Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committees on Agriculture and Water, Land Use, and Hawaiian Affairs, to which was referred S.B. No. 1034, S.D. 1, entitled:

beg leave to report as follows:

The purpose of this bill is to ensure the long-term productive use of agricultural lands by allowing certain agricultural lands leased or available to be leased by the Department of Land and Natural Resources (DLNR) to be transferred to, and managed by, the Department of Agriculture (DOA).

Forest Industry Association supported this bill. Hawaii's Thousand Friends opposed this bill. Sierra Club, Hawaii Chapter offered comments.

This measure will allow the transfer and management of public lands classified for agricultural use from DLNR to DOA upon mutual agreement and approval by the respective Boards of both departments. With the transfer of responsibility, both departments are directed to coordinate and determine the commensurate level of personnel resources which should likewise be transferred.

An underlying purpose of this bill is to provide appropriate flexibility in the administration of leases so that productive farmers will be able to remain on public agricultural lands. This will be accomplished through the rule making process pursuant to chapter 91. It is the intent of your Committees that lease extensions and the privilege of remaining on public agricultural lands be accorded only to deserving farmers who meet criteria established by such rules.

However, your Committees note that several concerns were raised during the public hearing for this measure. One issue raised was the absence of aquaculture activities under the definition of "agricultural activities" contained in this bill. Your Committees support future legislative efforts to address the issue of whether aquaculture should be included in the definition.

In addition, another concern raised during the public hearings related to the issue of allowing golf courses on prime agricultural lands transferred as a result of this bill. Your Committees received assurances by testifiers representing DLNR and DOA that none of the prime agricultural lands transferred as a result of this bill would be used for golfing. However, it is not the intent of your Committee to prohibit golfing on marginal or "non-prime" agricultural lands that are transferred as a result of this bill.

Furthermore, your Committees note that serious concerns were raised regarding the proceeds from DLNR's leases on ceded lands. Currently, 20 percent of such proceeds are transferred to the Office of Hawaiian Affairs for the betterment of the conditions of native Hawaiians. However, with the transfer of agricultural ceded lands to DOA and the potential of lower lease rents levied by DOA, the funding for OHA may be reduced. Your Committees recognize this potential problem and support future legislative efforts to address this issue.

In a related point, your Committees note that grave concerns were expressed regarding the funding mechanism included in this bill. This measure establishes the Other Agricultural Lands Special Fund (Special Fund), into which all revenues received by DOA from transferred agricultural lands are to be deposited. The proceeds from the Special Fund are to be used for purposes approved by the Board of Agriculture. Your Committees recognize, however, that the establishment of the Special Fund will result in a revenue loss to the State. Currently, 80 percent of the proceeds from ceded lands leased by DLNR are transferred to the general fund. If these lands are transferred to DOA under the provisions of this bill, then the proceeds from the lands will be deposited into the Special Fund, instead of the general fund. This is a serious problem, especially in light of the fiscal and budgetary constraints already facing the State.

In light of these factors, your Committees have amended this measure by:

As affirmed by the records of votes of the members of your Committees on Agriculture and Water, Land Use, and Hawaiian Affairs that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 1034, S.D. 1, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 1034, S.D. 1, H.D. 1, and be referred to the Committee on Finance.