THE SENATE

S.C.R. NO.

76

TWENTY-FOURTH LEGISLATURE, 2008

 

STATE OF HAWAII

 

 

 

 

 

SENATE CONCURRENT

RESOLUTION

 

 

supporting and encouraging the establishment of good faith valuation standards and negotiating practices by lessors and lessees under long-term industrial and commercial ground leases.

 

 


     WHEREAS, industrial and commercial businesses in Hawaii are vital to Hawaii's economy and provide thousands of jobs and pay millions of dollars in state and local taxes; and

 

     WHEREAS, many small industrial and commercial lessees in Hawaii operate under long-term ground leases for properties being used as warehousing, office, and distribution facilities for the sale and servicing of industrial and construction equipment, materials, and supplies; for the sale and servicing of automobiles, trucks, and other vehicles; and for the general manufacture, warehousing, distribution, and sale of goods of every kind and nature into the stream of commerce for the people of Hawaii; and

 

     WHEREAS, under most long-term industrial and commercial ground leases, rents are customarily "renegotiated" at periodic intervals of typically ten to fifteen years; and

 

     WHEREAS, Hawaii's industrial and commercial ground lessees already pay among the highest ground rents in the country and have no choice but to pass on these increasing ground rents to Hawaii consumers, thereby adding significantly to Hawaii's already extremely high cost of living; and

 

     WHEREAS, continuing increases in ground rents put increasing economic pressure on Hawaii's industrial and commercial lessees and make it more and more difficult for them to compete with out-of-state businesses, and increasingly require them to downsize, move their businesses out of the State, or go out of business altogether; and

 

     WHEREAS, under current valuation and renegotiation practices, current ground rent demands by ground lessors may lead to a round of staggering new ground rent increases that will further increase the economic pressure on Hawaii's industrial and commercial ground lessees and ultimately on Hawaii's consumers, workers, and the state economy; and

 

     WHEREAS, the economic effects of such increases are likely to include:

 

     (1)  A significant increase in unemployment and the number of families becoming homeless or requiring increasing financial assistance to survive in Hawaii; and

 

     (2)  A significant decrease in the tax base and in local and state tax collections in Hawaii; and

 

     WHEREAS, in order to ensure an even playing field where long-term ground lessees and lessors will be able to negotiate ground rents and increases that will allow a fair return on investment to both parties, the Legislature should encourage the development of good faith valuation standards and negotiating practices as will allow such lessors and lessees to achieve fair and reasonable rents under such leases, with due regard for the existing use of the land demised as well as pertinent economic principles and considerations; and

 

     WHEREAS, if such lessees and lessors are unable to develop such good faith valuation standards and practices, it may be necessary for the Legislature, in order to best serve the interests of the consumers, workers, and the economy in Hawaii, to adopt such measures as will otherwise allow such lessors and lessees to achieve fair and reasonable rents under such leases, with due regard for the existing use of the land as well as pertinent economic principles and considerations; now, therefore,

 

     BE IT RESOLVED by the Senate of the Twenty-fourth Legislature of the State of Hawaii, Regular Session of 2008, the House of Representatives concurring, that the Legislature supports and encourages the establishment of good faith valuation standards and negotiating practices by lessors and lessees under long-term industrial and commercial ground leases to allow such lessors and lessees to achieve fair and reasonable rents under such leases, with due regard for the existing use of the land as well as pertinent economic principles and considerations, that will provide a fair return on investment for both parties and will best serve the interests of the consumers, workers, and the economy in Hawaii; and

 

     BE IT FURTHER RESOLVED that a certified copy of this Concurrent Resolution be transmitted to the Director of Commerce and Consumer Affairs.

 

 

 

 

OFFERED BY:

_____________________________

 

 

Report Title: 

Ground Leases; Good-Faith Valuation Standards