STAND. COM. REP. NO. 593

                                 Honolulu, Hawaii
                                                   , 1999

                                 RE: H.B. No. 827
                                     H.D. 2




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Water and Land Use, to which was referred
H.B. No. 827, H.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO PUBLIC LANDS,"

begs leave to report as follows:

     The purpose of this bill is to create incentives for
reinvestment in the resort infrastructure of the Banyan Drive
resort area in Hilo, Hawaii, by providing a five-year opportunity
for lessees within the Banyan Drive resort area to obtain new
leases by applying to the Board of Land and Natural Resources.

     The Department of Land and Natural Resources (DLNR)
testified in support of this bill.  The Banyan Drive Association
and the Hawaii Island Economic Development Board supported its
intent. The Hawaii Naniloa Hotel supported the bill with certain
amendments.  The Office of Hawaiian Affairs opposed passage of
this measure.

     Your Committee has amended this bill by:

     (1)  Deleting the requirement that DLNR develop a process to
          ensure the assumption of no market demand for the
          resort leases, including the option of issuing a
          request for proposal;

     (2)  Requiring DLNR to develop a process to determine the
          residual value on the tenant improvements for the

 
 
 
                                 STAND. COM. REP. NO. 593
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          duration of the lease term, and allowing for
          arbitration to settle differences;

     (3)  Requiring, rather than authorizing, that certain
          provisions be included in a new lease;

     (4)  Deleting the requirement to improve the property with
          the term of the new lease to be co-terminus with a
          mortgage loan;

     (5)  Requiring that the new lessee make substantial
          improvements to the property, and defining "substantial
          improvements" to mean alterations equivalent to at
          least ten per cent of the replacement cost of the
          existing facility or $2,000,000, whichever is greater;

     (6)  Authorizing DLNR to promulgate rules, including setting
          the terms for the completion of the substantial
          improvements for each lease;

     (7)  Deleting the option of issuing one master lease to the
          existing lessees;

     (8)  Specifying that new leases shall extend existing leases
          for a term not exceeding an additional thirty years;

     (9)  Amending the purpose section; and
 
     (10) Making technical, nonsubstantive amendments for the
          purpose of clarity.

     As affirmed by the record of votes of the members of your
Committee on Water and Land Use that is attached to this report,
your Committee is in accord with the intent and purpose of H.B.
No. 827, H.D. 1, as amended herein, and recommends that it be
referred to the Committee on Finance in the form attached hereto
as H.B. No. 827, H.D. 2.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Water and Land
                                   Use,



                                   ______________________________
                                   ROMY M. CACHOLA, Chair