STAND. COM. REP. NO.344-02

Honolulu, Hawaii

, 2002

RE: H.B. No. 2002




Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-First State Legislature

Regular Session of 2002

State of Hawaii


Your Committee on Water and Land Use, to which was referred H.B. No. 2002 entitled:


begs leave to report as follows:

The purpose of this bill is to support efforts to transform the Holiday Inn Sunspree Resort Kauai (Hotel) into an economically viable resort by authorizing the Department of Land and Natural Resources (DLNR) to issue new State leases to Kauai Beach Resort, LLC (Lessee), the hotel's owner and operator.

The Lessee testified in support of this measure. DLNR offered comments.

The Lessee has long-term leases on three parcels in Wailua, Kauai. Approximately 29 years remain for the term of one lease, and 33 years remain for the term of the other two leases. Although the Lessee has invested over $14,000,000 to improve and renovate the Hotel, additional financing is needed. The problem is that most lenders are reluctant to finance a property that has a ground lease that is less than 50 years in duration. As a result, the Lessee is unable to make further improvements to the property without a change in the terms of the leases.

Your Committee finds that DLNR and the Lessee have come to a conceptual agreement on mutually canceling the existing leases, determining the residual value of the existing improvements, and re-auctioning the leases. As discussions continue, it is your Committee's intent that this bill move forward in the event that unforeseen complications arise.

As affirmed by the record of votes of the members of your Committee on Water and Land Use that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 2002 and recommends that it pass Second Reading and be referred to the Committee on Finance.


Respectfully submitted on behalf of the members of the Committee on Water and Land Use,