With some Hilo business owners having a hard time getting their leases of state land extended, a bill in the state Legislature seeks to cut the Board of Land and Natural Resources out of the process entirely.
Senate Bill 3375 would repeal the need for the BLNR to approve lease extensions in the Hilo Community Economic District, leaving the approval process in the hands of the Department of Land and Natural Resources.
The bill was introduced in the midst of a contentious lease extension program that began in 2018. A law passed that year, Act 149, allowed lessees of state land in the Kanoelehua Industrial Area to extend their leases with the state by up to 40 years.
Many of the leases within the KIA were awarded following the 1960 tsunami and are approaching the end of their terms. Under Act 149, lessees would be allowed to have those leases extended if they commit to making improvements to the properties.
However, since then, the approximately half-dozen lessees who have applied for extensions have had their applications held up by the BLNR for months or even years.
State Sen. Lorraine Inouye of Hilo, who co-introduced the bill, said during a Wednesday hearing of the Senate Committee on Water and Land the failure of Act 149 to provide lease extensions for the businesses that have been the bedrock of East Hawaii’s economy for decades is a black mark on the Legislature’s record.
Citing a January article by the Tribune-Herald, Inouye said the juxtaposition of Gov. David Ige’s strong support for Act 149 in 2018, along with the subsequent inaction by the BLNR, is an “embarrassing situation.”
“The governor comes to Hilo with a delegation, (and) the Big Island community attended the signing of this particular bill,” Inouye said. “Until today, or up until recently, the (DLNR’s Land Division) has done nothing. It’s kind of embarrassing to our governor.”
Inouye said the BLNR does not have statutory authority to amend or add lease provisions under Act 149, only to extend their terms. However, the BLNR has added extensive provisions to the lease of at least one applicant, HPM Building Supply.
HPM President and CEO Jason Fujimoto said last month that the new provisions offered by the BLNR would have greatly hindered HPM’s ability to do business, but ultimately he conceded to most of them. Fujimoto submitted written testimony in support of SB 3375 for Wednesday’s hearing.
“Although HPM will not currently benefit by the passage of this bill, we feel compelled to show support for the benefit of other lessees in the Hilo Community Economic District,” Fujimoto wrote. “With this bill, our hope is other lessees will not have to spend the same amount of time, energy and costs in extending their lease.”
Inouye said that when she served as a state representative between 1998 and 2008, she worked on a lease extension bill in the KIA with the assistance of then-HPM President Bobby Fujimoto.
“I leave in 2008, I was absent for six years,” Inouye said. “And now the same issue that we’re dealing with is with the grandson of Bobby Fujimoto who we tried to help in the early 2000s. Are we going to extend the same issue for generations to come?”
Kevin Moore, assistant administrator for the DLNR Land Division, said during the hearing that negotiating development agreements with each of the lessees is a time-consuming process which is a large contributor to the delays.
Moore added that the Land Division is “not comfortable” with the proposals in the bill, a sentiment echoed by BLNR chair Suzanne Case and Land Division Administrator Russell Tsuji.
In written testimony submitted for Wednesday’s hearing, Case wrote that the DLNR opposes the measure on the grounds that it would hamstring the BLNR’s ability to fulfill its obligations to the public trust, and reduce the department’s status to a mere “rubber stamp” approver of any lease extension application.
“The department believes that the best practice is to present lease extension requests to the board at open, public meetings so that the public has an opportunity to testify,” Case wrote. “For every lessee of public lands who believes it is entitled to a lease extension at discounted rental rates, there are many opposing views including those of observers who would like to see the land returned to the state with improvements at the end of the original lease term or who would charge a premium to the lessee as a condition to a lease extension.”
Other legislators on the committee had concerns about the bill. Oahu Sen. Gil Riviere took issue with a clause in the bill that would base lessees’ rents off of tax assessed value instead of fair market rents. Because tax assessed values are typically lower than market rents, Riviere said it would remove a not-insignificant amount of income to the state.
Oahu Sen. Kurt Fevella directly opposed the bill, questioning whether any of the owners of businesses within the KIA actually reside on the Big Island.
Hilo Rep. Chris Todd, who was a strong supporter of Act 149 in 2018 and has advocated for KIA lessees since then, said SB 3375 is the inevitable result of legislators feeling that a law is not being followed in good faith.
“It’s a symptom of a lot of frustration people have with the situation,” Todd said. “It does feel like the BLNR has overstepped its bounds.”
During the hearing, Inouye said the bill would fulfill an obligation to KIA businesses the Legislature itself took on in 2018, adding that it isn’t fair to business owners to offer a tool to extend their businesses’ lifespans and then delay action for years at a time.
“What we’re having here is an extension and a demand that all businesses make their improvements, but then we’re going to add some more stuff, which is contrary to what Act 149 is,” Inouye said. “This bill sends the message that we will not wait any longer.”
Ultimately, the committee voted to recommend that the measure be passed, with four voting in full support, two — including Riviere — voting in favor with reservations, and only Fevella voting against it.
The bill as of Wednesday had not yet been scheduled for its next joint Senate committee hearing.
Email Michael Brestovansky at mbrestovansky@hawaiitribune-herald.com.