HB465

SECTION 1. The legislature finds that in November 1977, the State of Hawaii acquired seven hundred ninety-five acres of land in Waiahole valley from Elizabeth Low McCandless Marks. 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. The Hawaii housing finance and development corporation is the current lessor of ninety-two long-term ground leases for residential, agricultural, and commercial lots within the Waiahole subdivision. Generally, the agricultural leases currently set rent at $100 per acre plus 0.9 per cent of the gross agricultural products, and rents of the residential leases are set at $600 per lot plus additional amounts for larger lots. 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 currently are in negotiations to establish increased rents for the next term of fifteen years.

The legislature further finds that the Hawaii housing finance and development corporation's initial offer for the next term of the lease proposes to increase lease rents by approximately 6.6 times the current rates. A rental rate of 6.6 times the current rate is estimated to be below the current market rate, which is approximately ten times the current lease rent rate. 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. However, 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. Consequently, the increased rent may not be affordable for many of these farmers.

The legislature believes that there is no law or policy that requires the Hawaii housing finance and development corporation to increase rent. Leasing land is not within the primary mission of the Hawaii housing finance and development corporation, nor is supporting agriculture. The Hawaii housing finance and development corporation does not provide agricultural support services to the farmers of Waiahole valley, despite the obvious need. 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. 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. Part of that operating expense is related to the water supply system, which requires multiple pumps, is reliant on powerlines that run through the forest to fill a faulty reservoir, and requires expensive maintenance. 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. 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.

The legislature further finds that 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. 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.

The purpose of this Act is to require the Hawaii housing finance and development corporation to offer the lessees a five‑year lease extension at the current rents and to submit a report to the legislature recommending whether the management duties for the valley should be transferred from the Hawaii housing finance and development corporation to a different state entity.

SECTION 2. No later than January 1, 2024, the Hawaii housing finance and development corporation shall offer to each lessee of land of Waiahole valley that has a lease with a term expiring before 2028 a lease extension with an expiration date of June 29, 2028. The offered lease extension shall be at the current rents and other current terms; provided that this section shall not be construed as prohibiting the housing finance and development corporation from negotiating or entering into a new lease with different terms.

SECTION 3. The Hawaii housing finance and development corporation shall submit a report to the legislature no later than twenty days prior to the regular session of 2024:

(1) Recommending whether:

(A) The Hawaii housing finance and development corporation should retain its responsibilities regarding Waiahole valley; or

(B) A different state agency should serve as the landlord of the properties and manager of Waiahole valley, and if so, determining the state agency that is most appropriate; and

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

SECTION 4. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	465
THIRTY-SECOND LEGISLATURE, 2023
STATE OF HAWAII