STAND. COM. REP. NO. 2168

                                   Honolulu, Hawaii
                                                     , 2000

                                   RE:  S.B. No. 2005
                                        




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committees on Water, Land, and Hawaiian Affairs and
Economic Development, to which was referred S.B. No. 2005
entitled: 

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

beg leave to report as follows:

     The purpose of this measure is to enable the Department of
Land and Natural Resources to issue new long term leases to the
existing lessees located on Banyan Drive in Hilo, Hawaii.

     Testimony in support of the measure was received from the
Department of Land and Natural Resources, the Chamber of Commerce
of Hawaii, the Hawaii Association of Realtors, the Hawaii Island
Economic Development Board, the Hawaii Naniloa Hotel, and a
private citizen.  The Office of Hawaiian Affairs opposed the
passage of the measure.

     Your Committees recognize the unique and critical situation
facing resort area lessees on Banyan Drive in Hilo, Hawaii.  With
the majority of the leases expiring in 2015, these lessees are
faced with the uncertainty of continued tenancy.  Under the
current laws, as the end of the lease term nears, the lessees
will have fewer incentives to make major investments in
improvements to their infrastructure and ensure the long-term
maintenance of their facilities.  As a result, deterioration of
the infrastructure is likely to occur.


 
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     Under this measure, Banyan Drive lessees would be exempted
from the overall public policy of making public lands available
to the highest qualified bidder at auctions.  Your Committees
believe, however, that in this specific and unique case, an
exception to this public policy is justified for the Banyan Drive
lessees.

     According to the measure, the exception is based on the fact
that the State owns virtually the entire Banyan Drive resort
area, which represents, approximately eighty per cent of total
overnight accommodations in east Hawaii.  Banyan Drive is an
integrated resort area.  All of the existing structures were
built as hotels although not all are in hotel use at this time.
It is important that the entire Banyan area be maintained as a
resort area.  Because the State controls so much of the hotel
space in east Hawaii, the State has a responsibility to ensure
that its actions will not have a harmful impact on the larger
community as a whole.  Should the State allow the Banyan Drive
resort area to deteriorate, including the structures not
currently used directly for hotel purposes, if and when the
tourism market rebounds, east Hawaii will not be in a position to
respond promptly with adequate hotel space.  The negative impact
would magnify as ancillary industries, dependent on the tourist
market, would also suffer.  Furthermore, approximately five
hundred direct resort jobs would be affected, as well as many
other indirect jobs.

     In order to protect the State's ability to use the leased
lands for other purposes if the need arises, the measure reserves
the State's right to do so if the current downturn in visitor
activity in the Hilo area turns into a more long-term structural
shift in the east Hawaii tourism market.

     Your Committees find that the measure would affect fifteen
total leases in the Banyan Drive resort area.  Of these fifteen
leases, there are ten leases covering three resort facilities
(Naniloa, Hilo Bay, and Hilo Hawaiian), three leases for each of
three apartment/condominium facilities (Country Club, Bayview
Banyan, and Reed's Bay), one golf course lease, and one
restaurant lease.

     Your Committees believe that the measure will enable Banyan
Drive lessees to secure long term leases, thereby enhancing their
ability to secure capital improvement loans to remain viable.

     As affirmed by the records of votes of the members of your
Committees on Water, Land, and Hawaiian Affairs and Economic
Development that are attached to this report, your Committees are
in accord with the intent and purpose of S.B. No. 2005 and

 
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recommend that it pass Second Reading and be referred to the
Committee on Ways and Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committees on Water, Land, and
                                   Hawaiian Affairs and Economic
                                   Development,



____________________________       ______________________________
LORRAINE R. INOUYE, Chair          COLLEEN HANABUSA, Chair

 
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