WHEREAS, Article XI, section 10 of the Constitution of the State of Hawaii states, "The public lands shall be used for the development of farm and home ownership on as widespread a basis as possible"; and

WHEREAS, it is in the best interest of the State to use agricultural lands productively and reasonably in ways to emphasize its sustainability and preservation; and

WHEREAS, in many parts of Hawaii, state lands are used for agricultural purposes, and as state agricultural leases are reopened, appraisals of the lands are used to determine appropriate lease rents; and

WHEREAS, the Uniform Standards of Professional Appraisal Practice guides appraisers in analyzing applicable information using several appraisal methodologies, including sales, costs, and income comparisons; and

WHEREAS, one of the more common ways of appraising agricultural land is by comparing the appraised property with other land sales; however, this methodology is flawed because during peak real estate markets, appraisals of agricultural lands using the sales comparison approach dramatically inflates lease rents; and

WHEREAS, alternatively, methodologies that utilize income capitalization approaches appraise the value of the agricultural land based on its agricultural yield, usually appraising the land at a more reasonable price; however, there is a shortage of appraisers who are capable of using this type of approach; and

WHEREAS, the Department of Land and Natural Resources and the Department of Agriculture both need to work together to maintain agricultural production statistics that are valuable for the income capitalization appraisal process; and

WHEREAS, by having more appraisers trained in the income capitalization appraisal process and having the Department of Land and Natural Resources and the Department of Agriculture maintain the necessary statistics, state agricultural lease rents will stabilize even during peak real estate markets; now, therefore,

BE IT RESOLVED by the Senate of the Twenty-third Legislature of the State of Hawaii, Regular Session of 2005, that the Department of Land and Natural Resources is requested to establish a training program together with the local chapters of national appraisers' organizations as part of their professional education seminars to train appraisers in the income capitalization approach using agricultural yields for determining lease rent rates for state agricultural lease reopenings; and

BE IT FURTHER RESOLVED that the Department of Land and Natural Resources is requested to establish a pilot program to implement the income capitalization approach for reopenings of state agricultural leases; and

BE IT FURTHER RESOLVED that the Department of Land and Natural Resources is requested to report on the progress of the pilot program and any findings and conclusions based on the pilot program to the Legislature no later than twenty days before the convening of the Regular Session of 2006; and

BE IT FURTHER RESOLVED that certified copies of this Resolution be transmitted to the Chairperson of the Board of Agriculture and the Chairperson of the Board of Land and Natural Resources.

Report Title:

Agricultural Land Appraisals; Income Capitalization Approach; DLNR; Pilot Program