STAND. COM. REP. NO. 175________

                                 Honolulu, Hawaii
                                                   , 1999

                                 RE: H.B. No. 827
                                     H.D. 1

Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 1999
State of Hawaii


     Your Committee on Tourism, to which was referred H.B. No.
827 entitled: 


begs leave to report as follows:

     The purpose of this bill is to create incentives for
reinvestment in the resort infrastructure of the Banyan Drive
resort area in Hilo, Hawaii, by providing a five-year opportunity
for lessees within the Banyan Drive resort area to extend their
existing leases or to obtain new leases by applying to the Board
of Land and Natural Resources (BLNR).

     The Mayor of the County of Hawaii; the Chair of the Finance
Committee, Hawaii County Council; the Director of the Department
of Research and Development, County of Hawaii; the President of
Banyan Drive Association and General Manager of Hilo Hawaiian
Hotel; Hawaii Naniloa Hotel; and an individual submitted
testimony in support of the measure.  Another individual
submitted testimony in support of the intent of the measure.  The
Department of Land and Natural Resources (DLNR) testified that it
does not support the bill and instead encouraged the Committee to
consider its recommended changes.

     Your Committee notes that there are 15 total leases in the
Banyan Drive resort area.  Of the 15 leases, there are 10 leases
covering three resort facilities (Naniloa, Hilo Bay, and Hilo
Hawaiian), three leases for each of three apartment/condominium
facilities (Country Club, Bayview Banyan, and Reed's Bay), one

                                 STAND. COM. REP. NO. 175________
                                 Page 2

golf course lease, and one restaurant lease.  Your Committee
recognizes that with the majority of the Banyan Drive resort
leases expiring in 2015, these affected lessees are faced with
the uncertainty of continued tenancy.  As the end of the lease
term nears, these lessees will have less and less incentive to
make major investments to improve their resort infrastructure or
to ensure the long-term maintenance of their resorts.

     Upon consideration, your Committee has amended this bill by:

     (1)  Authorizing DLNR to issue new resort leases or one
          master lease to the existing Banyan Drive resort
          lessees, rather than authorizing BLNR to extend the
          leases or issue new leases for lessees within the
          Banyan Drive resort area;

     (2)  Stipulating that the lands eligible for lease are
          limited to those existing 13 state leases with
          infrastructure located along Banyan Drive that are used
          for resort purposes;

     (3)  Establishing conditions in which DLNR may issue the new
          resort leases or the one master lease, including
          providing that:

          (a)  The new leases contain current standard terms and
               conditions and other conditions as deemed
               appropriate by DLNR;

          (b)  DLNR develop a process to ensure the assumption of
               no market demand for the resort leases; and

          (c)  DLNR may issue a request for proposal or other
               means to determine competition;

     (4)  Specifying that the Legislature not interfere with
          market forces by subsidizing these resort uses;

     (5)  Eliminating the stipulation that any new or extended
          lease be for a maximum of 55 years from the bill's
          effective date; and

     (6)  Making technical, nonsubstantive amendments for

     Your Committee notes that the 13 state leases do not include
the golf course lease and the restaurant lease in keeping with
the intent of the bill, which is to help stimulate tourism in

                                 STAND. COM. REP. NO. 175________
                                 Page 3

East Hawaii by creating incentives for reinvestment in the resort
infrastructure of the Banyan Drive area.

     As affirmed by the record of votes of the members of your
Committee on Tourism that is attached to this report, your
Committee is in accord with the intent and purpose of H.B. No.
827, as amended herein, and recommends that it pass Second
Reading in the form attached hereto as H.B. No. 827, H.D. 1, and
be referred to the Committee on Water and Land Use.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Tourism,

                                   JERRY L. CHANG, Chair