Report Title:

Private Noncommercial Piers; Lease Rent Formula; Multiplier

Description:

Requires department of land and natural resources, in calculating lease rents for private noncommercial pier, to value the submerged lands under the piers at 50% of the assessed value for real property taxes of the fast lands; sets rent at 2% of submerged land value; extends sunset date. (SD1)

THE SENATE

S.B. NO.

3191

TWENTY-SECOND LEGISLATURE, 2004

S.D. 1

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO PRIVATE NONCOMMERCIAL PIERS.

 

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

SECTION 1. The legislature finds that in May 1998, the board of land and natural resources approved a plan to address the problem of unauthorized piers in Kaneohe Bay, island of Oahu, and created a program to bring the piers into compliance with the law.

To help facilitate a solution to this problem, the governor, on June 20, 2000, signed Act 261, which amended chapter 171, Hawaii Revised Statutes, by allowing the board to issue direct leases for private noncommercial residential piers. Prior approval by the governor and legislature is no longer required for dispositions processed under Act 261. This provision is repealed on June 30, 2005.

To induce participation in the program by owners of these unauthorized piers, an "amnesty program" was created that essentially pardons individuals possessing an unauthorized pier. No fines will be imposed on pier owners coming forward to legalize their piers. The goal of this program is to provide owners of unauthorized piers with the required permits to achieve compliance with the State's land use laws and ultimately resolve the illegal pier problem in Kaneohe Bay.

In addition to issues relating to permitting under the amnesty program, the department of land and natural resources reviewed several methodologies for calculating pier lease rents and developed what it considered to be an equitable lease rent for pier owners in Kaneohe Bay. The lease rent methodology adopted by the board on February 23, 2001, uses a fifty per cent multiplier, on the theory that the value of the submerged land has historically been considered to be fifty per cent of the value of the abutting fast land.

In adopting this methodology, the board noted that it is used by the harbors division of the department of transportation when leasing submerged lands for commercial purposes and by the division of boating and ocean recreation when leasing submerged lands for commercial and recreational boating activities.

When applied to Kaneohe Bay properties, the methodology assumes the highest and best use of the residential fast land is a residential site with a pier, and considers the pier and fast land to be a single residential unit. The methodology begins with an estimate of the fast land without the added value of a pier. The submerged land value is then calculated and a residential rate of return is applied, since the submerged land is part of a single residential unit. The board considers this to be the most accurate method to determine lease rent because the value of the submerged land is tied to the value of the land it supports.

However, the legislature finds that applying the fifty per cent commercial rate to the fair market value of the residential fast lands for private noncommercial piers in Kaneohe Bay is not justified. The legislature finds that these private noncommercial piers do not produce any income and that the adjoining residential properties are not dependent on the piers. The submerged lands are inaccessible, and there is no demand for their use except to build piers by the adjoining property owners. The fast and submerged lands should not be considered a single residential unit. The rental is on the submerged land, which essentially has no value, and not on the pier.

The legislature finds that it would be more reasonable to apply the fifty per cent valuation multiplier to the assessed value for real property tax purposes of the adjoining fast land only, without improvements.

The purpose of this Act therefore is to require the department to apply the fifty per cent multiplier to the assessed value of the fast land, unimproved, when calculating lease rents for Kaneohe Bay private residential noncommercial piers. It further sets the rent for the state submerged lands at two per cent of the determined state submerged land value per year. This Act also extends the amnesty program.

SECTION 2. Act 261, Session Laws of Hawaii 2000, as amended by section 1 of Act 68, Session Laws of Hawaii 2002, is amended by amending section 1 to read as follows:

"SECTION 1. Chapter 171, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"171-   Private noncommercial piers. Notwithstanding any limitations to the contrary, the board of land and natural resources may lease, by direct negotiation and without recourse to public auction, state submerged lands or lands beneath tidal waters for private noncommercial piers on [such] terms and conditions as may be prescribed by the board[.]; provided that, in calculating lease rents for private noncommercial piers in Kaneohe Bay, the board shall determine the value of the submerged land under the piers at no more than fifty per cent of the assessed value for real property tax purposes of the adjoining fast land, unimproved. Rent for the state submerged lands shall be calculated at a two per cent return on the value of the state submerged lands annually.""

SECTION 3. Act 216, Session Laws of Hawaii 2000, as amended by section 2 of Act 68, Session Laws 2002, as amended by section 1 of Act 103, Session Laws of 2002, is amended by amending section 5 to read as follows:

"SECTION 5. This Act shall take effect upon its approval; provided that:

(1) The authority granted to the department of land and natural resources to enter into lease agreements with owners of private noncommercial piers shall be repealed on June 30, [2005;]     ;

(2) The amendments made by sections 1 and 3 of this Act to the Hawaii Revised Statutes, shall be repealed as of June 30, [2005,]     ; and section 171-53(c), Hawaii Revised Statutes, shall be reenacted in the form in which it read on the day prior to the effective date of this Act;

(3) The amendment made by section 2 of this Act to section 171-36(a), which deleted paragraph (9), shall be repealed as of June 30, [2005,]     , and paragraph (9) shall be reenacted in the form in which it read on June 19, 2000; and

(4) Any lease agreement executed pursuant to this Act prior to June 30, [2005,]     , or any lease extension executed thereon after the repeal of this Act, shall remain exempt from section 171-36(a)(9), Hawaii Revised Statutes, after the repeal of this Act."

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect upon its approval and shall apply retroactively to lease rent calculations made after June 20, 2000.