There is appropriated out of the general revenues of the State of Hawaii the sum of $13,000,000 or so much thereof as may be necessary for fiscal year 2023-2024 for architectural and engineering design, water supply, and other construction costs for the development of Kukaniloko.

The sum appropriated shall be expended by the office of Hawaiian affairs for the purposes of this part.

PART VI

SECTION 10. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 11. If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the invalidity does not affect other provisions or applications of the Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

SECTION 12. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 13. This Act shall take effect on July 1, 2050; provided that the appropriations made in sections 5, 6, 8, and 9 of this Act shall take effect on July 1, 2050.

HOUSE OF REPRESENTATIVES	H.B. NO.	1385
THIRTY-SECOND LEGISLATURE, 2023		H.D. 2
STATE OF HAWAII		S.D. 2