Report Title:

Oceanic Institute

 

Description:

Promotes the growth and continuation of the research and development activities of the Oceanic Institute by authorizing the department of land and natural resources to issue a new lease to the Oceanic Institute.

 

THE SENATE

S.B. NO.

1496

TWENTY-FIRST LEGISLATURE, 2001

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO PUBLIC LANDS.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature recognizes the importance of fundamental scientific marine research in the State's quest for its economic future. The Oceanic Institute is one of the world's premier applied research organizations involving marine aquaculture and its various disciplines. It is the largest organization of its kind in the United States. The Oceanic Institute mission is a critical one, and one that is in turn critical for our State. One recent major accomplishment of the Institute is the revitalization of the moi fishery and the production of moi in offshore cages. In addition, the Oceanic Institute has developed techniques for cost effective recirculating shrimp aquaculture systems. This new technology will guide the world in environmentally sustainable products. These accomplishments and others help to establish Hawaii's place as not only a leading edge research center for aquaculture but also provide local entrepreneurs the ability to build new and exciting businesses for our State. The Oceanic Institute also is home to the Center for Tropical and Subtropcal Aquaculture, one of only five regional aquaculture centers in the United States. The Center is broadly charged with aquaculture research, development, demonstration, and extension education to enhance viable and profitable aquacultural activities in the United States. Hawaii is thus the base for all of the tropical and subtropical species research for the United States.

The Oceanic Institute is a private, not-for-profit 501(c)(3) research and development organization, which has a lease on state lands at Makapuu, Oahu. This site is the location of the new Center for Applied Aquaculture and Marine Biotechnoology, which is a $23.6 million expansion of the Institute's campus designed to position the Oceanic Institute as the world center for advanced aquaculture, coastal resource management, and marine biotechnology. The lease of the site with the department of land and natural resources is about to expire, and the Institute is facing uncertainty as to its continued tenancy. In part, the issue stems from the revenues derived from Sea Life Park, a for-profit activity operated under a sublease from the Oceanic Institute. A portion of the revenues derived from this enterprise, approximately $500,000 in calendar year 1999, form a crucial part of the revenue stream used by the Oceanic Institute for operations not covered by grants. This is just over 6.5 per cent of the Institute’s total revenue for 1999. Common infrastructure supports both the Institute and Sea Life Park.

This commercial activity also threatens the Institute’s ability to secure a long-term lease from the State, and may force the State to place the entire complex, including the research and development facilities, up for a bid at the end of the current lease term. The legislature believes that such an action is not in the public interest. Fundamental research such as that performed at the Institute cannot be threatened because a portion of the property is used for the purpose of funding the operations of a nonprofit activity. The State of Hawaii has always taken great pride in the advances to aquaculture made at the Institute and throughout the islands. It is therefore appropriate that the legislature consider an exception to the lease requirements in the same manner that was previously enacted in the 2000 legislative session through Act 55, Session Laws of Hawaii 2000, which granted exceptions to certain lessees along Banyan Drive on the island of Hawaii. However, unlike the lease properties along Banyan Drive, the Oceanic Institute has made a commitment to engage strictly in nonprofit activities under a new lease. This Act embodies that commitment. The legislature understands that forcing this Makapuu property to be subject to an auction may seem prudent in the abstract, but on reflection, is not in the best interests of the State of Hawaii or the generations of citizens to come. We must encourage the Institute’s activities and not subject it to well—intentioned but harmful applications of generalized laws.

The purpose of this Act is to promote the growth and continuation of the research and development activities of the Oceanic Institute by authorizing the department of land and natural resources to issue a new lease to the Oceanic Institute.

SECTION 2. Notwithstanding any law to the contrary, the department of land and natural resources is authorized to issue a new lease to the existing lessee of that certain property located at , subject to the following:

(1) A new lease shall contain those conditions deemed appropriate by the department to carry out the purposes of this Act; provided that the new lease shall contain a limitation on for-profit activity allowed on the parcel and shall further limit the activities on the parcel to research and development activities for aquaculture and related purposes;

(2) The department may issue a request for proposal or other means to ensure that a fair, open, and competitive process is used to determine competition for the parcel subject to the requirement that the site be used for nonprofit aquaculture research and development purposes. This process shall take into account the current fair market value of the tenant-owned improvements under the terms of the existing lease. The current fair market value shall be negotiated and agreed to between the lessee and the lessor. If the current fair market value is agreed upon, the department may initiate a request for proposal process to reveal whether there are other entities interested in obtaining the lease subject to the requirement that the site be used for nonprofit aquaculture research and development purposes. If this process shows a willing and able bidder, the department shall proceed with an auction with the understanding that the successful bidder shall pay the existing lessee the current fair market value of all tenant-owned improvements in full at closing. If there are no qualified entities other than the existing lessee, or if the lessee is the successful bidder, then a new lease may be issued to the existing lessee for a term not to exceed fifty-five years; and

(3) If a new lease is issued, then the following may be contained in the lease:

(A) Fair market rent, excluding tenant-owned improvements;

(B) Percentage rent, where gross receipts from the for-profit activities on the property exceed a certain level;

(C) An assignment premium; and

(D) Requirements to substantially improve the property.

(4) The new lease may provide that the lessee shall derive not more than per cent of its annual revenues from the for-profit operations on the property subject to the lease. Revenues derived from the sale of intellectual property, patents, or technology transfers shall not constitute revenues from for-profit operations. In addition, revenues derived from activities of the lessee off-premises, but derived from research and development on-premises, shall not constitute for-profit revenues for the purpose of the lease.

SECTION 3. It is the expressed intent of this Act that the legislature not interfere with market forces by subsidizing these uses to ensure that the State is receiving a fair return from public lands and that investment is made into the infrastructure associated with the lease.

SECTION 4. The lands eligible for lease under section 2 of this Act shall be limited to the existing lease with infrastructure located in the Makapuu area.

SECTION 5. All costs for the issuance of a new lease, including determining the current fair market value and the request for proposals, shall be paid for by the lessee interested in acquiring the new lease.

SECTION 6. This Act shall take effect on July 1, 2001.

INTRODUCED BY:

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