KIAA Government affairs committee

2017 Legislative report to membership

We have a new law, HB 575 is now Act 215, 2017.  Through the efforts and support of our East Hawaii caucus we were able to place HB 575, originally introduced by Rep Mark Nakashima in the House and Sen. Kai Kahele in the Senate,  at the desk of the Governor for consideration. The Attorney General’s office then weighed in with concerns and the Governor announced his intent to veto the bill.  Your KIAA GAC ad hoc committee was able to meet with the Governors Chief of Staff, Mike McCartney, to  provide our counter arguments to those concerns.  In addition we reinforced the need for statutory reform in order to promote economic development in East Hawaii.  Finally, Rep. Mark Nakashima met with the Governor on the final day prior to the Veto deadline and ultimately convinced the Governor to allow HB 575 to become law without his signature.  Mark assured the Governor that we would work next session to improve the new statutory framework Act 215 provides.  The Governors message, GM 1329, expresses concerns about the constitutionality of the bill.  From KIAA’s perspective our focus will be to simplify the law and make it more efficient.

So what does HB 575 mean to you?  There is attached a Flowchart that provides the pathway to renew your lease.  “Renew” means to negotiate a new lease for a new term on your existing property.  In order to protect the public’s interest, these are state lands for the benefit of all the people, the legislature required changes in HB575 to further the public policy of disposition by Auction.  It’s quite different from the Extension bill we submitted originally.  Here’s an example of how it might work in the real world:

1. Let’s say you have a lease that expires within 10 years, e.g.  2026
2. You notify the state that you wish to renew your lease
3. The state DLNR then orders an appraisal of your property with improvements.  It then advertises the prospective lease at least once statewide and once in the County of Hawaii.  
4. The advertisement states that the property will only be available at the termination of the lease in 2026
5. To qualify a new bidder must meet the criteria established by the DLNR (a recent example attached, “Appendix A”, please note that current lessees are exempt from this requirement)  
6. If there are no qualified bidders then the board enters direct negotiations with the current lessee and you begin your new lease when the negotiations are completed. You will not have to meet any specific criteria for improvements or a business plan.
7. The time period from when you notify the state to when they give you a determination of the results of the qualification process could be as long as 450 days. 
8. If there are no qualified bidders then the board enters direct negotiations with the current lessee and you begin your new lease when the negotiations are completed.  You will not have to meet any specific criteria for improvements or a business plan.
9. If there are qualified bidders they will be advised that they will be contacted between 2023 and 2026 and notified of the scheduled auction.  They will then be required to show that they are still qualified and that they have a business plan.
10. If there are no qualified bidders at that time the lessee should be able to enter direct negotiation.
11. If an auction does occur and the current lessee does not win the auction then they can retain their leasehold position until the end of the original lease.  Any improvements they have made on the property from the day they requested a renewal and the day of the transfer of the land will be paid to them as a premium by the new lessee.

Attachments:

KIAA did make a strong case for the state to focus on East Hawaii’s economic redevelopment.  Our arguments were that this is best driven by reinvestment in our industrial area and the tourism facilities on Banyan Drive.  However, our efforts to support the two economic redevelopment bills, HB 1469 and HB 1479 were frustrated by various legislative issues.  Both bills had significant support and neither bill has significant opposition, they just both fell victim to the budgetary issues and effects of the rail debate. The TAT tax share to the Counties, and the extension of the excise tax to support the Oahu rail project,  monopolized the last month of the session and bills such as ours suffered accordingly.  But we will not let this stop us.  Our work is not done and we plan to be proactive and start gathering support now in anticipation of the 2018 session.

We will also be hosting a Community Meeting with our legislators sometime this fall.  We will keep you posted on dates and times of this event.  We thank you for your continued support.

Mahalo,

KIAA GAC