RESOLUTION

WHEREAS, during the "Japanese bubble" period covering 1985 to 1990, Japanese investments in Hawaii real estate totaled approximately $15,000,000,000, sending land prices spiraling upward to levels unsustainable by the properties' economic uses; and

WHEREAS, these artificially high land values were used as the basis for the calculation of highly inflated long-term ground leases, and many of these leases do not permit new lease rents that are less than the previous rent; and

WHEREAS, having to pay these inflated lease rents has imposed a burden on some lessees who have been forced to undertake cost-cutting measures such as downsizing their businesses, reducing employee work hours and benefits, postponing improvements, and reducing capital investments; and

WHEREAS, some lessees who were not able to pay their ground rents have had to walk away from their properties and forfeit valuable improvements, and some face mortgage foreclosures or bankruptcy; and

WHEREAS, the failure of these businesses adversely impacts upon Hawaii's economy, adding to the rolls of the unemployed and reducing tax revenues; and

WHEREAS, in 1993, the House of Representatives and the Senate adopted H.C.R. No. 312 which created a task force to examine the problems of lessees; and

WHEREAS, the task force report stated, "Commercial lease rents have increased in recent years. Contracts negotiated some 20 to 30 years ago are coming up for renegotiation and some of the lessees have found themselves facing increases in excess of 200%. Some are mom and pop operations and neighborhood shops. Increasingly, however, larger businesses, retail chains and other local commercial operations have been forced to shut their doors as their business becomes unviable. Sadly, many jobs are lost, the goods and services they provided in our neighborhoods and communities are lost, their business to supporting industries are lost, the opportunities for our local businesses and entrepreneurs are lost." The task force also found fault with the practice of settling disputes over value by use of arbitration and recommended change; and

WHEREAS, now that ten years have passed and many problems for lessees still remain; now, therefore,

BE IT RESOLVED by the Senate of the Twenty-second Legislature of the State of Hawaii, Regular Session of 2003, the House of Representatives concurring, that the Legislative Reference Bureau is requested to study the major problems still facing commercial and other land lessees; and

BE IT FURTHER RESOLVED that, in conducting the study, the Legislative Reference Bureau is requested to consult with representatives of the Kamehameha Schools, the Hawaii Bankers Association, the Small Landowners of Oahu and Small Landowners Association of Hawaii, the Land Use Research Foundation of Hawaii, the Hawaii Council of Associations of Apartment Owners, and any individual or agency or organization representative with a direct interest in the issues to ensure that all stakeholders are allowed to express their thoughts and concerns; and

BE IT FURTHER RESOLVED that the Legislative Reference Bureau also is requested to consult with the Attorney General for legal issues, opinions, and advice relating to any constitutional issues related to the study; and

BE IT FURTHER RESOLVED that the Legislative Reference Bureau is requested to submit a report of its findings and recommendations, including any proposed legislation, to the Legislature no later than twenty days before the convening of the Regular Session of 2004; and

BE IT FURTHER RESOLVED that a certified copy of this Concurrent Resolution be transmitted to the Director of the Legislative Reference Bureau.

Report Title:

Lease Rent Renegotiation; Study