Hawaii-2020-SB651-Amended

SECTION 1. The legislature finds that the department of agriculture's non-agricultural park lands program supports new and bona fide farmers, among others, who are generally farmers engaged in diversified agriculture on smaller parcels, in gaining a foothold in the agricultural industry. The legislature further finds that technological advances have created opportunities for innovation in agriculture that may improve efficiency, increase yields, and encourage sustainable farming practices. However, these technologies often require high investments of capital that farmers are often unable to access alone. By partnering with investors or establishing partnerships with others who have access to capital, farmers may be able to invest in these technologies and other capital necessary to establish and grow their businesses.

The legislature finds that the department of agriculture's administrative rules on the non-agricultural park lands program require bona fide farmers to be: individuals who meet certain qualifications; agricultural cooperatives or other agricultural associations or partnerships, at least seventy-five per cent of the members of which would qualify individually as bona fide farmers; or corporations incorporated primarily for agricultural production purposes where at least seventy-five per cent of its trustees, officers, stockholders, and members qualify individually, excluding a holder of record having a security interest. In addition, the legislature finds that there may be some confusion regarding qualifications for bona fide farmers; specifically, a durational Hawaii residency requirement may apply to bona fide farmers, despite the fact that chapter 166E, Hawaii Revised Statutes, relating to non-agricultural park lands, does not include such a requirement. The legislature believes that the law should more clearly specify the application of the definition of "bona fide farmer" and broaden the types of entities that may qualify for non-agricultural park leases.

The purpose of this Act is to expand opportunities for certain entities, including farmers, to obtain investment capital for their operations and be eligible for a non-agricultural park lease.

SECTION 2. Section 166E-8, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) In all dispositions, the department shall be subject to the requirements set forth in rules adopted by the board consistent with section 166E-6 and subject to the following:

(1) All land and facilities shall be disposed of for purposes of agricultural or aquacultural activities only;

(2) Each lessee shall derive a major portion of the lessee's total annual income earned from the lessee's activities on the premises; provided that this restriction shall not apply if:

(A) Failure to meet the restriction results from mental or physical disability or the loss of a spouse; or

(B) The premises are fully used in the production of crops or products for which the disposition was granted;

(3) The lessee shall comply with all federal and state laws regarding environmental quality control;

(4) The board shall:

(A) Determine the specific uses for which the disposition is intended;

(B) Parcel the land into minimum size economic units sufficient for the intended uses;

(D) Set the upset price or lease rent based upon an appraised evaluation of the property value, adjustable to the specified use of the lot;

(E) Set the term of the lease that shall be not less than fifteen years nor more than sixty-five years, including any extension granted for mortgage lending or guarantee purposes; and

(F) Establish other terms and conditions it deems necessary, including but not limited to restrictions against alienation and provisions for withdrawal by the board; [~~and~~]

(5) Any transferee, assignee, or sublessee of a non-agricultural park lease shall first qualify as an applicant under this chapter. For the purpose of this paragraph, any transfer, assignment, sale, or other disposition of any interest, excluding a security interest, by any legal entity that holds a non-agricultural park lease shall be treated as a transfer of the non-agricultural park lease and shall be subject to the approval of the board and to reasonable terms and conditions, consistent with this chapter or rules of the board that the board may deem necessary. No transfer shall be approved by the board if the disposition of the stock or assets or other interest of the legal entity would result in the failure of the entity to qualify for a non-agricultural park land lease[.]; and

(6) Any provision in this chapter to the contrary notwithstanding, when a person, whether individual, agricultural cooperative, agricultural association, partnership, or corporation incorporated primarily for agricultural production purposes, seeks an agricultural lease to construct and operate a facility for agriculture or aquaculture that requires more than $500,000 in construction and equipment acquisition costs to operate the facility, the board may determine that person is eligible for the lease; provided that:

(A) The agricultural or aquacultural use is based on operations or methodology that require high, advanced, or innovative technology and substantial initial capital funding;

(B) No less than fifty-one per cent of the operational decision making authority regarding crop selection and pricing is held by persons who are:

(i) Either citizens of the United States who have resided in the State for at least three years or permanent status aliens who have resided in the State for at least five years; and

(ii) Bona fide farmers, as defined in section 171-68;

(C) The agricultural or aquacultural operations are primarily for food crops or products that contribute to the replacement of similar food crops or products that are imported into the State; and

(D) The board finds that making the determination of eligibility is in the best interests for agriculture in the State and is consistent with the department's mission and priorities."

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 4. This Act shall take effect on July 1, 2019, and shall be repealed on June 30, 2024; provided that section 166E‑8(b), Hawaii Revised Statutes, shall be reenacted in the form in which it read on the day prior to the effective date of this Act.

THE SENATE	S.B. NO.	651
THIRTIETH LEGISLATURE, 2019		S.D. 1
STATE OF HAWAII