SECTION 1. The legislature finds that the department of land and natural resources has the responsibility of planning for the disposition of commercial, industrial, hotel, and resort classes of public lands to determine:

(1) Specific use or uses;

(2) Minimum size of parcels;

(3) Required building construction or improvements; and

(4) Lease terms and requirements.

The legislature also finds that because of the policies guiding the management of public lands with commercial, industrial, resort, and hotel uses, there has been little incentive for lessees to make major improvements to their infrastructure, resulting in the deterioration of infrastructure and facilities. The lack of improvement to property in many of these areas has resulted in dilapidation, deterioration, age, or obsolescence of the buildings and structures in those areas.

The legislature further finds that the rejuvenation of areas of public lands that have become dilapidated, obsolete, or have deteriorated over time is in the public interest and constitutes a valid public purpose.

The purpose of this Act is to authorize the designation of development districts, comprising areas or regions of public lands classified as commercial, industrial, resort, or hotel, and the establishment and implementation of guidelines for the redevelopment of the areas or regions that will:

(1) Define the policies for the management of public lands in the designated area;

(2) Establish a plan for the designated area, including district-wide improvements, that is coordinated with state and county land use and planning policies; and

(3) Implement asset and property management concepts that can optimize income from the properties and evolve in response to changing principles of property administration.

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

"PART . PUBLIC LANDS REDEVELOPMENT

§171-A Definitions. As used in this part:

"Redevelopment district" or "designated district" means an area of public lands designated pursuant to section 171-B for redevelopment.

"Planning committee" or "committee" means the policy-making committee for a redevelopment district established pursuant to section 171-C.

"Public facilities" include streets and highways, storm drainage systems, water systems, street lighting systems, off-street parking facilities, and sanitary sewerage systems.

§171-B Designation of redevelopment district; boundaries; termination. (a) By statute, the legislature shall designate an area of public lands that is designated as an industrial park, pursuant to section 171-132, or classified as commercial, industrial, hotel, or resort use, pursuant to section 171-10, as a redevelopment district if it determines that there is a need for planning, development, or redevelopment because the buildings and infra-structures in the area are dilapidated or have deteriorated due to age or obsolescence.

(b) The designation shall describe the boundaries of the redevelopment district.

§171-C Planning committee; district administrator. (a) Upon the designation of a redevelopment district pursuant to section 171-B, a planning committee for the designated district shall be established and placed in the department for administrative purposes.

(b) The committee shall be a policy-making committee for the designated district and shall consist of nine members. The members shall consist of:

(1) The chairperson of the board of land and natural resources;

(2) The director of planning of the county in which the designated district is located; and

(3) Seven public members appointed by the governor pursuant to section 26-34; provided that three of these members shall be selected from a list of not less than six names submitted by the mayor of the county in which the designated district is located; provided further that all seven public members shall be residents of the county in which the designated district is located, and shall be selected on the basis of their knowledge, experience, and expertise in:

(A) Small or large businesses management;

(B) Economics, banking, investment, or finance;

(D) Real estate management;

(E) Marketing; or

(F) Hotel and resort management.

(d) The members of the committee shall serve without compensation, but shall be reimbursed for expenses, including travel expenses, incurred in the performance of their duties.

(e) The committee shall appoint a district administrator who shall be the chief executive officer for the designated district. The district administrator shall have experience and expertise in engineering, planning, architecture, real estate, or law. The committee shall set the district administrator�s duties, responsibilities, holidays, vacations, leaves, hours of work, and working conditions. The committee shall set the salary of the district administrator, who shall serve at the pleasure of the committee and shall be exempt from chapter 76.

(f) The committee shall cease to exist on June 30 of the tenth year following the effective date of the Act establishing the designated district.

§171-D Powers and duties; generally. The committee shall have the powers and duties related to its functions in the designated district that are delegated to the committee by the board. In addition, the committee may:

(1) Through its district administrator, appoint staff and employees, prescribe their duties and qualifications, and fix their salaries, without regard to chapter 76;

(2) Through its district administrator, allocate space or spaces that are to be occupied by the committee and appropriate staff; and purchase necessary supplies, equipment, or furniture;

(3) Prepare a development plan for the designated district;

(4) Notwithstanding any other law to the contrary, renew or renegotiate any lease in connection with any project contained in the development plan for the designated district, on such terms and conditions as it deems advisable;

(5) Prepare or cause to be prepared plans, design criteria, landscaping, and estimates of costs for the construction, rehabilitation, or repair of any project contained in the development plan for the designated district, and from time to time to modify such plans, or estimates;

(6) Conduct studies in conjunction with county and state agencies necessary to determine the appropriate activities for development in the designated district;

(7) Reduce or waive the lease rental on any lease of public land for any project in the designated district that requires substantial improvements; provided that the reduction or waiver shall not exceed one year;

(8) Make and execute all contracts and instruments that are necessary for the exercise of its powers and functions relating to the designated district, including the engaging of the services of consultants for rendering of professional and technical assistance and advice;

(9) Enter into a development agreement with a developer or developers for any project contained in the development plan; provided that the development agreement shall contain:

(A) The location, area, and size of the parcel to be developed;

(B) The use or uses to which the parcel shall be put in conformance with the development plan, and with applicable state and county laws and ordinances;

(D) Other terms and conditions that the committee deems necessary;

(10) Work closely and communicate with the county government to coordinate the execution of the designated district�s planning, incremental projects, work schedules, public works, and budget; and

(11) Do any and all things necessary to carry out its purposes and exercise the powers given and granted in this chapter.

§171-E District redevelopment plan. (a) The committee shall prepare a redevelopment plan for the designated district, including district development policies, the district improvement program, necessary public facilities, and the development guidelines and rules for the designated development district.

(b) The committee shall prepare a redevelopment plan for the designated district that:

(1) Establishes, if applicable, areas principally for:

(A) Commercial activities;

(B) Processing, construction, manufacturing, transportation, wholesaling, storage, and similar industrial activities;

(D) Public and recreational facilities with detailed standards for height, bulk, size, and location of buildings;

(2) Includes a district-wide improvement program for necessary district-wide public facilities within the designated district;

(3) Includes plans, specifications, and estimates of the costs for the development, construction, reconstruction, or improvement of any project in the designated district, and from time to time modify the plans, specifications, or estimates;

(4) If possible, identifies specific uses for areas in the designated district and the required parceling of land into minimum size areas related to the specific uses;

(5) Determines the lease rental that should be established for the specific uses and the terms and conditions of the leases; and

(6) Establishes interim development controls to be implemented during the transition to the execution of the provisions of the redevelopment plan, such as recommending the holdover of a lessee pursuant to section 171-40 or issuance of permits pursuant to section 171-55 to existing lessees upon the expiration of their lease terms.

(c) The district redevelopment plan may provide for the withdrawal or taking for public purposes of the public land or portion of the public land under a lease. The rental shall be reduced in proportion to the value of the portion of the premises condemned, and the lessee shall be entitled to receive the proportionate value of the permanent improvements legally made to or constructed upon the land by the lessee taken in the proportion that it bears to the unexpired term of the lease.

(d) The committee shall hold a public hearing on a proposed redevelopment plan for the designated district, and shall consider the comments received and incorporate any revisions to the plan that may be necessary.

(e) Two years after the date it is established, the committee shall submit a report to the board with the development plan recommended by the committee with its recommendations for appropriations by the legislature or the authorization of bonds or both, to implement the development plan in a timely manner. The board shall submit the report to the governor and the legislature with a request for the required appropriations and bond authorization.

(f) The designated district redevelopment plan shall supersede all other inconsistent ordinances and rules relating to the use, planning, development and construction on public land in the designated development district.

§171-F Designated redevelopment district revolving fund. (a) The department shall establish a separate revolving fund for each redevelopment district designated pursuant to section 171-B, into which shall be deposited:

(1) Fifty per cent of the revenues, income, and receipts of the department from the public lands in the designated development district, notwithstanding section 171-19;

(2) Moneys appropriated by the legislature to the revolving fund; and

(3) Any gifts, grants, and other funds accepted by the department.

Each revolving fund shall bear the name used by the legislature in designating the development district.

(b) Moneys in the designated redevelopment district revolving fund shall be used in the designated redevelopment district for the purposes of this part; provided that no expenditure shall be made from the fund and no obligation shall be incurred against the fund in excess of the amount standing to the credit of the fund."

SECTION 3. Section 171-1, Hawaii Revised Statutes, is amended by amending the definition of "public purpose" to read as follows:

""Public purpose", as used in this chapter, unless the context clearly indicates otherwise, includes [~~but shall not be limited to~~] all public uses, the straightening of boundaries of public lands, acquisition of access to landlocked public lands, the consolidation of the holdings of public lands, development of houselots, farmlots, [~~and~~] industrial parks[.], and the redevelopment of public lands pursuant to part ."

SECTION 4. Section 171-35, Hawaii Revised Statutes, is amended to read as follows:

"§171-35 Lease provisions; generally. Every lease issued by the board of land and natural resources shall contain:

(1) The specific use or uses to which the land is to be employed;

(2) The exact commencement and termination dates for the lease, and the term and type of notice required to exercise any renewal option, if applicable;

[~~(2)~~] (3) The improvements required; provided that a minimum reasonable time be allowed for the completion of the improvements;

[~~(3)~~] (4) Restrictions against alienation as set forth in section 171-36;

[~~(4)~~] (5) The rent, as established by the board or at public auction, which shall be payable not more than one year in advance, in monthly, quarterly, semiannual, or annual payments;

[~~(5)~~] (6) Where applicable, adequate protection of forests, watershed areas, game management areas, wildlife sanctuaries, and public hunting areas, reservation of rights-of-way and access to other public lands, public hunting areas, game management areas, or public beaches, and prevention of nuisance and waste; and

[~~(6)~~] (7) Such other terms and conditions as the board deems advisable to more nearly effectuate the purposes of the state constitution and of this chapter."

SECTION 4. Section 171-36, Hawaii Revised Statutes, is amended to read as follows:

"§171-36 Lease restrictions; generally. (a) Except as otherwise provided, the following restrictions shall apply to all leases:

[~~(1)~~ ~~Options for renewal of terms are prohibited;~~

~~(2)~~] (1) No lease shall be for a longer term than sixty-five years, except in the case of a residential leasehold which may provide for an initial term of fifty-five years with the privilege of extension to meet the requirements of the Federal Housing Administration, Federal National Mortgage Association, Federal Land Bank of Berkeley, Federal Intermediate Credit Bank of Berkeley, Berkeley Bank for Cooperatives, or Veterans Administration requirements; [~~provided that the aggregate of the initial term and extension shall in no event exceed seventy-five years;~~

~~(3)~~ ~~No lease shall be made for any land under a lease which has more than two years to run;~~

~~(4)~~] (2) No lease shall be made to any person who is in arrears in the payment of taxes, rents, or other obligations owing the State or any county;

[~~(5)~~] (3) No lease shall be transferable or assignable, except by devise, bequest, or intestate succession; provided that with the approval of the board of land and natural resources, the assignment and transfer of a lease or unit thereof may be made in accordance with current industry standards, as determined by the board; provided further that prior to the approval of any assignment of lease, the board shall have the right to review and approve the consideration to be paid by the assignee and may condition its consent to the assignment of the lease on payment by the lessee of a premium based on the amount by which the consideration for the assignment, whether by cash, credit, or otherwise, exceeds the depreciated cost of improvements and trade fixtures being transferred to the assignee; provided further that with respect to state agricultural leases, [~~in the event of~~] if a foreclosure or sale[,] occurs, the premium, if any, shall be assessed only after the encumbrances of record and any other advances made by the holder of a security interest are paid;

[~~(6)~~] (4) The lessee shall not sublet the whole or any part of the demised premises except with the approval of the board; provided that prior to the approval, the board shall have the right to review and approve the rent to be charged to the sublessee; provided further that in the case where the lessee is required to pay rent based on a percentage of its gross receipts, the receipts of the sublessee shall be included as part of the lessee's gross receipts; provided further that the board shall have the right to review and, if necessary, revise the rent of the demised premises based upon the rental rate charged to the sublessee including the percentage rent, if applicable, and provided that the rent may not be revised downward;

[~~(7)~~] (5) The lease shall be for a specific use or uses and shall not include waste lands, unless it is impractical to provide otherwise;

[~~(8)~~] (6) Mineral and metallic rights and surface and ground water shall be reserved to the State; and

[~~(9)~~] (7) No lease of public lands, including submerged lands, nor any extension of any [~~such~~] lease[,] of public or submerged lands shall be issued by the State to any person to construct, use, or maintain a sunbathing or swimming pier or to use the lands for [~~such~~] those purposes, unless [~~such~~] the lease, or any extension thereof, contains provisions permitting the general public to use the pier facilities on the public lands and requiring that a sign or signs be placed on the pier, clearly visible to the public[~~, which~~] that indicates the public's right to the use of the pier. The board, at the earliest practicable date, and where legally possible, shall cause all existing leases to be amended to conform to this paragraph. The term "lease", for the purposes of this paragraph, includes month-to-month rental agreements and similar tenancies.

(b) The board, from time to time, upon the issuance or during the term of any intensive agricultural, aquaculture, commercial, mariculture, special livestock, pasture, hotel, resort, or industrial lease, may:

(1) Modify or eliminate any of the restrictions specified in subsection (a);

(2) Extend or modify the fixed rental period of the lease[; ~~provided that the aggregate of the initial term and any extension granted shall not exceed sixty-five years;~~] upon approval by the board of a development agreement proposed by the lessee to make substantial improvements to the existing improvements or to construct new improvements; or

(3) Extend the term of the lease,

to the extent necessary to qualify the lease for mortgage lending or guaranty purposes with any federal mortgage lending agency, to qualify the lessee for any state or private lending institution loan, private loan guaranteed by the State, or any loan in which the State and any private lender participates, or to amortize the cost of substantial improvements to the demised premises that are paid for by the lessee without institutional financing, such extension being based on the economic life of the improvements as determined by the board or an independent appraiser; provided that the approval of any extension shall be subject to the following:

(1) The demised premises have been used substantially for the purpose for which they were originally leased;

[~~(2)~~ ~~The aggregate of the initial term and any extension granted shall not be for more than sixty-five years;~~

~~(3)~~] (2) [~~In the event of~~] If a reopening[,] occurs, the rental for any ensuing period shall be the fair market rental at the time of reopening;

[~~(4)~~] (3) Any federal or private lending institution shall be qualified to do business in the State;

[~~(5)~~] (4) Proceeds of any mortgage or loan shall be used solely for the operations or improvements on the demised premises;

[~~(6)~~] (5) Where improvements are financed by the lessee, the lessee shall submit receipts of expenditures within a time period specified by the board, otherwise the lease extension shall be canceled; and

[~~(7)~~] (6) The rules of the board, setting forth any additional terms and conditions, which shall ensure and promote the purposes of the demised lands.

(c) The board at any time during the term of any intensive agricultural, aquaculture, or mariculture lease and when justified by sound economic practices or other circumstances, may permit an alternative agricultural, aquaculture, or mariculture use or uses for any portion or portions of the land demised. As a condition to permitting alternative uses, the board may require [~~such~~] other modifications, including rental adjustments or changes in the lease as may be necessary to effect or accommodate the alternative use or uses. An alternative use or uses may be allowed by the board upon:

(1) The application of the lessee;

(2) Consent of each holder of record having a security interest in the leasehold; and

(3) A finding by the board that the alternative use or uses are in the public interest.

(d) The board, from time to time, during the term of any agriculture, intensive agriculture, aquaculture, commercial, mariculture, special livestock, pasture, hotel, resort, or industrial lease, may modify or eliminate any of the [[]restrictions[]] specified in subsection (a), extend or modify the fixed rental period of the lease, or extend the term of the lease upon a showing of significant economic hardship directly caused by:

(1) State disaster, pursuant to chapter 209, including seismic or tidal wave, tsunami, hurricane, volcanic eruption, typhoon, earthquake, flood, or severe drought; or

(2) A taking of a portion of the area of the lease by government action by eminent domain, withdrawal, or conservation easement; provided that the portion taken shall not be less than ten per cent of the entire leased area unless otherwise approved by the board; and provided that the board determines that the lessee will not be adequately compensated pursuant to the lease provisions.

(e) The approval of any extension granted pursuant to subsection (d) shall be subject to the following:

(1) The demised premises has been used substantially for the purposes for which they were originally leased;

[~~(2)~~ ~~The aggregate of the initial term and any extension granted shall not be for more than fifty-five years;~~

~~(3)~~] (2) The rental shall not be less than the rental for the preceding term;

[~~(4)~~] (3) The rules of the board, setting forth any additional terms and conditions which shall ensure and promote the purposes of the demised lands; and

[~~(5)~~] (4) The length of the extension shall not exceed a reasonable length of time for the purpose of providing relief [~~and shall in no case exceed five years~~]."

SECTION 6. In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 7. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2015-2016 and the same sum or so much thereof as may be necessary for fiscal year 2016-2017 to carry out the purposes of this Act.

The sums appropriated shall be expended by the department of land and natural resources for the purposes of this Act.

SECTION 8. 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 9. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 10. This Act shall take effect on July 1, 2015.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	1267
TWENTY-EIGHTH LEGISLATURE, 2015
STATE OF HAWAII