Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2002

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred H.B. No. 2002 entitled:

begs leave to report as follows:

The purpose of this measure is to allow Kauai Beachfront Hotel to extend its ground leases with the State.

Kauai Beachfront Hotel is presently situated on state leased land in Wailua on the island of Kauai. Since the commencement of the leases in 1969, the hotel has faced its share of economic adversity including Hurricane Iniki and the slump following September 11. Despite the $14,000,000 invested thus far by Kauai Beachfront Hotel in improvements and renovations, the hotel is still struggling to remain in business. A bank loan could provide the funds necessary for the hotel to remain open, but banks are reluctant to finance a property subject to a ground lease that is less than fifty years in duration. Additionally, the law does not allow lease extensions long enough to satisfy the needs of the hotel.

Your Committee finds that it is in the State's best interest to support Kauai Beachfront Hotel not only as an employer in a struggling island economy, but also as a member of a recovering tourism industry that is the island's primary economic engine. This bill would assist the hotel by allowing the State to renegotiate the ground leases to provide the necessary lease duration so that the hotel can qualify for a bank loan.

Your Committee has amended the bill by inserting a defective date in order to promote further discussion on this matter.

As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 2002, as amended herein, and recommends that it pass Third Reading in the form attached hereto as H.B. No. 2002, S.D. 1.