S.B. NO.



















SECTION 1. The legislature finds that creating mechanisms and incentives to help lessees of public lands obtain financing to construct improvements upon those lands will support small businesses and concomitantly facilitate the maximization of revenue from public land leases. For example, a lessee securing a new lease with the intent to make substantial capital improvements to the land or replace existing improvements needs assurance that the time period of the new lease conforms, at a minimum, to any applicable financing agreement obtained by the lessee to finance the new lease or improvements. The legislature is committed to ensuring fair and equitable access in the leasing of public lands through public auction and to protecting the State from the expense of future remediation requirements or legal claims that may result from the actions of lessees.

The purpose of this Act is to:

(1) Enable lessees of public lands to obtain financing to construct improvements upon those lands;

(2) Enable lessees of public lands to relinquish leases during the second half of a lease; and

(3) Ensure fair and equitable valuations and disposition of capital improvements in conjunction with the establishment of lease rents and public auctioning of relinquished leases.

SECTION 2. Chapter 171, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"171- Right to relinquish a lease; appraisals; improvements. (a) Notwithstanding any other provision of law to the contrary, a lessee of public land that is subject to the management, administration, or control of the department may relinquish the lease during the last half of the term of the lease, as provided in this section.

(b) Prior to relinquishing the lease, the lessee shall:

(1) Provide the board with not less than ninety days written notice of the intent to relinquish the lease; and

(2) Contract with a real estate appraiser licensed or certified pursuant to chapter 466K to determine the current depreciated or residual value of any improvements to the land.

If the board fails to agree to the appraised residual value of the improvements, the department may contract with an appraiser licensed or certified pursuant to chapter 466K and agreed to by the lessee, and the value shall be determined by arbitration as provided in chapter 658A. In the event that the lessee disagrees with the department's selection of the appraiser, the board shall select the appraiser. The cost of contracting with the appraiser shall be borne equally by the lessee and the board.

(c) Unless specifically required to do so by the board, a relinquishing lessee shall not be required to remove improvements or restore the land to a vacant condition; provided that, without prejudice to any other rights or remedies that either party may have, this subsection shall not indemnify a relinquishing lessee from any claims regarding pollution or contamination of the land with potentially hazardous substances.

(d) Upon relinquishment of the lease, the board shall dispose of the land by public auction as provided in section 171-14; provided that the auction upset shall be the greater of the current ground rent or the appraised fair market rent, as if the land were vacant and unimproved. The relinquishing lessee may bid on the new lease at the public auction; provided that if the relinquishing lessee does not bid or is not awarded the lease after the public auction, the relinquishing lessee shall vacate the land within one hundred twenty days, unless the department agrees to allow a longer term.

(e) Lease terms for the new lease shall be determined by the board; provided that if the lease is awarded after public auction to any party other than the relinquishing lessee, the lease rent shall include a premium equal to the residual value of any improvements to the land, as determined pursuant to subsection (b), which shall be paid to the relinquishing lessee prior to transfer of the land and improvements to the new lessee.

(f) In the event that the relinquishing lessee is the sole bidder on a new lease, the lease rent established in any new lease issued pursuant to this section shall be not less than the lease rent established in the lease being relinquished pursuant to this section.

(g) This section shall not apply to:

(1) Any lessee who is in arrears in the payment of taxes, rents, or other obligations owing to the State or any county or who has had, during the five years preceding the anticipated disposition of the public land at a public auction, a previous sale, lease, license, permit, or easement covering other public lands canceled for failure to satisfy the terms and conditions thereof; or

(2) Any lease that is subject to cancellation for failure to satisfy the terms or conditions of a lease, license, permit, or easement covering the public lands.

(h) As used in this section, "improvements" means all physical improvements to the land that are for the benefit of the lessee, including but not limited to:

(1) Buildings, structures, driveways, roads, or fences erected on or affixed to the land; and

(2) Water and sewer pipes, electricity and telephone lines and cables, or other infrastructure necessary to the utility of the land."

SECTION 3. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 4. If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the invalidity does not affect other provisions or applications of the Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

SECTION 5. New statutory material is underscored.

SECTION 6. This Act shall take effect on January 1, 2016.








Report Title:

Public Lands; Relinquishment of Lease; Capital Improvements



Grants lessees of public land the right to relinquish a lease. Provides for the valuation of improvements to the land. Provides that a relinquishing lessee shall not automatically be required to remove improvements. Provides for disposition of the land at public auction after relinquishment. Defines "improvements" to include infrastructure.




The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.