Report Title:

Kaneohe Bay Recreational Piers; Lease Rent Formula; Multiplier

Description:

Requires the board of land and natural resources, in calculating lease rents for private residential noncommercial piers in Kaneohe Bay, to use a methodology that values sites with piers at an enhanced value of a maximum of 10%.

THE SENATE

S.B. NO.

516

TWENTY-SECOND LEGISLATURE, 2003

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to KANEOHE BAY 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 This provision is repealed on June 30, 2005.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 pier. 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 they 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 the use of the fifty per cent commercial rate for private residential 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.

Moreover, the legislature finds that the fifty per cent valuation multiplier is simply not reasonable. It appears that no other state uses a multiplier as high as the fifty per cent figure that is used by the department of land and natural resources. Rather, the legislature finds that a multiplier of ten per cent is more consistent with the valuation of submerged lands across the country. The purpose of this Act therefore is to require the department to use a ten per cent multiplier when calculating lease rents for Kaneohe Bay private residential noncommercial piers.

SECTION 2. Act 261, Session Laws of Hawaii 2000, as amended by 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 residential noncommercial piers in Kaneohe Bay, the board shall use a methodology that values sites with piers at an enhanced value of a maximum of ten per cent.""

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 Statutory material to be repealed is bracketed and stricken.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

SECTION 4. This Act shall take effect upon its approval.

INTRODUCED BY:

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