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THE SENATE |
S.B. NO. |
622 |
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THIRTY-SECOND LEGISLATURE, 2023 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
relating to public lands.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
"§171-
Renewal of leases;
public auction required. (a) Subject to any other law or agreement to the
contrary, within
three years before the termination date of each lease, the board shall dispose
of the land by public auction as provided in this chapter. The auction upset price shall be the greater
of the current rent or the fair market rent pursuant to section 171‑17(d)
based upon the appraised value of the land and any improvements to the land
that existed as of the date of the written request.
(b)
The current lessee may bid on a new lease at the public auction. The current lessee's business plan shall be
deemed acceptable to the board and the current lessee shall not be required to
submit a new business plan; provided that the current lessee is in compliance
with the terms of the existing lease and has submitted a business plan prior to
the date of the auction.
(c) Lease terms for any new lease executed
pursuant to this section shall be determined by the board and shall:
(1) Not commence prior to the
termination of the current lease;
(2) Establish the rent at no less than
the greater of the current rent or the fair market rent pursuant to section
171-17(d) based upon the appraised value of the land and any improvements to the
land that existed as of the date of the written request;
(3) If the lease is awarded after public
auction to any person other than the current lessee, include a premium equal to
the value of any improvements to the land made after the date of the written
request in subsection (a), which shall be paid to the current lessee prior to
transfer of the land and improvements to the new lessee; and
(4) Include the previously submitted
business plan.
(d) Unless specifically required to do so by the
board, the current lessee shall not be required to remove improvements or
restore the land to a vacant condition at the expiration of the lease; provided
that, without prejudice to any other rights or remedies that the current lessee
or State may have, this subsection shall not alter any obligation of a current
lessee to indemnify, defend, and hold the State harmless from any claims
regarding pollution or contamination of the land with potentially hazardous
substances.
(e) As used in this section, "improvements" means all physical improvements constructed, owned, or constructed and owned by the lessee during the lease term and shall exclude all infrastructure constructed, owned, or constructed and owned by third parties, such as water and sewer pipes, electricity and telephone lines and cables, or other infrastructure."
SECTION 2. Section 171-36.5, Hawaii Revised Statutes, is repealed.
["[§171-36.5] Commercial, industrial,
resort, mixed-use, or government leases; extension of term. (a) Notwithstanding section 171-36, for leases
that have not been assigned or transferred within ten years prior to receipt of
an application for a lease extension submitted pursuant to this section, the
board may extend the rental period of a lease of public lands for commercial
use, industrial use, resort use, mixed-use, or government use upon the board's
approval of a development agreement proposed by the lessee or by the lessee and
developer to make substantial improvements to the existing improvements. For the purposes of this subsection,
"assigned or transferred" shall not include:
(1) A sale or change in ownership of a
lessee that is a company or entity; or
(2) A collateral assignment of lease or
other security granted to a leasehold mortgagee in connection with leasehold
financing by a lessee.
(b) Before 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
proposed. The board shall review the
plans and specifications and determine:
(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 necessary 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, if deemed
appropriate by an appraiser, the appropriate percentage of rent where gross
receipts exceed a specified amount.
No lease extension shall be approved until the board and the
lessee or the lessee and developer mutually agree to the terms and conditions
of the development agreement.
(c) No construction
shall commence until the lessee or the lessee and developer have filed with the
board a sufficient bond conditioned upon the full and faithful performance of
all the terms and conditions of the development agreement.
(d) Any extension of a
lease pursuant to this section shall be based upon the substantial improvements
to be made and shall be for a period no longer than forty years. No lease shall be transferable or assignable
throughout the first ten years of the extended term, except by devise, bequest,
intestate succession, a collateral assignment of lease or other security
granted to a leasehold mortgagee in connection with leasehold financing by a
lessee, a change in direct ownership of less than fifty per cent of a lessee
that is a company or entity, a change in indirect ownership of a lessee that is
a company or entity, or by operation of law.
The prohibition on assignments and transfer of leases shall include a
prohibition on conveyances of leases.
During subsequent periods of the extended term of the lease, the lease
may be assigned or transferred, subject to approval by the board.
(e) The applicant for
a lease extension shall pay all costs and expenses incurred by the department
in connection with processing, analyzing, or negotiating any lease extension
request, lease document, or development agreement under this section.
(f) As used in this
section:
"Government use" means a development undertaken
under a lease held by any agency or department of the State or its political
subdivisions other than the University of Hawaii or any department, agency, or
administratively attached entity of the University of Hawaii system.
"Mixed-use" means a development that combines two
or more of the following uses in a single project: commercial use, resort use,
multifamily residential use, or government use.
"Resort use" means a development that:
(1) Provides transient accommodations as
defined in section 237D-1 and related services, which may include a front desk,
housekeeping, food and beverage, room service, and other services customarily
associated with transient accommodations; and
(2) Where at least seventy-five per cent
of the living or sleeping quarters are used solely for transient accommodations
for the term of any lease extension.
"Substantial improvements" means any renovation,
rehabilitation, reconstruction, or construction of existing improvements,
including minimum requirements for off-site and on-site improvements, the cost
of which equals or exceeds thirty per cent of the market value of the existing
improvements, that the lessee or the lessee and developer installs, constructs,
and completes by the date of completion of the total development."]
SECTION 3. Section 171-41.6, Hawaii Revised Statutes, is repealed.
["§171-41.6 Lessees within the last ten years of their
lease terms; requests for interest.
(a) Notwithstanding any other
provision of law to the contrary, and except as otherwise provided in section
171-36(b), (c), and (e) and section 171-193, a lessee of public land that is
classified as commercial and industrial use pursuant to section 171-10 and that
is subject to the management, administration, or control of the board may
submit, during the last ten years of the term of the original lease, a written
request to the board to initiate a request for interest process as provided in
this section.
(b) Within one hundred eighty days of a lessee's
written request to initiate a request for interest, the board shall:
(1) Appraise the value of the land and
any improvements to the land that existed as of the date of the written request
pursuant to section 171-17(a) and require the awardee of a new lease
executed pursuant to this section to reimburse the department for the
appraisal;
(2) Publish a request for interest and
request for qualifications notice inviting persons to express their interest in
leasing the land and their qualifications as potential lessees and describing
any improvements to the land that exist as of the date of the written request. The notice shall be given at least once
statewide and at least once in the county where the land is located and shall
contain:
(A) The qualifications required of
eligible lessees;
(B) A general description of the land,
including the address and tax map key, and of any improvements to the land that
existed as of the date of the written request;
(C) That the land to be leased is
classified as commercial and industrial use pursuant to section 171-10;
(D) The appraised value of the land and
of any improvements to the land that existed as of the date of the written
request;
(E) The closing date and manner by which
a person shall indicate interest and submit a statement of qualifications; and
(F) Notice that a business plan is a
prerequisite to participate at time of auction or direct negotiation, if
applicable, and shall be made a term of the lease.
(c) Within ninety days after the closing date
specified in the notice, the board shall determine if any persons have
qualified under the terms of the request for qualifications and shall notify
all persons who expressed interest as to whether they qualified. The board shall also notify the current
lessee as to whether any other persons qualified.
(d) The board shall enter into direct negotiation
with the current lessee immediately upon notification if no other qualified
persons have expressed interest in the property.
(e)
If the land is not leased pursuant to subsection (d) within three years before
the termination date of the lease, the board shall dispose of the land by
public auction as provided in this chapter; provided that the board has
determined that at least one person, who:
(1) Is not the current lessee;
(2) Has been determined by the board to be qualified; and
(3) Has submitted a business plan prior to the date of the auction,
has
expressed interest in leasing the land and any improvements to the land that
existed as of the date of the written request in subsection (a). The auction upset price shall be the greater
of the current rent or the fair market rent pursuant to section 171-17(d) based
upon the appraised value of the land and any improvements to the land that
existed as of the date of the written request.
The current lessee may bid on a new
lease at the public auction. The current
lessee's business plan shall be deemed acceptable to the board and the current
lessee shall not be required to submit a new business plan; provided that the
current lessee is in compliance with the terms of the existing lease and has
submitted a business plan prior to the date of the auction.
(f) Lease terms for any new lease executed
pursuant to this section shall be determined by the board and shall:
(1) Not commence prior to the
termination of the current lease;
(2) Establish the rent at no less than
the greater of the current rent or the fair market rent pursuant to section
171-17(d) based upon the appraised value of the land and any improvements to
the land that existed as of the date of the written request;
(3) If the lease is awarded after public
auction to any person other than the current lessee, include a premium equal to
the value of any improvements to the land made after the date of the written
request in subsection (a), which shall be paid to the current lessee prior to
transfer of the land and improvements to the new lessee; and
(4) Include the previously submitted
business plan.
(g) Unless specifically required to do so by the
board, the current lessee shall not be required to remove improvements or
restore the land to a vacant condition at the expiration of the lease; provided
that, without prejudice to any other rights or remedies that the current lessee
or State may have, this subsection shall not alter any obligation of a current
lessee to indemnify, defend, and hold the State harmless from any claims
regarding pollution or contamination of the land with potentially hazardous
substances.
(h) This section shall not apply to:
(1) Any lessee who is in arrears in the
payment of taxes, rents, or other obligations owing to the State or any county
or who has had, during the five years preceding the anticipated disposition of
the public land at a public auction or direct negotiation, a sale, lease,
license, permit, or easement covering other public lands canceled for failure
to satisfy the terms and conditions thereof; or
(2) Any lease that is subject to
cancellation for failure to satisfy the terms or conditions of a lease,
license, permit, or easement covering the public lands.
(i) As used in this section,
"improvements" means all physical improvements constructed, owned, or
constructed and owned by the lessee during the lease term and shall exclude all
infrastructure constructed, owned, or constructed and owned by third parties,
such as water and sewer pipes, electricity and telephone lines and cables, or
other infrastructure."]
SECTION 4. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.
SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 6. This Act shall take effect upon its approval; provided that section 171-41.6, Hawaii Revised Statutes, shall not be reenacted on June 30, 2028, pursuant to Act 149, Session Laws of Hawaii 2018.
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INTRODUCED BY: |
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Report Title:
Public Lands; Negotiation; Public Auction
Description:
Requires
that all lease extensions for public lands be subject to public auction.
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.