Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committee on Water and Land Use, to which was referred H.B. No. 870 entitled:

begs leave to report as follows:

The purpose of this bill is to clarify that lessees of public lands may be granted an extension to their leases without having to obtain a loan.

Section 171-36, Hawaii Revised Statutes, authorizes the Board of Land and Natural Resources to extend the term of a lease to the extent necessary to qualify the lease for mortgage lending or guaranty purposes with various lenders.

The Hawaii Farm Bureau Federation (HFBF), the Big Island Association of Nurserymen, and H. Eunice Nursery, Inc., testified in support of this measure. The Department of Land and Natural Resources (DLNR) expressed concerns.

According to HFBF, over 30 percent of the State's agricultural leases will expire within the next nine years. In order for lessees to continue their operations over the long term, they will need lease extensions. However, the law requires a lessee to first obtain a loan. From DLNR's perspective, requiring a loan accomplishes two things:

(2) It ensures that the lessee's operation is legitimate.

Testifiers pointed out that some of the farmers who are approaching the end of their leases do not require a large loan to maintain or improve their operations. And yet, to extend their lease, they are forced to go further into debt. According to testifiers, the law also penalizes lessees who can self-finance major improvements to their operations.

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. 870 and recommends that it pass Second Reading and be referred to the Committee on Finance.