SR15

WHEREAS, in November 1977, the State of Hawaii acquired 795 acres of land in Waiahole Valley from Elizabeth Low McCandless Marks; and

WHEREAS, in 1998, after a series of protests, discussions, and compromises, the State, as lessor, entered into long-term agricultural and residential leases for lands within the valley; and

WHEREAS, the Hawaii Housing Finance and Development Corporation, as an entity of the State, is the current lessor of ninety-two long-term ground leases for residential, agricultural, and commercial lots within the Waiahole subdivision; and

WHEREAS, generally, the agricultural leases currently set rent at $100 per acre plus 0.9 percent of the gross agricultural products, and rents of the residential leases are set at $600 per lot plus additional amounts for larger lots; and

WHEREAS, the initial twenty-five year term of the leases will end on June 29, 2023, and the lessees and Hawaii Housing Finance and Development Corporation are currently in negotiations to establish increased rents for the next term of fifteen years; and

WHEREAS, the Hawaii Housing Finance and Development Corporation's initial offer for the next term of the lease is that lease rents will increase by approximately 6.6 times the current rates; and

WHEREAS, a rental rate of 6.6 times the current rate is estimated to be below current market rates, which are approximately ten times the current lease rent rates; and

WHEREAS, the additional income from a 6.6 times lease rent increase would only offset seventy-nine percent of the State's cost in operating the valley; and

WHEREAS, a 6.6 times lease rent increase would mean that many farmers leasing more than ten acres would be forced to pay thousands of dollars in additional rent per year, which, for a profession that is known for being low-income, may not be affordable; and

WHEREAS, there is no law or policy that requires the Hawaii Housing Finance and Development Corporation to increase rent; and

WHEREAS, leasing land is not within the primary mission of the Hawaii Housing Finance and Development Corporation, nor is supporting agriculture; and

WHEREAS, the Hawaii Housing Finance and Development Corporation does not provide agricultural support services to the farmers of Waiahole Valley, despite the obvious need; and

WHEREAS, the Hawaii Housing Finance and Development Corporation's annual expenses for management of Waiahole Valley have exceeded revenues, with an estimated deficit of $500,000 in 2016; and

WHEREAS, the deficit is funded from moneys in the Dwelling Unit Revolving Fund, which was established to fund housing development programs and regional state infrastructure programs, not agriculture; and

WHEREAS, part of that operating expense is related to the water supply system, which requires multiple pumps, is reliant on powerlines that run though the forest to fill a faulty reservoir, and requires expensive maintenance; and

WHEREAS, the State has recommended replacing the water supply system with a system based upon the old and deteriorating system, which would not help to reduce the State's operating costs of the valley; and

WHEREAS, a gravity-fed system fed from the waters of the higher elevation Waiahole ditch would require no electricity, would reduce maintenance costs, and could potentially generate electricity; and

WHEREAS, changing the management of the valley to a community-based management system supported by state agencies with expertise in agriculture and leasing could significantly reduce the State's costs while improving farmer productivity, and

WHEREAS, the lessees and the Hawaii Housing Finance and Development Corporation are currently in the process of developing a more comprehensive plan for Waiahole Valley, but are not expected to complete that plan before the end of the current lease term; now, therefore,

BE IT RESOLVED by the Senate of the Thirty-second Legislature of the State of Hawaii, Regular Session of 2023, that the Hawaii Housing Finance and Development Corporation is urged to postpone any arbitration proceedings and lease rent increases for five years to allow for the development of a comprehensive plan for Waiahole Valley on the island of Oahu; and

BE IT FURTHER RESOLVED that the Hawaii Housing Finance and Development Corporation is requested to allow the lessees to continue using their leased lands at current lease rates for the duration of the five-year postponement period; and

BE IT FURTHER RESOLVED that the Hawaii Housing Finance and Development Corporation is requested to submit a report to the Legislature no later than twenty days prior to the Regular Session of 2024:

(1) Recommending whether the Hawaii Housing Finance and Development Corporation should retain its responsibilities regarding Waiahole Valley or whether a different state agency should serve as the landlord of the properties and manager of Waiahole Valley, and if so, which state agency is the appropriate entity; and

(2) Including any necessary findings, recommendations, and proposed legislation; and

BE IT FURTHER RESOLVED that a certified copy of this Resolution be transmitted to the Executive Director of the Hawaii Housing Finance and Development Corporation.

	OFFERED BY:	_____________________________

Report Title:

Waiahole Valley; Leases; Hawaii Housing Finance and Development Corporation; Report

THE SENATE	S.R. NO.	15
THIRTY-SECOND LEGISLATURE, 2023
STATE OF HAWAII